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J u l y 2 0 0 8
Penton Media Publication outsourced-logistics.com
Also in this issue:
Why Size Matters in Global
Supply Chain Services
Diebold and Menlo
7 Steps to Improve
Transport Management
Part 2
India Faces Its Logistics
Challenges
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A New Paradigmin Logistics Outsourcing
at an inflexion point and that this is the beginning of an
explosion in spending on logistics outsourcing.
A third metric is the breadth of spending on logistics
services. For years, transportation services was the prin-
cipal candidate for outsourcing. In recent years there has
been dramatic growth in spending on third party provid-ers and on warehouse services. It is clear that as compa-
nies make the move to outsourcing their decisions impact
an array of Outsourced Logistics options.
Our research also shows that outsourcing knows no
geographic boundaries. It is no secret that companies
source raw materials, finished goods and services from
around the world. Our new editorial lineup reflects the
global nature of outsourcing in several ways. We have
contributors who offer a Euro-centric, Sino-centric or
Latin American view of outsourcing. We have features
dealing with 3PLs in China, compliance issues in the
European Union and transparent global Outsourced
Logistics networks, to name a few. When we speak the
language of logistics outsourcing, we may communi-
cate in English, but be speaking in the
tongues of the global market.
The market is changed and so is our
magazine. We continue to write and
editorialize about traditional logistics
and SCM topics, but now we take a
broader view. Our intent is to provide
the community of manufacturers,
3PLs and logistics services providerswith reliable information, useful case
studies, and a forum for the discussion
of best practices.
There is indeed a new paradigm, in
the market and in our magazine. It is
called Outsourced Logistics.
In recent years there has been a significant evolution
in the use of logistics outsourcing in supply chain
management. What was formerly an ad hoc deci-
sion to hire a transportation provider or 3PL is now
a transformative business practice. What was a business
transaction is now a strategic business decision. What
used to be contract logistics has become Outsourced
Logistics.This magazine, Outsourced Logistics, is evolved from
Logistics Today, and is edited to reflect the new paradigm
in logistics outsourcing. Content of Outsourced Logistics
is a mix of articles, features and stories about operations
and strategy, logistics services and global markets. Our
intent is to deliver useful content and to stimulate con-
versation among the community of logistics management
decision makers. Our message to our fellow community
members is not as much the how to of global logistics
outsourcing, but the why these are sound business
practices.
Our decision to re-focus our magazine and website
is based on an analysis of over 15 years of data, extend-
ing back at least to the early 1990s. References like Cap
Gemini, Armstrong and Associates,
our own Strategic Decision-Making in
Supply Chain Management and other
sources document clearly the move-
ment of companies in three important
areas. The first indicator is the grow-
ing number of companies the data
showed were and are using outsourc-
ing to replace existing services. Thesecompanies use outsourcing not only
as replacements but also as a way to
enter new markets or to support new
product introductions. Outsourcing is
more than just cost savings.
A second indicator is the hundreds
of billions of dollars being spent annu-
ally on outsourcing. In 2008 the num-
ber is forecast to be well north of US
$130 billion. And while that number
is significant, indicators are that we are
Outsourced Logistics |July 2008 | 1
David H. Colby, Publisher,
Publishers Page
mailto:[email protected]:[email protected]8/4/2019 Outsourced Logistics 200807
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MORE SPEED MORE TECHNOLOGY
MORE SMARTS MORE CONNECTIVITY
Our logo says it all. About our commitment to deliver supply chain excellence through an optimal and flexiblecombination of industry-leading logistics services and technology. Tap into our dense network of shippers andproviders,on demand transportation management and a suite of professional services tailored to your organization'sneeds.www.transplace.com
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8Global Markets
Coping with IndiaCommunity Voice
World Economic Pace Slows
14Operations
Moving a 66 Ton Chamber from Brisbaneto Milwaukee
Community VoiceThird-Party Logistics Labor PerformanceManagement, An Untapped Opportunity
41Logistics Services
US Logistics Costs Rise in 2007
Community VoiceA 3PL by any other name
Features
20Global Strategy
DHL Plans to Ease Its
$1.3 Billion Headache
Entry into the US domestic marketcost more than anticipated, causing the
delivery giant to take dramatic measuresto staunch a gushing loss.
26Global Strategy
TNT Focuses on Emerging Markets
On the tightwire of express services, TNTconcentrates on keeping its balance.
28Supplier Selection
Size Matters When Choosing a 3PLSupplier scope and scale loom large in the
selection of a logistics provider.
32PartneringCollaboration Trumps CostDiebold reaches for high-level supply chainpartnerships that support its strategic goals.
36Field Report
7 Steps to Transportation ManagementExcellenceThe second and final installment. Developing astrategy to build top-performing transportationmanagement.
483PL FileC.H. Robinson Worldwide, Inc.
Departments1 Publisher's Letter
A New Paradigm in Logistics Outsourcing7 Editorial
A Time for Decisive Action
46 ClassifedsAdvertiser Index
Outsourced Logistics |July 2008 | 3
July 2008 Volume 1 , Numb er 2
32
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Have you
heard?
Outsourced-Logistics.com
is more than just a
companion site to the
magazine. It is the online
logistics daily, providing
news, decision-making tools
and information resources
for logistics professionals.
Daily News Featureson the industry
White Papers
Webcasts
Current and PastIssues
Forums/Rateem & Rankem
Outsourced Logistics (ISSN 1547-1438) is published monthly by Penton Media, Inc.,9800 Metcalf Ave., Overland Park, KS 66212-2216.
The magazine is sent to qualified management in the field of logistics.Periodicals postage paid at Shawnee Mission, KS and at additional mailing offices.
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POSTMASTER: Send address changes toOutsourced Logistics, P.O. Box 2113, Skokie, IL 60076-7813.
Printed in U.S.A. Copyright 2008 by Penton Media Inc.
Send editorial correspondence to: Editor, Outsourced Logistics, 1300 E. 9th Street, Cleveland, OH 44114-1503,or [email protected]
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Editorial
Publishing DirectorDavid H. ColbyeMedia Market Development ManagerJason Washburn
Circulation ManagerTyler MotsingerProduction Coordinator Rachel Klika
Custom Media GroupTerrence GroganBob MacArthur Senior VP Industrial Group
Chief Executive Officer John [email protected]
Chief Financial Officer Jean B. [email protected]
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249 W. 17th St., New York, N.Y., 10011212-204-4200
Chief Editor
Perry A. Trunick
Senior Editor
Roger Morton
Professional ContributorsJames A. CalderwoodDesign
Art DirectorBill Szilagyi
Business
EASTERN REGION Mike Antell, Phone: 978.282.5625, Fax: 978.282.9749, [email protected]
CENTRAL REGION. Terry Davis, Phone: 404.325.9037 Fax: 404.325.6737, [email protected]
WESTERN REGIONChristopher Hartnett, Phone: 832.237.4004 Fax: 832.237.4114, [email protected]
FLORIDABob Eck, Phone: 352-391-5577, [email protected]
ENGLAND Paul Barrett, Mark Whiteacre, David Moore Phone: 44-1268-711-560, Fax: 44-1268-711-567FRANCE Fabio Lancellotti, Phone: 331-4294-0244, Fax: 331-4387-2729
ITALY Cesare Casiraghi, Phone: 39-31-261407, Fax: 39-31-261380BELGIUM, HOLLAND Peter Sanders, Phone: 31-299-671303, Fax: 31-299-671500
TOKYO Yoshinori Ikeda, Phone: 813-3661-6138, Fax: 813-3661-6139SEOUL, KOREA Young Sang Jo, Phone: 822-739-7840-2, Fax: 822-732-3662
TAIWAN Charles Liu, Phone: 886-2-707-5829, Fax: 886-2-707-5825CHINABallycastle Trading, Inc. Ltd., Phone: 852-524-7256, Fax: 852-524-7027
INDIA Shivaji Bhattacharjee Phone: 91-11-268-7005, Fax: 91-11-2652-6055SINGAPOREMike Seah, Phone: 65-299-0413, Fax: 65-758-7850 or 65-296-6629
Sales
4 | July 2008 | Outsourced Logistics
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As the US enters an election season with two clear
presidential contenders, its open season on their
present and past positions. The media love to
make a story out of an apparent flip flop on some issue,
but most strategists will agree that changes are not only
normal, they are necessary. Rigidly adhering to battle
plan can bury an army (or a business) as conditions and
circumstances change.
Just over a decade ago, DHLs position in North America
was that it could connect businesses in the US with global
markets through its well developed networks in Asia,Europe and beyond. At the time, that was a smart choice,
though there was less emphasis on global reach among
US-based businesses. The fact was, FedEx, UPS, Airborne,
BAX Global, Emery Worldwide, Roadway Package Sys-
tem and, to some degree, the US Postal Service were all
contending for parcel and express business in the market.
There wasnt room for a seventh or eighth player.
At the time, TNT took a look at the market and even
made some acquisitions that could help it start building
the ground network that was critical to success for any
operator seeking a market position in the US. In June,
Marie-Christine Lombard, group managing director for
TNT Express, said its small pres-
ence in the US was in some
ways a great regret, but in
others, thank God were
not. The TNT footprint
in 2008 looks much like
DHL did 10 or 15 years
ago and for the same rea-
son--building a ground
network to cover the
US is expensive, andthe return if you
are the new-
comer facing large, entrenched competitors wont support
the position.
With the deep pockets of Deutsche Post and some
changes in the US market, the time may have appeared
ripe for DHL to enter the US through its acquisition of
Airborne. With UPS and FedEx experiencing slowdowns
in the domestic express market and issuing earnings guid-
ance, being third in a shrinking market is anything but a
growth strategy. It is clearly time to change tactics, but not
necessarily strategies.
As global logistics providers, DHL and TNT both realizethe importance of a presence in the North American mar-
ket. The key is to stay in the battle and not lose the war.
For DHL that means protecting a much larger investment
against the day when the markets recover and being one of
three major players offers potential for modest profit rather
than massive losses.
TNT has little to change in its tactics as it pursues a strat-
egy that has been evolving over the last four years. Its focus
is on developing markets where a key acquisition will
allow it to transplant its network design and operating ex-
pertise to become the number one provider in the market.
Then, it can provide national, regional and interregional
service and link to its global network. The principal dif-
ference in the two strategies being TNT isnt interested in
fighting with giants.
What makes the express wars a story for the age is that,
in the cases of TNT and DHL, the two companies have a
very clear global strategy with regional tactics that support
it. Both have undergone major revisions in both strategy
and tactics in recent years. As painful as it may have been
to make these adjustments, they were clearly called for. If
they had not changed, they could have ended up pouring
increasing amounts of assets into battles which wouldhave eventually resulted in unsustainable losses and ulti-
mate defeat. The business leaders who had to make those
changes were facing new realities and, we can only hope,
choosing the better path. Call it a retreat, a flip flop or a de-
cisive redeployment of resources, but when the situation
changes, you have to change with it or give up your market
position completely.
Editorial
A Time For Decisive Action
Outsourced Logistics |July 2008 | 7
Perry A. Trunick, chief editor,[email protected]
mailto:[email protected]:[email protected]8/4/2019 Outsourced Logistics 200807
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8 | July 2008 | Outsourced Logistics
market, its inadequate.
Its still a sunrise part of the industry,
so in terms of using India as a back office
for logistics, it lags behind. The National
Association of Software and Services
Companies (NASSCOM) has flagged logistics
as a target area because they view the lack of
formal education as an impediment. Its not
that there isnt some supply, its just inadequate for
the size of the demand.
From a logistics perspective, India lags behind,
which is surprising given that logistics is a $100
billion industry expected to reach $120 billion by
2010.
India has 20 million expatriates living outside
India, and 2.4 million of those are living in the
US. They tend to be on the higher levels of educa-
tionprofessionals with good management skills.Physical infrastructure is probably one of the
most hotly discussed areas and is probably Indias
biggest opportunity and its biggest problem area.
Core to the success of smooth logistics operations
is having a network of roads that interconnect the
cities and ports. Roughly 60% to 70% of goods
move by road in India. Thats where India has
had its biggest challenges. That doesnt mean
there hasnt been positive progress. The govern-
ment embarked on a project called the Golden
Quadrilateral centered on four metro cities ofNew Delhi in the North, Mumbai in the West,
Outsourced Logistics
a s k e d P r a d e e p
Vachini and Jaison
Augustine to comment
on the business realities
of operating in India. Speaking from their of-
fices in India, they addressed people and skill
levels, physical infrastructure and the regula-
tory and business climate.
Given the history of India with the legacy of the
British, the English education system and English
language, skills are very high, with a large number
of people who are educated in English and also a
large group for whom English is a second language.
So, there is a large talent pool of college-educated
people with English skills.
Logistics is a niche skill which is not as widely
available at a university level in India. Unlike well-known universities in China, the UK and the US,
India doesnt have universities with a heavy focus
on the field. Most of the education takes place on
the job. To some degree, that impedes professional-
ism in the logistics business.
Expatriate Indians with logistics skills arent
coming home in very large numbers If they are
coming back with higher education in the field,
they arent a very visible group in the industry,
perhaps due to the size of the market. There are
three or four good educational institutions in Indiaproviding logistics training, but given the size of the
Global Markets
Coping
WithIndiaA
conversationwith Pradeep
Vachiniand Jaison
Augustine
One of the fastest
growing global
markets, India has
its strengths and its
challenges.
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Outsourced Logistics |July 2008 | 9
ate monies out of India, especially in a business like
logistics where a company may be collecting revenues in
India, but in an international transaction, all that would
have stayed in India would be the expenses incurred
there. It used to be a challenge to repatriate the rest, but
now the Central Bank of India has made it much simpler
for businesses to move those funds.
Ports, however, are still controlled by archaic port au-
thorities. There are still tariff bodies that govern tariffs in
ports and almost artificially keep costs up. And, by and
large, the ports are still controlled by bureaucrats and
not professionals. Some bureaucrat is actually calling theshots and making decisions, which has some bearing on
the regulatory environment.
Lack of competition has impeded progress at ports. In
the past you had three or four major gateways into India,
but today you have a choice. All are competing with tar-
iffs and services and thats a new environment that has
largely resulted from all of the private investment the
government has recently permitted.
Theres also been a relaxation of requirements for
foreign direct investment in the retail industry and as a
result, there has been a lot more commerce involving all
of the big global retailers, including Marks & Spencer,
Tesco and Wal-Mart, who are setting up shop in India.
Theyre bringing their sophistication on the movement
of goods and supply chain management which is spark-
ing improvements.People often speak of India and China in terms of
their growing economies. The opportunity for India is
that while it has been slow compared to China, when
you look at what China has managed to achieve, thats
what India needs to aspire to. Chinas throughput at its
ports is almost 15 to 17 times that of India. Thats some-
thing India can learn from.
Pradeep Vachini, Co-CEO, Industrial & Infrastructure
Services, and Jaison Augustine, vice president of business
development, Industrial & Infrastructure Services for WNSGlobal Services, a business process outsourcing firm.
Chennai in the South and Kolkata in the East. This is
where the commerce and trade takes place. Except for
New Delhi, they are free ports.
The government embarked on a project to connect
all of these cities with four- to six-lane highways. This
will facilitate trade and access to the ports. The average
speed of a truck carrying cargo is about 20 kilometers
per hour, which means they cover about 200 km in a
day. Thats probably one third or even one fourth of what
can be done. That imposes a huge burden of inefficiency
on the system.
From the mid-1950s to now, traffic or density ofvehicles has grown by as much as 100 fold and the
roads have grown eight fold. The road building and the
Golden Quadrilateral nearing completion will give a
huge boost to the economy in general.
Technology and telecommunications infrastructure,
as a result of India being a late starter, now surpasses
China as the fastest growing cellular telephone market,
with more than 300 million users. The telecom infra-
structure has improved dramatically. India may have
started late, but the quality and customer service on its
nearly completely digital networks is very high.
India was an early adopter as far as IT is concerned.
There was a good fit for the skill sets and the education
Indians received, and it has become the call-
ing card for Indias success.
In general, since about 1991, Indian law
has been slowly but surely removing some
of the requirements for operating a business.
Whether that is deregulation in the telecom
industry or relaxation of duties on imports or
requirements on foreign direct investment, all of that has
been happening.
India has made a lot of progress in these areas butthere are some remnants of the past draconian regime in
the complex mesh of taxation which is controlled by the
central government and partly by state government. If
you are moving goods from one state to another, you get
entangled in all of that mess. There is a move to get rid
of all of these taxes that get imposed on cargo moving
from one point to another. Discussion centers on going
to a common value-added tax (VAT), but thats easier
said than done. India may be slow in implementing it,
but it appears to be headed in that direction. It will be a
welcome move for companies that operate in India.There were measures that made it difficult to repatri-
Do you have direct experience with logisticsoperations and logistics providers in India? Goto Rate em and Rank em at www.outsourced-logistics.com and share your experiences.
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10 | July 2008 | Outsourced Logistics
Global Markets
NewsB
riefsJuly08
The UKs New $3 Billion Port Gets the Go-AheadJust 25 miles from central London, the project is designed to become the
countrys national hub port and Europes largest logistics park. To be devel-
oped by DP World, the Dubai-based global marine terminals operator, London
Gateway will accommodate the worlds largest container ships and is claimed
to be the most fully automated and efficient in the country when completed.
Construction of the 1,850-acre site is slated to begin later this year.
As it sought to gain approval for London Gateway, DP World proposals
included the capacity of handling 3.5 million TEU (twenty-foot equivalent
units) annually along a 2,300-meter container dock. To enhance the value
its customers, DP World would include in the logistics park surrounding
the Gateway container and other terminals, free zones and logistics facilities
among other infrastructure developments.
Even before winning final approval from the UK government for the proj-ect, Dubai World Chairman Sultan Ahmed Bin Sulayem, claimed that, After
visiting the London Gateway site, we have realized the vital significance of this
project for the British economy as well as for DP World. We are fully commit-
ted to this project and believe it will enhance the value we offer our custom-
ers due to its proximity to the UKs largest consumer market as well a unique
combination of facilities provided by the port and park together.
RoadwayIntroducesExpedited OceanTransport fromChina
The less-than-container-load
service cuts six days off standard
ocean transit time. A subsidiary
of YRC Worldwide, Roadway is
working in cooperation with YRC
Logistics Global on the expedited
product. It is offering new supply
chain services for international
shippers at both origin and
destination. The carrier is ableto offer the service by utilizing
multiple shipments from seven
ports of origin in China. Once
cargo arrives at US ports it receives
priority unloading. Shipments are
then expedited through Roadways
network with guaranteed delivery
to final customer.
Commenting on the service,
the carriers president, Terry
Gilbert, said, Our new RoadwayExpedited Ocean Service meets
a need in the marketplace for a
reliable, cost-effective alternative
to air transit for less-than-
container-load shipments from
China. It is just one aspect of
our ability to create the right
combination of service and
expertise wherever needed in
the supply chain through our
expanded global offerings.
As Roadway explains, servicesoffered by YRC Logistics Global,
an NVOCC-licensed affiliate,
include global freight forwarding,
inland transport, global logistics,
g loba l t rade management ,
technology for shipment visibility
and control, and supply chain
management services . Port
deconsolidation services are
available in the US for complex
requirements, including deliverydirect to the retail floor.
SkyTeam Alliance Gets Antitrust ImmunitySix airlines are being allowed to combine Transatlantic operations,
finalizing a tentative decision issued on April 9. While Delta Air Linesand Northwest Airlines are part of SkyTeam, the decision from the US
Department of Transportation (DOT) has no bearing on the move by the
two airlines to merge. Those plans are under review by the US Department
of Justice. The four other members of SkyTeam are Air France, Alitalia,
Czech Airlines and KLM Royal Dutch Airlines. Northwest already has an
alliance with KLM and Delta is allied with the other three airlines.
Under terms of the new Open Skies Plus agreement between the
US and European Union (EU), Transatlantic markets are open to other
competitors since both US and EU airlines are now permitted to serve any
routes between the two entities.
In approving the antitrust immunity, DOT said that, the proposed
alliance is in the public interest because it features a proposed new and
highly integrated joint venture that will likely produce efficiencies and
provide consumers with additional price and service options.
In reflecting on the announcement, Glen Hauenstein, Deltas executive
vice president Network Planning and Revenue Management, said, We
are pleased the DOT recognizes once again that antitrust immunity
offers significant advantages to customers including more choice in
flight schedules, travel times, services and fares. This grant of immunity
allows us to expand these benefits for our customers to two other airline
partners and significantly strengthen the SkyTeam Alliance.
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Outsourced Logistics |July 2008 | 11
Connell Bros. Expands In GlobalLogistics Management
Specialty chemical distributor Connell Bros.
Company is using the GT Nexus global trade andlogistics portal on-demand platform to procure,
execute, monitor and audit containerized freight
services, across all ocean carriers.
The initial level of service, which provides
shipment tracking and contract management
services was activated in 2007. Within six-
weeks, CBC had all of their container status
messages flowing into a centralized database
and all of their ocean contracts digitized
online in a common format across all carriers.
That foundation has now been expanded to
freight procurement and advanced spend
management capabilities.
CBCs business can be exposed to
unpredictable demand swings based on
changes in regional economies, said GT Nexus.
Additionally, transportation costs represent a
significant part of operational budgets. For these
reasons, CBC required a flexible solution that
could support constant change, and also deliver
industry leading strategic spend management
capabilities.
GT Nexus has a proven track recordof success with the worlds biggest shippers,
said John Figura at CBC. We now have a fully
integrated suite of tools that allow us to transform
the way we run our transportation network.
And since its an industry platform, our carriers
were already connected to it and familiar with
the applications based on their experience
supporting other customers on GT Nexus.
The spend management capabilities of the
platform focus on two primary areas. Strategic
optimization supports the procurement cycle
and allows CBC to identify the best service-price
combinations before making final allocation
decisions. The freight audit capability compares
the data inside final digitized service contracts
with electronic bills of lading and then presents a
real-time view of discrepancies.
The entire platform is provided as an on-
demand service that is hosted and managed
by GT Nexus. CBC shares the network, data
translation services, and infrastructure with all
other GT Nexus customers, but uses a secure
private environment to use applications andcollaborate with partners.
Canada Bolsters Its Latin America Trade
Looking south, the Canadian government has lately signed two
free trade agreements and is exploring a third. In late May, Canada
signed free trade, labor cooperation and environment cooperationagreements with Peru. In regard to commerce, as soon as the free trade
agreement (FTA) is approved, Peru will eliminate tariffs on 95% of
current Canadian exports. Remaining tariffs will be eliminated over a
five- to ten-year period. Products to receive duty-free access to Peru
include wheat, barley, lentils, peas and selected boneless beef cuts,
as well as a variety of paper products, machinery and equipment.
For its part, immediately upon implementation of the FTA, Canada
will quickly move to eliminate 97% percent of its tariffs on Peruvian
imports with the remainder to be eliminated over a three- or seven-
year period, with the exception of over-quota tariffs on dairy, poultry,
eggs and refined sugar, which are excluded from tariff reductions. For
refined sugar, a tariff-rate quota will apply. Two-way trade between the
two nations was $2.45 billion in 2007, with Canadian investment in
Peru estimated at $1.8 billion.
In early June, the Canadian government announced the conclusion
of free trade agreements with Colombia. Trade between the countries
in 2007 was $1.14 billion with Canadian investment in the country at
$739 million.
The Government of Canada is delivering on its commitment to
open up opportunities for Canadian business in the Americas and
around the world, claimed David Emerson, Minister of Foreign Affairs
and International Trade, and Minister for the Pacific Gateway and
Vancouver-Whistler Olympics. The free trade agreement will expandCanada-Colombia trade and investment, and will help solidify ongoing
efforts by the Government of Colombia to create a more prosperous,
equitable and secure democracy.
As the government explains, under Canadas Global Commerce
Strategy, it is working to advance the countrys trade interests in key
markets by opening up new opportunities for Canadian exporters,
investors and innovators. The Strategy includes an aggressive agenda
of trade negotiations that aims to secure competitive terms of access in
markets that offer significant potential for our products and expertise.
Canada entered into exploratory discussion with Panama on a
FTA. In 2007, bilateral trade between the countries was $115 million.
Through the end of 2006, Canadian direct investment in Panama
was $111 million. Through last year, Canadas greatest exports to
Panama included pharmaceutical products, machinery, electrical and
electronic equipment, malt and barley, vegetables and meats. Imports
from Panama included mineral fuels, fruits and nuts, fish and seafood,
spices, coffees and teas, fats and oil products and wood products.
In addition to these recent moves within this hemisphere, earlier this
year Canada signed its first FTA in six years. It was with the European
Free Trade Association, consisting of Iceland, Liechtenstein, Norway
and Switzerland. The agreement has been tabled in the Canadian
House of Commons where it must rest for 21 days before ratification.
Tabling of all FTAs is required under a new governmental policy.
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12 | July 2008 | Outsourced Logistics
Global Insight has revised its forecast for
2008, projecting US real gross domestic
product (GDP) growth will decrease toa mere 1.36%. Imports to the US could
turn negative for the first time since the 2001 reces-
sion. The impact of the US economic situation will also
affect the growth rate of world
real GDP, bringing it to 3.07%
in 2008.
The financial crisis created
by the subprime mortgage cri-
sis has yet to spread to more
countries whose financial in-
stitutions had either directly
or indirectly invested in the
US mortgage market. This cri-
sis will negatively affect these
countries economies, making
their economic growth even
lower than what is currently
forecast. The result is that in-
ternational trade could be even
further depressed.
Private consumption in the
US is likely to inch up 0.83%,
which is hardly in keep-ing with population growth.
The low levels of private con-
sumption are likely to cause
a marked decrease in the de-
mand for imports. As a result,
US real imports are expected
to drop by 1.79% in 2008.
Comparing the current US
recession and the recession in
2001, an obvious difference
is that the 2001 recession wascaused by the burst of IT bub-
bles. In 2000, the economy was still booming, and
imports grew at a recored rate. In contrast, the current
recession is a gradual emergence of a financial crisiscreated by the inflated housing market and the sub-
prime mortgage crisis.
US economic growth had already started to slow by
Global Markets
Community Voice
World Economic Pace SlowsBy Global Insights
Selected Global Trade Growth Projections
2006 2007 2008 2009
World Trade 9.53 7.57 6.46 7.48World GDP 3.94 3.65 3.07 3.38
US Export Trade 10.77 8.75 4.64 5.62US Import Trade 7.23 1.31 -1.79 5.31US GDP 2.87 2.19 1.36 2.17NAFTA Export Trade 8.92 6.29 3.70 5.47NAFTA Import Trade 7.92 2.03 0.15 5.43NAFTA GDP 2.96 2.26 1.50 2.24EU Four Export Trade 6.76 4.72 5.39 5.59EU Four Import Trade 6.23 5.85 5.90 4.76EU Four GDP 2.62 2.40 1.58 1.86Eurozone Export Trade 6.43 4.48 5.31 5.63
Eurozone Import Trade 6.82 6.47 6.50 4.80Eurozone GDP 2.87 2.53 1.79 1.95China Export Trade 23.11 17.32 11.9 12.59China Import Trade 16.57 16.76 14.86 15.85China GDP 11.1 11.5 10.4 9.40India Export Trade 11.18 9.52 10.23 9.96India Import Trade 13.14 15.71 10.25 12.03India GDP 8.83 8.38 8.14 8.05
EU Four = Germany, UK, France and Italy
Eurozone = Austria, Belgium, Cyprus, Finland, France, Germany, Greece,Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovenia, Spain
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A Key Advantage
3924 Clock Pointe Trail, Suite 101
Stow, OH 44224 USA
Phone: (330) 923 5080
www.interchez.com
Turn to the pros at InterChez
as your company prepares
for the global market.InterChez presents an extensive
lineup of capabilities from state-of-
the-art global logistics managementto complete linguistics services.
Dont risk your bottom line before
understanding the complete picture
of international business.
Outsourced Logistics |July 2008 | 13
exporter, accounting for 8.5% of the world exports. Countries
that mainly supply the US with capital goods and luxury con-
sumer goods and whose currencies have appreciated against
the US dollar have been hurt by the current US recession.
The majority of Chinas exports to the US are low-cost
consumer goods. Since China has restricted the apprecia-
tion of its currency, Chinas exports to the US will be hurt
the least among the top five exporting countries.
Global Insight provides economic, financial, and politicalcoverage of countries, regions, and industries covering over
200 countries and spanning more than approximately 170
industriesusing a unique combination of expertise, models,
data, and software within a common analytical framework to
support planning and decision making. The company has 700
employees, and 25 offices in 14 countries covering North and
South America, Europe, Africa, the Middle East, and Asia.
2007 and import growth slid to its lowest growth rate since
2002. In 2008, the US economy and imports will continue
to experience down-side pressure. They will gradually de-
teriorate in the first half of the year. This will allow house-
holds and firms to adjust their consumption, investment
and production and gives time to policy-makers to take
rescue measures. Therefore, it is likely the current US eco-
nomic recession will not be as deep as the one in 2001 and
the United States might not cut back on imports as much as
it did in 2001.Countries whose exports rely more on the US market will
be affected even more by the US recession. Mexicos exports
rely on the US market more than any other country. More
than 50% of Mexicos exports to the US are machinery and
motor vehicles and parts. In nominal terms, in 2007, more
than 80% of Mexicos exports relied on the US market.
In 2007, the United States was the worlds third largest
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14 | July 2008 | Outsourced Logistics
one of the only vessels that can handle
a shipment of this size.
Working with US authorities,
Connor cleared the load through
Customs three days before it reached
the Port of Long Beach. The truck that
would transport the load was waiting
at the pier when the ship landed and
was unloaded. Because the transport was 132 ft long
on 13 axlesover wide, over high and over weight
special permits were required from each state along the
route.
This unique shipment was a matter of tight coor-
dination and cooperation among John S. Connor and
all of our contracted partners and vendors, recalls
Diane Olszewski, Connors Export/NVOCC manager.
Working on an extremely tight schedule, we coor-
dinated the logistics from the manufacturing plant inAustralia, including inland transport, port crane han-
dling, ocean transport to Long Beach, customs clear-
ance, and then truck transport to Milwaukee.
The load could only arrive on site on a Thursday. A
2,700 ft section of the roof of the hospital building was
removed above the level at which the chamber would
be placed. Connor coordinated delivery with the con-
struction company, crane operator and others engaged
in the process. The street had to be closed, bus routes
changed and a police escort arranged. The roof was re-
placed, electrical and mechanical components installedto complete the project.
Taking the pressure off the manufacturer
of whats been called the largest rectan-
gular hyperbaric chamber ever made was
Maryland-based John S. Connor, Inc.
Getting the $3 million chamber from the
Fink Engineering plant in Australia to
Milwaukees St. Lukes Medical Center required ex-
tremely tight coordination all along its route.
The chamber is one of four in the US. Hyperbaric
oxygen therapy is a medical treatment in which apatient breathes 100% oxygen within the pressurized
chamber for conditions such as problem wounds, car-
bon monoxide poisoning and exceptional blood loss.
Fink outsourced all movement of the 52.4 ft long,
12.3 ft wide and 9.5 ft tall chamber from its plant to
the hospital. For a previous similar operation, Fink
used a different provider and had the shipment sit for
two weeks in Long Beach while the Mayo Clinic waited
its arrival.
An Australian Connor partner, Global Product
Supply Management, arranged the pick up of thechamber, its movement to the port and loading aboard
Moving a 66 Ton Chamber From Brisbane to Milwaukee
Operations
The hyperbaric chamber on
site at St. Lukes being lifted
by crane.
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Outsourced Logistics |July 2008 | 15
NewsBriefsJuly
08
It doesnt end with just
the new magazine.
More opportunities await online!
Outsourced Logistics readers will be
longing for much more. Check us out at:
http://outsourced-logistics.com
The seller is 3M; the purchaser is Battery
Ventures, a technology venture capital and private
equity firm. HighJumps software is used by indus-
tries as diverse as aerospace
and automotives, consumer
goods, direct store delivery, dis-
crete manufacturing, document
management, food and bever-
age, retail, third party logistics,
as well as wholesale and indus-
trial distribution. The company describes itself as,
simplifying the art and business of creating, selling
and moving products across global networks, help-
ing more than 1,300 clients worldwide drive growth
and manage change.
Citing reasons for selling HighJump, the vice
president and general manager of 3M Track and
Trace Solutions Division, Lemuel Amen, notes that
the company, is refining its approach to provid-ing comprehensive track and trace solutions for
high-value assets and people that deliver customer
value through asset utilization, safety and security.
Therefore, we believe HighJump will have more
opportunity to maximize its potential with Battery
Ventures.
The sale is expected to close in the second quar-
ter of this year after which HighJump will function as
a stand-alone company. The company says that af-
ter the transaction is completed, it will remain com-mitted to investing in the development of its prod-
ucts, services and technologies in order to continue
to provide value for its customers and maintain its
strong offering in the marketplace. The products
will continue to be sold and supported under the
HighJump brand around the world, offering the
functionality and flexibility required by customers.
Battery Ventures manages nearly $3 billion in
committed capital, including its current fund of
$750 million. It describes itself as partnering with
entrepreneurs and management teams across
technology sectors, geographies and stages of
a companys life, from start-up and expansion fi-
nancing, to growth equity and
buyouts.
Jesse Feldman, senior associ-
ate of Battery Ventures, explains
that, We have been evaluating
the supply chain software marketfor over 18 months, and believe
HighJump Software represents the best-in-class
solution. Moving forward, the company provides us
with an excellent platform to grow both organically
and through acquisition. Terms of the transaction
were not disclosed.
HighJump Software is Being Sold
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16 | July 2008 | Outsourced Logistics
NewsBriefsJuly08
Operations
Cardinal Health Moves Fleetto Penske Logistics
Penske Logistics announced it has begun a transition to man-
age the dedicated fleet for Cardinal Healths medical supply
chain business. As a part of the agreement, Cardinal Health will
outsource the management of its dedicated truck fleet to Penske
Logistics. This involves transitioning approximately 700 of
Cardinal Healths truck drivers and related transportation sup-
port staff across North America to become direct employees of
Penske Logistics.
Penske said it intends to hire all the employees and is col-
laborating with Cardinal Health to ensure the transition for the
employees is as smooth as possible.
We are very pleased to be working with Cardinal Health and
we welcome these new associates to our organization as highly
valued members of the Penske team, said Vincent Hartnett,
President-Penske Logistics. We are working to ensure the transi-
tion is seamless for Cardinal Healths customers, as these drivers
will continue to serve their normal routes with the same dedica-
tion to service.
Loss Prevention Conference
Association ClosesThe Loss Prevention Conference (LPC), a
transportation industry association dedicated
to educating its members on the prevention of
freight loss and damage, recently announced
to its membership that it will no longer operate
as a member-based organization. SMC3 will
begin offering an annual loss prevention con-
ference event that will be consistent with the
LPCs high quality educational conferences.
The integration of the LPCs educational
mission with SMC3s organizational principles
provides a win-win relationship that all freight
claims professionals will clearly benefit from,
said A. J. Mitchell, Southeastern regional man-
ager for MTI Inspection Services (Colorado
Springs, CO) and outgoing LPC President.
SMC3 will host its first annual loss preven-
tion conference this coming October in Atlanta.
Previous LPC board members are working with
SMC3 in an advisory capacity to ensure that
the SMC3 offering continues to be the indus-
trys premier loss prevention education event.
Consistent with previous LPC annual meetings,
the SMC3 Loss Prevention Conference will de-
liver valuable information for preventing freight
loss and damage, as well as best business
practices for claims resolution, said Mitchell.
Not only will the educational content re-
main highly relevant, but the peer interaction
and exchange of ideas the LPC meetings of-fered will continue on as well, said John Rader,
SMC3 director of industry and educational ser-
vices, and former LPC executive director.
SMC3 plans to announce the details sur-
rounding its 2008 Loss Prevention Conference
soon, including confirmed dates, speakers and
a conference agenda. Those interested in re-
ceiving conference information as it becomes
available can send their contact information to
The Panama Canal Raises Marine Service Fees
For shipping companies there are boosts in costs for tug, loco-motive and line handling services on the waterway. In explaining
the climb, the Canal Authority notes that over the past eight
years it has spent $1.329 million in upgrades its fleet of tugboats,
locomotives and other elements of infrastructure. Now almost
half of all transits of the waterway are by Panamax vessels that are
106-feet wide. Since locks are just 110-feet wide, state-of-the-art
equipment and personnel are needed to ease these ships along
the way.
Rates for tug services will grow 8%. Line handling services
will be boosted by 7%. Additionally, a $300-per-wire fee will be
charged for ancillary locomotive services, explains the Authority,
up from a $200-per-wire fee (wires are attached to the loco-
motives to ensure that the vessels stay centered as they transit
through the locks).
For visibility requirements, if a vessel notifies the Canal less
than 48 hours prior to its arrival that its load exceeds Canal
standards, there will be additional costs. Those vessels that notify
the canal at least 48 hours in advance of arrival will be charged
$4,000. If the data is submitted less than 48 hours, that fee will
be $8.000.
For complete details on these increases, visit the Canals web
site at www.pancanal.com and go to Marine Notice to Shipping
N-1-2008, page 18.
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Outsourced Logistics |July 2008 | 17
California Ports Ban Owner OperatorsCiting rapid improvements in air quality, the Los Angeles Harbor Commission approved
the Clean Truck Programs Concession Agreement that will phase out owner operators at
the port of Los Angeles by the end of 2013.
The program, which would require drayage services to use 100% employee drivers by
the end of 2013 is to be phased in from October 2008. Port officials say it will allow them
to hold the drayage companies accountable for truck maintenance (which will improve
emissions) and driver credentials (which has a security benefit).
The Long Beach Press Telegram reported that over 85% of the 17,000 short-haul trucks
operating at the ports of Los Angeles and Long Beach are independent drivers.
In a letter to the Intermodal Carriers Conference of the American Trucking Associations,
J. Christopher Lytle, deputy executive director of the Port of Long Beach, said, It is clear our
differences go to fundamental issues and not merely to details. He went on to say that, we
do not believe that further meetings on the contents of the Long Beach concession agree-
ment would be productive.
This action, says the National Industrial Transportation League (NITL), would appear to
clear the way for the American Trucking Associations (ATA) to start litigation challenging the
concession agreement.
The concession agreement calls for 20% of the l icensed motor carriers fleet to be made
up of employee drivers by the end of 2009, increasing to 66% by the end of 2010 and 85%
by the end of 2011. By year-end 2012, 95% of the drivers would have to be employees, and
the remaining drivers would be required to be employees by the end of 2013.
Major Trucker Jevic Shuts DownHigh fuel costs, an economic downturn, increasing insurance costs and tighten-
ing credit markets are cited as causes for going out of business. Jevic and Saia Inc.
were spun off from Yellow Freight and co-existed under an umbrella holding com-
pany named SCS Transportation. Eventually SCS sold Jevic for $51 million to Sun
Financial Partners, retaining Saia, which has experienced substantial
growth. At the time of the splitting off of Jevic from Saia, then-chair-
man and CEO of SCS, Bert Trucksess, was quoted as saying that, Jevic
historically has had performance challenges, and so theyre no longer
going to be part of our company, and well be able to focus all our re-
sources on Saia, which has been a consistently strong performer.
Jevic has struggled in a tough competitive market. It offered specialized less-than-
truckload (LTL) transportation services and selected truckload (TL) and time-definiteservices with delivery capability throughout the contiguous 48 states and Canada.
Founded in 1981, the carrier offered integrated customer solutions, including direct-
to-customer deliveries, multi-shipper order consolidation for inbound supplies, and
express and time-definite deliveries. Jevic focused on loads between 1,000 to 30,000
pounds (overlapping both the LTL and TL markets), providing shippers with an al-
ternative to traditional LTL and TL carriers that may have strict load requirements.
In a letter to customers announcing the closing, David Gorman, the companys
CEO, explained that Jevic, would continue operating to deliver all freight within
its system prior to closing and would
continue to provide Customer Service
during the wind down period at 888-
Go-Jevic. The Jevic website will remain
active and will be updated
during the period as well and
that should be your primary
point of contact for tracing
and needed documentation,
he explained.
We greatly appreciate the loyalty of
our many Jevic customers, continuedGorman. It has been our pleasure to
provide solutions to your transporta-
tion needs over these many years. We
are committed to providing the prompt
delivery of your shipments in our system
and professional customer service for all
your needs during this process. Thank
you again.
Menlo WorldwideLaunches WarehouseSolutions
Third-party logistics provider Menlo
Worldwide announced a multi-client net-
work of warehouse management solutions.
Customers of every size can outsource any
level of warehousing, distribution, and
transportation management operations, says
the company. Its scalable and customizable
warehouse offerings operate from Menlos
information technology platform and global
network of facilities.
Paul Tedfors, regional logistics manager
for BSH Home Appliances, is using the pro-
gram to create what he calls a scalable solu-
tion leveraging Menlos shared resources
for IT services, physical plant, labor, and
expertise.
Menlo modeled the multi-client operation
on a successful facility in Fremont, CA and
is rolling out six fully operational facilities:
Atlanta, GA; Dallas, TX; Aurora, IL; Cranbury,
NJ; Fontana, CA; and Portland, OR.
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18 | July 2008 | Outsourced Logistics
Third-Party Logistics LaborPerformance Management
An Untapped Opportunity By Jack Webster
Too often companies and their third-party logistics
(3PL) partners lack business relationships thatextend beyond the standard three- to five-year
contract length. Reasons cited for these unsuc-
cessful relationships range from service-level agreements
not being met, to costing and pricing issues, to cultural
differences. While there is no one-size-fits-all solution to
address these relationship challenges, there is one tool
that is often overlooked as a way to potentially strengthen
a 3PLs relationship with its customer: a distribution center
(DC) labor performance management program.
DC labor performance management programs have
long been recognized by supply chain organizations as
tools to increase productivity and throughput capacity, re-
duce operating expenses and improve accuracy and safety
in DCs. Built around several core components, successful
programs typically include engineered labor standards
(ELS), a robust labor management system (LMS) with
the ability to track and report cost and performance, and
well-defined program polices and procedures. Strong
corporate sponsorship of the program and the adoption
of a continuous improvement culture throughout the
organization are equally important, as these elements are
the glue that holds the program together and helps drive
its short- and long-term success.If implemented in a 3PL DC environment, this type of
program can provide the 3PL and its customer with many
benefits. Of course the level of benefit realized depends
largely on the organizations commitment to the program,
as well as the type of price contract employed. The DC
labor performance management program offers each
organization the tools to succeed. It is up to the business
partners to determine the level of benefit each will realize.
Under a fixed cost or cost-plus arrangement, the imple-
mentation of a DC labor performance management pro-
gram benefits both parties. It allows the 3PLs customerto defer capital and operating expenses it might have in-
curred if 3PL productivity and throughput gains had not
been realized as part of the program. The 3PL can benefit
by maintaining its pricing structure while increasing profit
margins through decreased costs.
Under an open-book arrangement, both parties enjoy
many of the same benefits realized under the fixed cost
or cost-plus arrangement. Additional benefit is gained
through collaboration and understanding of the true work
content and costing. The most critical elements required
to build this understanding and collaboration under the
open-book arrangement are accurate engineered labor
standards (ELS) and a high-quality LMS.
ELSs enable the 3PL to develop accurate, activity-based
pricing that is representative of the work content actu-
ally performed by the 3PL, In turn, this allows the 3PL to
maintain adequate margin levels and fair pricing for the
customer.
Using an LMS provides visibility of DC performance,
accuracy and cost associated with specific DC operations.
The LMS is a powerful tool that helps build understand-
ing between the 3PL and customer. It provides unbiased,
fact-based reporting that details the successes of and op-
portunities for the 3PLs DC. Working with these reports,the 3PL and its customer can collaborate to develop tac-
tics and strategies to capitalize on successes and overcome
challenges faced at the DC.
The success of a DC Labor Performance Management
Program hinges on corporate sponsorship for the pro-
gram from both the 3PL and its customer.
Jack Webster is a Senior Manager with Kurt Salmon
Associates (KSA).
Operations
Community Voice
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20 | July 2008 | Outsourced Logistics
DHL Plans to Ease
Headache
entering the US market, expectations have not been met.
Despite rumors that DHL would abandon the US en-
tirely, sell off its operations or merge with another sup-
plier, none of that has happened. Dr. Frank Appel, CEO
of Deutsche Post World Net, DHLs parent company,
has reaffirmed the companys commitment to sustain-
ing its US business. Consider that, as DHL notes, in the
Americas the US represents the largest express marketand is connected to the worlds principal trade lanes.
Facts facing DHL: In 2007 came a loss of$1 Billion and for 2008 an EBIT (earnings before inter-
est and tax) loss of $1.3 Billion is projected. Outside of
the US, the company is the major provider of express
and logistics services. Within the US, it is the third larg-
est player in the market, trailing FedEx and UPS. Its a
serious understatement to say that investors are upset
with the performance. Since 2003, when DHL boughtAirborne Express for $1.05 Billion as a stepping-stone to
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Outsourced Logistics |July 2008 | 21
Its $1.3 Billion
Entry into the US domestic market cost more than
anticipated, causing the delivery giant to take dramatic
measures to staunch a gushing loss. By Roger Morton
a 20-year commitment for guaranteed capacity on
Transpacific air routes. The agreement remains in force.DHL and UPS are working aggressively to reach
agreement. Noting that it will begin transporting a
small portion of DHL this year then feed the rest into
its network next year, UPS Spokesperson Ken Sternad,
says that, We are compelled to get a contract completed
before we can begin.
As a consequence of moving airlift to UPS, the
Wilmington hub will no longer be part
of the global DHL backbone. In effect
the UPS WorldPort Air Hub at Louisville
International Airport becomes the North
American hub for DHL.
Even before talks with DHL began,
WorldPort has been growing. We will
have additional capacity with aircraft
coming into the fleet that we are com-
mitted to, claims Sternad. We also have
a rather large expansion of WorldPort. A
lot of that capacity will come on by next
summer. Adding efficiency and density
is what our business is all about. This
move is very good for us and good for
our business.On hindsight, looking at the
Wilmington facility, Mullen reflects that
it was an under-mechanized hub. In or-
der to keep it up and running, he says it
would have been necessary to upgrade it
and improve its ramp facilities to handle
DHL intercontinental flights with Polar
and its Transatlantic carriers. We would
have had to mechanize the parcel sort
and to gradually replace all of the aging
aircraft, he notes. All of those costsdisappear now with this arrangement.
Further, the company says that 47% of all its domestic
and international shipments are billed in the US wherehalf of its 200 largest customers are based.
The US business is accretive in value to our global
network, explains John Mullen, CEO of DHL Express.
Thats because if we didnt have the US, then we would
firstly lose all of the profit we make in the rest of the
world on shipments to and from the US, which is quite
substantial. Secondly, the US pays a proportion of global
costs. It pays for a piece of the Hong
Kong hub, the Leipzig hub, the air net-
works and so forth. If we didnt have a
US then those costs dont go away.
So much attention had been given to
the strategic plan announced by DHL
to restructure its US business, that it
overshadowed news of the opening
of its new air hub at Leipzig/Halle in
Germany some two days earlier. The
hub is a significant part of the backbone
of DHLs worldwide coverage that joins
one at Hong Kong, and had included a
hub at Wilmington in Ohio in the US.
The DHL strategic plan contains two
principal elements: outsourcing NorthAmerican airlift and reorganizing its in-
frastructure. The first of these two is gar-
nering most attention as DHL intends to
pay UPS $1 billion a year for the next 10
years to move its freight from airport-to-
airport only. DHL will retain its ground
network, pickup and delivery functions
and Customs clearance.
Previously DHL acquired a 49% stake
in the Atlas Air Worldwide Holding
subsidiary, Polar Air Cargo. Under termsof the agreement, DHL Express gained
Frank Appel, CEO,Deutsche Post World Net.
John Mullen, CEO DHLExpress.
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22 | July 2008 | Outsourced Logistics
delivery in certain locations, there will
be some impact on customers in areas
affected by closures and consolidation.
DHL characterizes the customer impact
as minimal, translating into 3.3% fewer
deliveries and 0.06% less pickups.
For DHL for the time being the bottom
line is the bottom line. Implementation
of its new strategy is expected to cost
$2 Billion. The company anticipates de-
creasing losses in US Express business
over the next three years at $900 Million
in 2009, $500 Million in 2010 and $300
Million in 2011.
If we can get it to the area of a $300million loss that weve targeted, thats our
step one, claims Mullen. We picked
that figure because we wanted to be able
to walk before we ran but also because at
that level, were actually better off having
the US with those losses than not hav-
ing the US with those losses. That said,
nobody wants to lose money. If we can
get there in the time frame that weve
scoped, the next plan will be how to get
the $300 million down to zero.
34% through consolidation and closure
of service centers. It will close facilities
in what it terms are low-density areas as
well as closing low-density stations in a
number of areas. It will also consolidate
facilities located in close proximity to
each other in a number of locations.
It will replace its current partially au-
tomated hub and spoke network with
what it terms is a more fully developed
multi-hub network supported by more
advanced automation.
Using newer technology solutions, the
company intends to re-engineer its basic
pickup and delivery route structure. Itwill also change the structure of its routes
with the aim of boosting premium inter-
national and express product service. It
anticipates a 17% reduction based on
the routing rationalization. To save 18%
in its ground line haul network, DHL is
cutting out runs to more remote loca-
tions while upgrading its fleet with more
efficient equipment.
While DHL is expanding its use of the
US Postal Service to serve for last mile
Going forward we avoid all of the capital
expenditure we would have had to incur
on our own if we kept going with our old
business model.
As characterized by Sternad the agree-
ment covers shipments from origin gate-
way to destination gateway. The only
aircraft UPS would not operate are those
coming into WorldPort on international
inbound flights. For shipments within
the US, or anything going to and from
UPS gateways in Canada and Mexico,
DHL will deliver the volume to a UPS
gateway location. The freight will then
move to the destination gateway. At thatpoint DHL will pick it up and move it
to its final customer. At the same time,
out there on the street, in front of the
customer, were still ardent competitors,
notes Sternad.
DHL is also changing the way it con-
ducts business on the ground with modi-
fications to the infrastructure in its sta-
tion network, pickup and delivery routes
and ground line haul. The company ex-
pects to reduce the size of its network by
Keeping track. Monitoring all flights, worldwide, atthe Global Quality Control Center at DHL ExpressGlobals Head Office in Bonn, Germany.
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Outsourced Logistics |July 2008 | 23
The new Leipzig/Halle Airport facility is an impor-
tant cog in the companys global commerce back-
bone that includes its major hub in Hong Kong.
Two days before announcing plans for changing its market
approach in the US, the international delivery giant opened
this 300 million facility to enhance its global express net-
work. For the company, this hub transfers flights previously
going to its Cologne gateway and its previous European air
freight hub in Brussels.
Some 60 planes per day arrive at the new hub from 46 des-
tinations across the globe. In addition to freight arriving from
the US and Hong Kong, cargo moves between Leipzig/Halle
and such points as Sharjahj in the UAE, Delhi, Istanbul,
Sofia, Warsaw and Ostrava, to name a few. These sites are
mentioned here to provide a sense of why this particular loca-
tion was chosen by DHL for creation of the new hub.
At the formal opening of the facility, Frank Appel,
Chairman of the Managing Board of Deutsche Post World
Net, spoke of a shift in global commerce increasingly toward
the east, not only with freight moving from China and India,
but with emerging markets that include the Mideast, the
Baltic States and Russia. Appel explained that this location in
Germany is central to DHLs continuing business with west-
ern destinations as well as to serving markets to its north and
south and the growing markets to the east.
John Mullen, CEO of DHL Express, observed that,
Demand for Express services is growing worldwide and we
took the decision to invest in our international network in
order to meet this need. The state-of-the-art new hub will
enable us to continue to offer the best possible service, quality
and reach for our customers. It is not only one of the indus-
trys most technically advanced hubs, with some of the worlds
most sophisticated sorting equipment, but it will also protect
and strengthen our leading position in the European, and
indeed global, express market.
The hubs sorting line is fully automatic and has been de-
signed to minimize sound levels as it operates. Its main sorter
is 6,500 meters long. There is a 900-meter document sorter
and 260 loading and unloading slots for air containers. At
present it is capable of handling 1,500 tons per day, antici-
pated to grow to 2,000 tons per day by 2012. The line can
handle 60,000 parcels and 36,000 documents per hour.
The facility is environmentally sensitive with, for example,
the use of natural gas powered cogeneration technology for
electricity, heating and cooling. The hub has 1,000 square
meters of solar cells on the roof of its workshop used for gen-
erating electricity. The hub catches and stores rainwater that
it then uses for drinking water and cleaning aircraft.
DHL Creates a Major Hub
Each night, freight arrives, issorted and departs from thenew Leipzig/Halle hub.
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26 | July 2008 | Outsourced Logistics
in Liege. Modeling the multi-stop route showed that the change
could provide good utilization on the Liege-Singapore leg and on
the Singapore-Shanghai segment. The Shanghai-Liege route was,
at times, at 100.1%, said Lombard, You just cant fit any more on
the plane.
In fact, TNT needed only 5% utilization outbound from Europe
to keep the 747 freighter operation in the black, and it had sur-
passed that in early trials. The service launched June 25th.
From 2004 to 2007, TNT engaged in the first phase of a trans-
formation that included stripping out its logistics services opera-
tion (now CEVA Logistics) and its freight forwarding group. It wasback to the core of optimizing and operating express networks.
TNTs density in Europe operating a road and air network in 35
countries provided the base for its operations and its experience.
The European road network features 16 road hubs and 85 inter-
national depots connecting another 415 regional depots. On the
air side, TNT operates from 70 gateways in Europe, Liege being
its principal express hub.
Examining its global strategy, Lombard comments that TNTs
lack of a presence in the intra-US express market is at times a great
regret, but at other times, we thank God we are not there. TNT
continues to deliver into the US market using regional carriersand subcontractors and it will connect US customers with other
TNTfaces the same challenges as
every other logistics provider and user of logistics services: re-
cord fuel prices, slowing Western economies, congestion and
productivity issues and rising environmental costs and pressure.
The express group is focusing its attention on using its strengths
to enter developing markets where it has the best prospect to
become the leading provider.
Marie-Christine Lombard, group managing director express,
describes TNTs strategic focus in simple terms. It has reached
the position of number one in Europe in national and intra-
European express flows. It is building uplift capacity from China
to fuel its European network and it is working to establish an
intra-China network. In the Rest of World category, it is number
one in selected emerging markets and is developing further op-
portunities.
Prior to selling its contract logistics unit (the current CEVA),
TNT announced a strategic direction that would focus on net-
works. The company has continued to develop its air and road
networks, says Mark Bradley, director of global network and op-
erations, taking a global approach of ensuring the networks are
planned, aligned and optimized so that we make accurate and
smooth capital investments to support growth.Being strong in core markets allows expansion into other mar-
kets, including China. TNTs announcement that it would begin
Liege-Singapore-Shanghai-Liege service in its own 747 freighter
is a prime example of how the company applies lessons learned
in the express business to enable it to develop tactics that sup-
port its larger global strategy.
Before the Singapore leg was added, the imbalance in the
Europe-China lane was significant. While China-Europe aver-
aged 92%, utilization, the return leg from Liege to Shanghai
was only averaging 39% of capacity. Lombard noted that TNT
was using commercial uplift on the lane and that was not onlyexpensive, it was less reliable and less connected to TNTs hub
By Perry A. Trunick
TNT Focuses onEmerging Markets
On the tightwire of express services,
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Outsourced Logistics |July 2008 | 27
have helped it optimize its European road net-
work and integrate with its air operations, and
it is this model TNT is migrating to developing
markets.
The company has also developed a road
network in Southeast Asia which Lombard says
has exhibited 23% growth operating within
and between the Southeast Asian countries
and Southern China. A similar developing
road network in the Middle East experienced
53% growth, she added. So, TNT isnt forget-
ting regional markets as it targets growth in the
Middle East, Africa, Southeast Asia and South
America.The South America experience is a little dif-
ferent, admits Lombard. There, TNT acquired
Mercrio in Brazil. Mercrio is a 60-year-old
company and a leader in Brazil. It also already
has express characteristics, says Lombard.
Bradley digs a little deeper into TNTs fact-
based and scientific approach utilizing a data
warehouse to feed information into strategic
planning tools to help build an optimized air
and road network. This is consistent and con-
stant process of alignment, analysis and restruc-
turing to suit the economic environment, says
Bradley. Its not just about building a pan-European approach but
taking a global approach with consistent deployment throughout.
Bradley points out that TNT first develops a baseline to deter-
mine the demand and service profile in the region. It models cur-
rent performance in service, service offering and cost characteris-
tics, and simulates and models various alternatives. TNT can then
take a clear strategic direction and do the tactical and transition
planning, he continues.
TNTs analysis of its European road network extends through
2017 and they have identified six potential new hubs on the
east-west axis going through Europe: Bratislava, Slovakia; Lyon,France; Munich, Germany; Prague, Czech Republic; Stuttgart,
Germany; Vitoria, Spain. TNT Hoau in China is mostly in the East
of China. India has five key hubs: Sinnar, Nagpur, Mahipalpur,
Martingale and Calcutta.
The road network in Southeast Asia serves Singapore, Malaysia,
Thailand, Cambodia and feeds into China. The European air net-
work operates a single hub based in Liege which connects with
65 airports utilizing 42 aircraft on 500 flights per week carrying a
weight ex-hub of 2,200 tons.
In North America, TNT provides international express delivery
services to and from the US and Canada. It has three internationalair gateways in New York, Los Angeles and Miami.
global destinations, but it has no desire to enter the intra-US
express market.
Just weeks after DHL had announced it would outsource its
US domestic express air lift to UPS, Lombard was explaining
the TNT position saying, If you come too late to the market,
you cant take a position. Given its focus on emerging markets
where it doesnt face large, entrenched competitors, TNTs goal is
to be the lead express provider in the markets where it operates.
Lombard explained the acquisition of Hoau in China in the
context of the companys larger strategy. Hoau was already a
leading less-than-truckload (LTL) carrier covering all of China,she pointed out. Hoaus 1,100 depots and 150,000 clients pro-
vide a strong platform for TNT in China. As an LTL operation,
however, Hoaus focus is on filling its trucks. Utilization is high
because they dont operate to a schedule, they optimize ve-
hicle capacity before the trucks leave the depot. That isnt TNTs
model, and it has begun moving Hoau to scheduled departures
that are necessary to support express operations.
The situation with Speedage in India, another acquisition, is
similar to China for TNT. That road network provides an LTL
platform TNT can transform into a national express network.
When you match schedule and capacity, it creates a strong bar-rier to entry in a market. TNTs sophisticated modeling tools
T concentrates on keeping its balance.
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28 | July 2008 | Outsourced Logistics
SIZEM
When Choosing a 3PL
A Ryder consumer packaged goods facility in Chile.
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Outsourced Logistics | July 2008 | 29
atters
Supplier scope and scale loom largein the selection of a logistics provider.
Chile, Brazil and especially in India.
Because of its presence in Southeast Asia, it is operating two
distribution centers for Nike in the regionone in Indonesia,
the other in the Philippines, both of which are growing. We
enabled them to very quickly outsource to us pick and packoperations, shipment staging, tracking and reporting for distri-
bution through the local markets, he explains.
Because of Agilitys local experience in India it was able to
win business by providing a custom solution for Germanys
Metro Cash & Carry. Metro has 615 stores in 29 countries that
offer a broad selection of goods and services at wholesale prices
to customers that include hotel and restaurant operators as well
as small- and medium-sized retailers. Among its other offerings
Metro Cash & Carry supplies fresh fish, meat,
fruits and vegetables every day. The company
now has several outlets around the country af-
ter its start in Bangalore in 2003.
Agility manages the companys cool chain
operations for fresh produce. They faced issues
that are typical in a developing market, recalls
Levy. The produce had to be processed, stored
and transported in very good condition in an
optimum temperature environment. At the time
they entered the Indian marketand its some-
thing often encountered in emerging markets
there was very little infrastructure for cool chain
available. So we built our own facilities.
Agility has to manage movement of fresh produce acrosslong distances through the hot and cold temperatures that are
typical of India. The good news for us, and this comes to intel-
lectual skill sets, says Levy, is that we have a long term Agility
team in India very experienced in managing general logistics
challenges that require us to deploy our own assets.
As does Agilitys Levy, Tom L. Jones, senior vice president
and general manager of Supply Chain Solution of Ryder em-
phasizes the importance of total landed cost and the ability to
manage it as key to success for any company. It involves a very
complex set of considerations that have to be put into the equa-
tion, he reflects. Then also you have to be able to change the
W
hen looking for an outsourcing
partner, depending on the nature
of the alliance, the size of the sup-
plier can play a part in making
the final choice. The size of theprovider matters but its where
that size is that makes the differ-
ence claims Jerry Levy, vice president of marketing for Agility.
Customers should be looking at where there are low cost sourc-
ing opportunities or where there is an opportunity for expand-
ing markets, he advises, and then they should examine the size
of potential logistics suppliers in that area.
As far as having presence in a market, Levy observes that,
The emerging market place is driving a lot of
growth. Those markets are China, of course, but
also Eastern Europe, the Middle East, Vietnam,
and places like Sri Lanka, Indonesia and Latin
America. He sees a significant trend in what
he terms Short Supply Chain shelf life. It used
to be if you built a manufacturing plant i