Is Your Logistics Provider a Problem Solver?

With the spotlight pointed directly at the predicted capacity shortage, businesses are looking to ensure that their shipments will not be left behind.  While many businesses are scrambling to lock-in service with a suitable carrier, others may find that the solution may be as easy as a heart-to-heart talk with their current provider.

That’s because a good logistics provider should also be a logistics problem solver.  Rather than just offer scheduled pickups and deliveries, with little room for flexibility, a problem solver will have options at its disposal to meet your specific needs.

In a recent Canadian Transportation & Logistics blog post, Dan Goodwill noted that the issue of delivering solutions had come up at a recent shipper-carrier roundtable he had attended.  “This idea was mentioned by both Heather Felbel, vice president, logistics of Indigo Books & Music, and J.J. Maislin, president of Maisliner, a Quebec-based freight carrier,” Goodwill wrote.  “Shippers are looking for transportation organizations that are problem solvers and can pull together a combination of resources to meet each cluster of customer needs,” he continued.  “Shippers are looking for solutions providers that can provide a range of services and modes, that can offer storage when requested, and that can make available value-added information services as needed.”

So how can your make sure that your logistics carrier is a logistics problem solver?  A few “points of discussion” to consider:

Flexibility:  Does your carrier offer a “one size fits all,” “take it or leave it” approach, or is there a menu of options to choose from to meet your exact needs?

Customized Plans:  Does your carrier understand your business needs and objectives?  Have you worked together to develop a logistics strategy that is specifically designed to meet or exceed those objectives?

Out of the Box Solutions:  Can your provider call on different resources to put together unique logistics plans to address unexpected or “rush” situations?

Contingency Planning:  When the inevitable crisis or SNAFU arises, will your carrier be able to offer a “Plan B” to ensure that your shipments are not delayed?

With 2012’s challenging business climate and transportation shortage on the horizon, it’s more important than ever for a business to have confidence that their logistics provider is also their partner.  A few minutes today to discuss your carrier’s service options could go a long way toward addressing your long-term service needs.

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New Driver Regulations Sent Holiday Chill through Trucking Industry

In a late-December announcement, the Federal Motor Carrier Safety Administration (FMCSA) gave the trucking industry what amounted to a lump of coal, when it finalized new rules that it claims will promote driver and highway safety.

FMCSA’s action, which takes effect in 18 months, will place tighter restrictions on the “restart provision,” that resets a driver’s clock following a designated period of rest. According to the Journal of Commerce, the new rule would cut weekly work time from 82 hours to 70 and require rest periods including the hours between 1 am and 5 am.

In a positive turn for the trucking industry, FMCSA opted not to proceed with a proposal to reduce the current 11-hour limit on daily driving.

However, industry groups were outraged by the changes to the restart provision, arguing that the change will reduce efficiency across their supply chains, complicate delivery schedules, and raise costs and possibly even increase incidences of highway accidents.

“This rule will put more truck traffic onto the roadways during morning rush hour, frustrate other motorists and increase the risk of crashes,” said American Trucking Association (ATA) President and CEO Bill Graves.

The National Retail Federation also expressed opposition:  “The current regulations have allowed U.S. retailers to achieve significant efficiencies within their supply chains and distribution networks while keeping safety as their top priority,” said David French, NRF senior vice president.  “We believe the new restart requirement will have a significant impact on the industry, especially those who rely on overnight or early morning deliveries.”

The ATA is considering legal action to try and prevent the rule changes from taking effect.  As currently written, the new rules will take effect in July 2013.

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US Retailers Be Prepared – 62% of Canadian Consumers Buy Online

Late last year the Canadian government reported that Internet sales in that country passed C$15.1 billion during 2009, an 18 percent increase from the C$12.8 billion that was spent online during 2007.  Internet sales were slow to take hold in Canada, but clearly, the option has caught on and is here to stay.  In fact, Canadian shoppers are projected to spend more than C$22.8 billion during 2012.  And the good news for U.S. retailers, is that roughly 62 percent of those consumers will be buying from U.S. retailers.

Canadian consumers are increasingly looking to U.S. retailers, since the stronger Canadian dollar means increased buying power, and since U.S. goods are generally in high demand among quality and status conscious consumers.  But, as a 2010 report by Visa Inc., points out, Canadian consumers have set some specific parameters when it comes to U.S. e-commerce:

  • 82 percent do not want to pay extra shipping charges for cross border sales
  • 75 percent are concerned about being faced with unexpected, or hidden charges
  • 72 percent believe U.S. sites offer a wider selection

Despite the strong demand among Canadian consumers for U.S. goods, a surprising number of American businesses have yet to develop websites targeted at the potentially lucrative Canadian market.  Breaking into the Canadian market can be a difficult process, as U.S. shoe retailer Zappos.com learned.  Zappos, which has established a niche in the U.S. as a result of its “free shipping both ways” policy, found that it could not replicate that service in Canada, nor could it offer the same selection of brands, due to distribution agreements.  The company announced that, effective April 1, 2011, it would no longer offer service to the Canadian market. 

Other U.S. retailers, including Amazon.com had to contend with stiff resistance from Canadian-based businesses, who claimed that the lower-priced U.S. retailer would unfairly infringe on their business.

According to Ksl eConsulting, there is a list of “do’s” for U.S. businesses interested in being “seriously considered as an online shopping destination for Canadians.” Among the tips:  Make sure your website lists prices in Canadian dollars, and be sure to use a Canadian shipping company!

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Driver Shortage Squeezes Already-Tight Capacity

It’s no secret that the recession had a serious impact on capacity – with the Internal Revenue Service reporting that as many as 3,000 carriers were forced out of business during 2008 alone – a less talked about story is the continuing shortage of drivers impacting current capacity.  Not only is there a serious driver shortage throughout the nation’s trucking industry but also, proposed changes to federal regulations threaten to make the problem worse.

The Council of Supply Chain Management Professionals (CSCMP) reported that the industry lost about 150,000 driving jobs during the recession, or more than 12 percent of the total number of drivers.  Factors in drivers leaving are due to retirement, new federal regulations and the industry’s need to add 400,000 drivers to accommodate post-recession spikes in demand.  Plus, a recent report by the American Trucking Association found that driver turnover rate is as high as 79 percent at some larger carriers.

In addition to recessionary cutbacks, reasons for the driver shortage include:

  • Aging workforce:  CSCMP reports that roughly one in six drivers are over the age of 55, and less than one quarter are under age 35.
  • Competition within Industry:  Shortage of drivers is resulting in companies increasing pay and benefits – which in turn has caused drivers to jump from carrier to carrier.
  • Proposed Federal Regulatory Changes:  Washington has issued proposed regulatory changes – under the auspices of improving highway safety and weeding out bad drivers – that industry officials say would have a net effect of forcing more drivers out of the workforce.  Among the federal government’s proposals:
    • Hours of Service Reduction:  The government would limit drivers to a 14-hour workday and reduce driving time to 10 hours from the current 11.  The Federal Motor Carrier Safety Administration has also proposed mandatory breaks and rest periods.  The trucking industry claims that these provisions will result in added costs and the need to bring on even more drivers, at a time when current drivers are in short supply.
    • CSA:  Though it is a Compliance, Safety, Accountability initiative, FMCSA has proposed new standards for driver safety and vehicle maintenance.  FMCSA is proposing to expand on current practices already in place.  The industry believes that the new changes are burdensome and impractical and will have little impact on the agency’s stated goal of reducing accidents.

How is your business looking to combat capacity shortages?  Do you maintain your own fleet or are you speaking with your logistics provider on maximizing linehauls for your shipments?

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U.S. Visitors from Mexico and Canada Face New Entry Tariff

Mexican and Canadian visitors to the United States are going to find that the price of admission has just gotten a bit steeper, thanks to a new $5.50 tariff that will be assessed on all visitors arriving by air or sea.

The new fee is the result of a U.S.-Columbia free trade deal, which was passed by Congress and signed into law by President Obama in October.  According to the CBC, the trade deal includes a clause “that removes an exemption from the tariff for travelers from Canada, Mexico and the Caribbean.”

Canada and Mexico had been exempt from the fee, per the 1997 North American Free Trade Agreement (NAFTA).

The new fee has raised the ire of consumers and government officials alike.

“Raising taxes at the border just raises costs on consumers,” said Canadian International Trade Minister Ed Fast.  “Canadian officials have raised concerns about the removal of the exemption at the highest level.  We will continue to raise Canada’s concerns with U.S. lawmakers.”  In addition, U.S. Rep. Bill Owens (D-NY) announced that he will introduce legislation to repeal the fee.

Imposition of the fee comes at a time when the joint Beyond the Border Working Group, established earlier this year by President Barack Obama and Prime Minister Stephen Harper, is attempting to finalize agreements on key trade and security issues.

U.S. officials suggested that budgetary pressures warranted the change.  “The elimination of the exemption was necessitated by the budget situation in my country,” said U.S. Ambassador David Jacobsen.  “It is paid by American citizens and foreign nationals alike, just like Canadian citizens and non-Canadian citizens pay fees at Canadian airports.”

According to the Watertown (NY) Daily Times, the Congressional Budget Office estimates that the tariff will raise “about $1 billion from 2012 until 2012.”

What do you think about this?

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Strong Canadian Dollar – an Opportunity for U.S. Retailers?

The U.S. dollar held strong competitive advantage over its Canadian counterpart for more than 30 years – with that it became standard among Canadian consumers for U.S. imports to cost more.  Recently, the Canadian loonie has achieved parity with the U.S. greenback presumably making U.S. goods less expensive on the Canadian market – many are scratching their heads wondering why prices have not fallen.

While explanations vary from smaller market, higher distribution costs, different labeling requirements and higher taxes among those often cited – others point the finger at retailers who are plain old reluctant to lower prices

As more consumers become aware of the Canadian currency’s increased buying power, many are speculating it is only a matter of time before Canadians look online to find their desired U.S. goods – but at a better cost.  In a CTV.ca report, marketing analyst Lindsay Meredith said if Canadian retailers don’t reduce prices to reflect the new economic reality, “they’re just going to lose a lot of business to the American guys who are going to have a field day picking up the action.”

In the same report, CTV reported that a shopping cart full of U.S. goods purchased in Canada, cost significantly higher than when the identical items were purchased in the U.S. – an average of 20.4 percent more.  “Sample items included a pair of cargo shorts sold from the Gap, which were priced 15% higher in Canada, as well as a Blu-Ray copy of ‘The King’s Speech,’ which was 28 percent cheaper in the U.S.”

While analysts predict the price discrepancy will disappear in the coming months, others are offering what may turn out to be the best advice of all to Canadian consumers.  According to Consumers Association of Canada President Bruce Cran, “there are two things consumers can do to protect themselves.  One is to buy across in the U.S.A., and the second is haggle.”

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Supply Chains have Enhanced Post-Recession Value Survey Finds

A recent survey of  supply chain and logistics professionals found that 89 percent of respondents believe that the supply chain function has become more important to their organization than it was prior to the recession.

The survey, sponsored by logistics industry research/analysis group eyefortransport, was conducted in September 2011 as a way to gauge perception about the role of supply chain management in the post-recession business environment.  As the survey findings make clear, businesses are increasingly realizing the value that a well-planned and well-managed supply chain can have on their bottom line.  In fact, supply chain management has become such a tier one issue, that 56 percent of respondents said that the supply chain function either has a seat on their board, or will within the next two years.

Katharine O’Reilly, eyefortransport executive director summed up the survey findings by nothing that:  “…[O]ne of the best weapons companies have is their supply chain, and the people who run it.  Their views are always of note to smart business owners.”

This survey would seem to support collective wisdom among business professionals that (a) cost efficiency and streamlined processes are key to life in the post-recession and (b) moving forward will mean learning from mistakes of the past.  As Detlef Trefzger of Germany’s Schenker AG put it:  “People are more focused and committed to solutions.  Before the recession we discussed strategies with our customers that were nice to talk about but never implemented.  That has changed.”

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Supply Chain Component Needs Consideration in Demand Management Processes

In its simplest form, demand management refers to the process whereby businesses utilize various indicators to forecast customer demand, and align its supply chain to meet those projections.  Now obviously there is no guarantee that demand management is going to be successful every time, but for many businesses, it has proven to be a reliable way to manage inventory and planning systems.

While some have likened demand management to “management by crystal ball,” the concept is actually quite complex, and involves the synchronization  and integration of many different parts, with technology being the glue that holds everything together.  A recent survey by Griffin Strategic Advisors, reported on by Supply Chain Management Review, found that just about half of businesses believe that their supply chain is adequately integrated with their technology function.  In fact, 25 percent of survey respondents said that they were not integrated at all.

This is particularly important, since responsibility for demand management most often falls to the supply chain function.  According to the Griffin survey, demand management responsibility tends to be assigned as follows:

  • Supply Chain – 33 percent
  • Operations – 21 percent
  • Sales – 18 percent
  • Procurement – 14 percent

So while businesses are increasingly assigning responsibility for the demand management function to supply chain managers, they are generally not taking steps to provide the visibility/technology necessary to evaluate all of the business’ moving parts.

Another surprising finding of the survey, only 17 percent of respondents said that their logistics/transportation function was “very involved” in demand management.  As the survey authors point out: “Regular input around supplier issues, capacity and mix, transportation or warehousing constraints, for example, are invaluable for a solid demand plan.  Similarly, logistics needs accurate and timely input to execute against the demand plan.”

Businesses that fail to factor logistics and transportation into their processes could be in for quite a surprise.  The transportation industry took quite a hit during the recession, with an estimated 3,000 carriers either absorbed by larger companies or forced out of business altogether.  This contraction in capacity, along with a serious shortage of drivers, could cause some businesses to have trouble locking in service.

Businesses that find demand management to be most helpful are those that integrate all functions into the demand management process – especially logistics and transportation.  By ensuring that all areas are looped into the process, a business can help ensure greater efficiency and results.

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Automotive Aftermarket Suppliers Need to Identify Logistics Efficiencies

Results from the Automotive Aftermarket Suppliers Association’s (AASA’s) quarterly “Supplier Barometer,” indicate strong concern among suppliers about higher manufacturing and fuel costs.   According to Steve Handschuh, president and COO of AASA, “all of our Q2 2011 survey respondents reported they experienced raw material prices increases over the last 12 months,” and while most reported price increases of 5 percent to 29 percent for raw materials, a significant number reported increases of more than 150 percent.

These findings are cause for concern among aftermarket suppliers.  News of the cost increases comes on the heels of what has been a very interesting period for the industry.  First, the aftermarket was able to withstand the negative fallout of the economic recession – largely due to cost-conscious consumers choosing to maintain their older vehicles.  The aftermarket also weathered uncertainty as a result of the earthquake and subsequent tsunami that struck Japan during March.  The disruptions to the automotive supply chain had a worldwide ripple effect, but the aftermarket was able to escape largely unscathed.

While the Japanese disasters have not had a major impact on the automotive aftermarket, a significant portion of Barometer respondents have “had to deal with parts shortages and seek alternative suppliers,” explained Paul McCarthy, AASA vice president of industry analysis, planning and member services.

With these issues on the horizon, the one certainty seems to be an interest in cost cutting and internal efficiencies.  Manufacturers will naturally be looking to their supply chains for savings. As suppliers do look to streamline logistics costs and improve efficiencies, here are a few things to keep in mind:

Customized Solutions are Key: A good provider will be able to offer a customized logistics solution that addresses a manufacturer’s unique business needs, which generally means that shipments travel more efficiently and seamlessly.

Keep it Local: If you’re sending a shipment of parts to Canada, doesn’t it make sense to use a logistics provider that has experience in the Canadian market – a provider that can ensure that shipments won’t be delayed at the border, and will arrive on-time at their Canadian destination?  This sounds obvious, but a surprising number of businesses trust their shipments to carriers with minimal experience, only to pay the price later with inordinate delays and unexpected fees.

Out of the Box Thinking could mean Big Efficiencies: A post-recession supply chain check is a good time to match your current operating procedures against current industry trends to make sure you’re taking advantage of different options.

  • Distribution Center Bypass: Logistics providers are increasingly able to skip unneeded distribution center stopovers by taking advantage of increasingly connected distribution networks.  Direct-to-store transit also means that suppliers can maintain leaner inventories.
  • Inbound Freight Management:  Take control of your transportation spend by managing logistics for all incoming shipments.  By centralizing logistics planning, a business negotiates service agreements with a logistics provider, and utilizes that provider for all incoming shipments.  A business is no longer beholden to the costs and delivery schedule of a transportation provider selected by a supplier.

AASA’s recent Barometer Survey made clear that aftermarket professionals are quite concerned about both short-and-long term economic factors.  By taking the time to evaluate its supply chain, a business could easily put in place new logistics practices that could result in measurable efficiencies and savings.

Is your business within the automotive aftermarket?  Are you concerned about the future economy.  Share your thoughts and opinions here.

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Bug-Free Pallets Could Add to Border Delays

Until recently, shipments entering the United States from Canada were exempt from a requirement that all wooden pallets be treated for bugs prior to arrival at the border.  But now, the U.S. Animal And Plant Health Inspection Service (APHIS) is proposing to end that exemption, claiming that more than 320 million Canadian pallets cross the border each year, bringing the threat of bug infestation that poses a risk to U.S. agriculture and forest safety.

While APHIS’ proposed change is still in draft form, it has generated backlash on both sides of the border.

The Canadian Food Inspection Agency (CFIA) responded by issuing its own recommendation — to eliminate the pallet-treatment exemption currently extended to U.S. shippers.

Today’s Trucking.com reported that the government of Canada has urged APHIS to delay implementation until at least 2013, warning that the new rule would “have serious consequences for Canada-U.S. trade and North American competitiveness.

And trucking officials have raised concerns about the added delays that would result, as agents would be required to inspect each pallet.  The Canadian Trucking Alliance (CTA) expressed concern that the changes not be implemented until an adequate supply of treated-pallets is accessible – which is currently not the case.  As reported by Canadian Transportation&Logistics, CTA CEO David Bradley wrote to APHIS, stating that:  “CTA has seen too many examples in recent years where new measures affecting the border have been rushed, only to be withdrawn at the 11th hour when it became apparent that they were unworkable.  Let’s just take the time to get this right.

In addition to delays, there is concern about the costs of complying with the pallet-treatment mandate.  The Canadian Wood Pallet Association estimates that it will cost $2(Canadian) per pallet for treatment, for a total of about $300 million (Canadian).

U.S. border agents will begin notifying non-compliant shippers of the rule change in the coming weeks, with actual enforcement to be phased in at a yet-to-be determined date.  For shipments headed north to Canada, the new requirement will be phased in beginning this year, with full compliance expected by the summer of 2012.

Which side of the issue is more important to you, reduced delays or environmental concerns?

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