A great article over at Logisticsview Points concerning use of lean tools in the distribution center. The article is written by Carl Fowler of Menlo Logistics.
I will not repeat it as you need to go there and read the entire piece. I will say I agree 100% and it makes the simple yet effective case for everyone to implement lean in the D.C.
Friday, January 20, 2012
Thursday, January 19, 2012
Unemployment Claims Plummet
The singular biggest metric to watch for business activity (IMHO) is the first time unemployment claims number. This number is going down consistently which means business activity will pick up. Unemployed people will begin working and employed people will feel more confident.
The graph below from Northern Trust tells the story:
The graph below from Northern Trust tells the story:
Since September we have been going straight down with the initial claims. Don't let the naysayers fool you by saying "people are dropping out of the market". These are first time claims so just about everyone files their initial claim. Firing slows way down and therefore we know the economy is stabilizing.
Good news for everyone and especially trucking and logistics firms. More workers, more confidence, more buying, more freight.. it is that simple.
Why You Want to Manage Your Suppliers' Social Responsibility
If there ever was an argument to manage social responsibility of your suppliers, this I think puts the argument to bed:
Wednesday, January 18, 2012
When Your Suppliers Tarnish Your Brand - Apple "Cry for Help"
I consistently talk about sustainability within your supply chain. Most companies look inward on this. But as this article, Apple's Cry for Help, calls out, you have to also look at your suppliers and even their suppliers. Nothing kills a brand faster than a T.V. camera in Foxconn showing the nets they have to put under the windows to keep workers from committing suicide.
The New Face of Brokerage
I have really stayed away from endorsing certain companies just because I want to discuss more macro issues in the logistics industry however I will break with tradition for this post. I am seeing a trend develop with brokers where it is not your "father's broker" anymore. They truly are becoming logistics experts who do more than just "dial for diesels".
One such company I have talked to many times is Coyote Logistics. This company is young, aggressive, extremely smart and a leader in technology. They listen and understand your needs then formulate solutions.
I say this because people who have been in the industry a long time (include me in this!) have a mindset of "no brokers". We remember the days of brokers just calling and wanting your freight but taking no ownership in true logistics solutions. They were "brokers" in ever sense of the word: matching up buyers and sellers and that was it. After meeting Coyote I can tell you the model I described above is dead. Long live the new generation of brokers!
As a shipper you may want to look at companies such as Coyote to manage certain segments, certain promotional events, moves or even your full transportation needs. It is not a one size fits all and there are reasons to use these new breed of brokers and reasons not to. However, I would tell you that if you still have the mindset of "brokers are bad" I highly suggest you call Coyote and see if this new breed can change your mind. It certainly did mine.
One such company I have talked to many times is Coyote Logistics. This company is young, aggressive, extremely smart and a leader in technology. They listen and understand your needs then formulate solutions.
I say this because people who have been in the industry a long time (include me in this!) have a mindset of "no brokers". We remember the days of brokers just calling and wanting your freight but taking no ownership in true logistics solutions. They were "brokers" in ever sense of the word: matching up buyers and sellers and that was it. After meeting Coyote I can tell you the model I described above is dead. Long live the new generation of brokers!
As a shipper you may want to look at companies such as Coyote to manage certain segments, certain promotional events, moves or even your full transportation needs. It is not a one size fits all and there are reasons to use these new breed of brokers and reasons not to. However, I would tell you that if you still have the mindset of "brokers are bad" I highly suggest you call Coyote and see if this new breed can change your mind. It certainly did mine.
Tuesday, January 17, 2012
Why Sustainability?
Unfortunately, I think sustainability is starting to get a bad rap. First, there are political overtones which people just can't seem to get over. However, what is more troublesome is the "greenwashing" which is going on. Many companies are now using it as a "marketing tool" and do not really believe in the idea of sustainability. As if to show how prevalent this is in the industry, Greenpeace actually has a web site dedicated to stopping greenwashing. The title is "Clean up your Act not your image".
I personally believe doing "good things" for the earth can be done while also being responsible to stake holders for a company. You have to just believe that statement or you will go down the rat hole of "pay back" periods, EVA and the other tools accountants dream up to "engineer" their finances. At the end of the day we either take sustainability seriously or we will have it imposed on us. What good is it to have an energy efficient product for example with "sustainable packaging" if the product arrived at the store on a truck spewing fumes into the air, idling and wasting fuel and using imported fuel? Makes no sense to me.
John Pattullo, CEO of CEVA Logistics said in 2010, "In today's economy, many customers are unwilling to pay a premium for green transport [however] the logistics industry must support change towards sustainable services." I could not agree with him more. Sooner or later we have to make the change and I hope it is sooner.
So, I implore all those in the logistics field: Do not take such a serious topic as sustainability and turn it over to the marketeers. Your customers and, most important, the public will see it for what it is, and ultimately, you will tarnish your brand.
I personally believe doing "good things" for the earth can be done while also being responsible to stake holders for a company. You have to just believe that statement or you will go down the rat hole of "pay back" periods, EVA and the other tools accountants dream up to "engineer" their finances. At the end of the day we either take sustainability seriously or we will have it imposed on us. What good is it to have an energy efficient product for example with "sustainable packaging" if the product arrived at the store on a truck spewing fumes into the air, idling and wasting fuel and using imported fuel? Makes no sense to me.
John Pattullo, CEO of CEVA Logistics said in 2010, "In today's economy, many customers are unwilling to pay a premium for green transport [however] the logistics industry must support change towards sustainable services." I could not agree with him more. Sooner or later we have to make the change and I hope it is sooner.
So, I implore all those in the logistics field: Do not take such a serious topic as sustainability and turn it over to the marketeers. Your customers and, most important, the public will see it for what it is, and ultimately, you will tarnish your brand.
Saturday, January 7, 2012
December Cass Index report shows signs of improvement but points to slow Q4 growth overall - Article from Logistics Management
As I have predicted for a while, freight was very soft in Q4. Shippers have reset inventory levels at very low points and unless they see a large swing in macro economic indicators, I doubt they will increase volumes (Don't pray for a "restocking" initiative).
I believe also shippers are starting to take advantage of improved technology driving actions such as back haul sharing, co loading and other joint initiatives. This, of course, takes sophisticated software. There may be a convergence going on: Sophistication of software and the willingness of shippers to accept a bit more complexity to offset the higher per unit costs. Key metrics to measure will be:
Loaded revenue per mile, revenue per tractor / trailer and the amount of idle equipment.
While everyone is complaining about the driver shortage, no carrier that I have seen has been willing to raise wages. The "windfall" of revenue due to tightened capacity appears to be flowing to company bottom lines and not to the driver.
Wednesday, January 4, 2012
The Coming Capacity Crunch. Y2K All Over Again? UPDATED: Added Former Government Officials
I must admit I do believe there is a capacity crunch coming but I am also starting to get very skeptical. Does this sound like the "Y2K" scare all over again? There is a cabal of vested interests in creating this scare. Too many people are profiting from the scare. Here is my quick inventory:
1) Carriers: By scaring the hell out of people they are trying to raise rates in advance of costs. Carriers will say they want to raise rates to "protect capacity" but then when you look to see what is being done with that money, it is essentially being pocketed. Driver wages have not moved one bit. I might understand if the money was going to driver wages but it is not. Where is it going?
2) Consultants: Lots being built on this just like the consulting of Y2K. Create a crisis then charge a lot of money to help solve the crisis.
3) Leasing Companies: The story goes that the capacity crunch is on and so you will want to look more to dedicated fleets. Voila! We have a solution for you if you will just lease these trucks for 5 years.
4) Trade organizations: Their story is in order to stay in front of the capacity crunch you have to join and pay fees to attend special seminars like "What to do when the capacity crunch hits". There are thousands of these seminars and they do not amount to much.
5) Former Government Officials: This is the best part of the entire cabal. There are former government officials (Link is provided as an illustration of the revolving door between government appointee then consultant.. I do not personally know Mr. Burnley) who are directly complicit in forming the laws which most likely will cause an artificial capacity constraint (i.e, tinkering with the HOS rules). They then leave government and make a lucrative career out of consulting on how to deal with the problem they helped create in the first place.
5) Former Government Officials: This is the best part of the entire cabal. There are former government officials (Link is provided as an illustration of the revolving door between government appointee then consultant.. I do not personally know Mr. Burnley) who are directly complicit in forming the laws which most likely will cause an artificial capacity constraint (i.e, tinkering with the HOS rules). They then leave government and make a lucrative career out of consulting on how to deal with the problem they helped create in the first place.
Unlike Y2K where the narrative was a technical issue (turned out not), this issue is purely economics. The key question is at what point will capacity come back to the market and what will be the market clearing equilibrium price for services. Further, what will be the alternatives and when will the costs get to the point where alternatives are used by the shippers.
I am not saying this is not real but like most things it probably is getting very over-hyped as an entire industry appears to be building around the anticipation of the event rather than the actual event.
I also wonder, from an antitrust standpoint, how much of this is the carrier base "signaling" to their competitors of intentions. They clearly are publicly signaling their intention of decreasing capacity and raising rates. Something perhaps someone should look in to.
Tuesday, January 3, 2012
Transplace Industry Blog - Domestic intermodal volume remains strong
Intermodal volume about the same as last year however I am very certain the container count is up in the overall fleet. This would mean excess capacity.
The "Softer Side"...
Fitting on my first day back my thoughts went to leadership and the "softer side" of logistics. An article written in December from Kate Vitasek talked about this issue directly. As logistics leaders we are very good at measuring the performance of our networks but how are we at measuring the performance of our people in terms of leadership and engagement? Do we believe these are important qualities?
John Bogle, founder of Vanguard Mutual funds says, "not all things that count can be counted and not all things that can be counted, count". Leadership is one of those things which cannot be counted very easily but probably "counts" more than anything in logistics.
What I am finding is the "technical" side of logistics and overall supply chain can be trained or, in most cases, the young and very good talent are coming to companies with the technical skills needed. What the universities cannot train is the leadership aspect. The more responsibility you have means you generally are going to spend more time on motivating, engaging and setting up people for success rather than on the technical details. So, how does young talent get that type of experience so they are ready when they reach the higher levels?
You must find the opportunities and they are out there. Even if they are leading a small team, get them into that leadership position early and often. Further, if you are lucky enough to have large groups (i.e., shifts in a distribution center) make sure they get to lead those groups. Reinforce the importance of doing this early and often in their career. I know most college graduates do not aspire to lead the night shift but they have to have that experience early in their career.
Also, ensure leadership is a fundamental skill one must acquire to get to higher levels. Leadership can be "practiced", learned and improved upon. Just like any other skill however, you must do it over and over again to get better at it. Make sure your younger folks are given these opportunities.
John Bogle, founder of Vanguard Mutual funds says, "not all things that count can be counted and not all things that can be counted, count". Leadership is one of those things which cannot be counted very easily but probably "counts" more than anything in logistics.
Saturday, December 31, 2011
Price of Fuel Going Down as Supply Increases? Don't Bet on It.
It is arrogance to assume the US can control the worldwide price of oil and refined petroleum products (PP). It is also delusional to think the oil companies will do anything other than what is in their best interest.
Practically, what those two statements mean is 1) Petroleum products, regardless of where they originate, will flow to the most economical location - it is fungible. 2) Oil companies could care less if the US is dependent on foreign oil or not (see 1. above).
We now have the interesting situation where US demand for petroleum products (i.e., gasoline) is lower than the supply. The narrative has been when this occurs, prices will go down and that will spur more demand, a new "market clearing" price will emerge and all will be fine. Of course, this assumes the US is a closed society and the only thing the oil companies can do (or want to do) is dump the excess oil /PP on the US market. But, we learn, they have a second option. They can export it to countries where demand is growing the price is higher.
This puts us into an odd situation: The US is now a net exporter of petroleum products. The excess supply did NOT lower prices or wean us off of foreign oil.
So, if you are a trucker or shipper thinking all that shale gas and oil will ultimately lower your operating costs you may want to think about a "plan B". It will merely get exported.
Practically, what those two statements mean is 1) Petroleum products, regardless of where they originate, will flow to the most economical location - it is fungible. 2) Oil companies could care less if the US is dependent on foreign oil or not (see 1. above).
We now have the interesting situation where US demand for petroleum products (i.e., gasoline) is lower than the supply. The narrative has been when this occurs, prices will go down and that will spur more demand, a new "market clearing" price will emerge and all will be fine. Of course, this assumes the US is a closed society and the only thing the oil companies can do (or want to do) is dump the excess oil /PP on the US market. But, we learn, they have a second option. They can export it to countries where demand is growing the price is higher.
This puts us into an odd situation: The US is now a net exporter of petroleum products. The excess supply did NOT lower prices or wean us off of foreign oil.
So, if you are a trucker or shipper thinking all that shale gas and oil will ultimately lower your operating costs you may want to think about a "plan B". It will merely get exported.
Friday, December 30, 2011
Thoughts on Economic Distortion
In transportation I have heard shippers say they do not want to negotiate too "hard" with carriers because they want to treat them as "partners". I have always wondered what that meant. What does "negotiating hard" mean and what does being a "partner" mean are key questions for both the buyer and seller of transportation services?
I submit they mean the same thing and tend to be emotional statements. What I prefer is to work with transportation providers as an extended supply chain. After all, unless one side is trying to get unfair or undo leverage on the other side we should be working together as a single entity for the common good of the ultimate customer.
What this means is there cannot be economic distortion in the discussions. Economic distortion exists when one side has information pertinent to the discussion the other side does not have - some call this information asymmetry. When economic distortion exists there is bound to be an outcome which is weighted to one side or the other in terms of value. When that occurs the sub-optimum solution is obtained and it will ultimately lead to mistrust and a dissolution of the relationship.
I go from the premise that eventually all information will become known and will be available to both sides. As soon as one side realizes they were disadvantaged by the other side not disclosing pertinent information the disadvantaged side tries to fight back and so begins the war of distrust and trying to "one up" the other side.
So my warning to the buyers is do not think you are somehow out maneuvering the transportation provider. Ultimately, the real situation will be discovered and when it is you will be hit back and hard. You may get a short term gain but at a long term price. To the suppliers / logistics providers: If you are thinking you have a long term sustainable business model by taking advantage of your customers by not disclosing proper information (costs, operational efficiencies etc) you are kidding yourself. Sooner or later what you thought was secret will become known and when the customer realizes they have had the wool pulled over their eyes, they will dump you.
In the end, American business could save a lot of time, money and extraneous resources if this little dance did not need to be played out every time an arrangement needed to be made between buyer and seller.
This may not be a 10X idea but it certainly is a 10X program if properly implemented. If a company and its suppliers really took this to heart I believe both sides would see dramatic improvement in productivity and efficiency thus driving the 10X change that we seek. Lots of people talk about this, few if any actually do it.
Assume all relevant information will become available and save a lot of time by trying to take advantage of short term economic distortions.
I submit they mean the same thing and tend to be emotional statements. What I prefer is to work with transportation providers as an extended supply chain. After all, unless one side is trying to get unfair or undo leverage on the other side we should be working together as a single entity for the common good of the ultimate customer.
What this means is there cannot be economic distortion in the discussions. Economic distortion exists when one side has information pertinent to the discussion the other side does not have - some call this information asymmetry. When economic distortion exists there is bound to be an outcome which is weighted to one side or the other in terms of value. When that occurs the sub-optimum solution is obtained and it will ultimately lead to mistrust and a dissolution of the relationship.
I go from the premise that eventually all information will become known and will be available to both sides. As soon as one side realizes they were disadvantaged by the other side not disclosing pertinent information the disadvantaged side tries to fight back and so begins the war of distrust and trying to "one up" the other side.
So my warning to the buyers is do not think you are somehow out maneuvering the transportation provider. Ultimately, the real situation will be discovered and when it is you will be hit back and hard. You may get a short term gain but at a long term price. To the suppliers / logistics providers: If you are thinking you have a long term sustainable business model by taking advantage of your customers by not disclosing proper information (costs, operational efficiencies etc) you are kidding yourself. Sooner or later what you thought was secret will become known and when the customer realizes they have had the wool pulled over their eyes, they will dump you.
In the end, American business could save a lot of time, money and extraneous resources if this little dance did not need to be played out every time an arrangement needed to be made between buyer and seller.
This may not be a 10X idea but it certainly is a 10X program if properly implemented. If a company and its suppliers really took this to heart I believe both sides would see dramatic improvement in productivity and efficiency thus driving the 10X change that we seek. Lots of people talk about this, few if any actually do it.
Assume all relevant information will become available and save a lot of time by trying to take advantage of short term economic distortions.
Thursday, December 22, 2011
US To Be A Net Exporter of Petroleum Products in 2011
For you transportation professionals who bought into the idea if we drill and produce more oil, prices will go down. Think again. This article in Seeking Alpha shows the US will end the year as a net exporter. Yes, the prices are not going down, the fuel is just going out.
Final HOS Rule Released and Sec. LaHood is on Santa’s Naughty List! - Article from Logistics Management
Final HOS Rule Released and Sec. LaHood is on Santa’s Naughty List! - Article from Logistics Management
Dodged a few bullets but the total work hours are down from 82 to 70. What is interesting, quite amazing and important is this gets phased in over 18 months. That is a lot of time for shippers and carriers to get ready and for lobbyists to get it overturned. Ok, I am a bit cynical but as the article points out, if there really was a "crisis" of safety on America's highways would we wait 18 months to implement a resolution?
Taking a Control Tower Approach - Article from Supply Chain Management Review
I am a big fan of the "control tower" idea and think it is absolutely a necessity. Whether you outsource it or not is an entirely different question. Outsourcing is a decision concerning what the core competency of your company is and where you want to put your capital to work. A manufacturing company who has a core competency in manufacturing may choose to outsource logistics. A retailer who believes their competitive advantage is logistics may choose not to.
Either way, you should embrace this control tower concept. It is an idea which has seen many lives over my 20+ years of logistics experience and it keeps getting better with age and technology.
Saturday, November 19, 2011
Q3 GDP Growth is a Fire in The Pan Spurt
Conference Board's perspective on the Q3 "growth" spurt. Personally, I cannot imagine GDP continuing to grow when we are at 9%+ unemployment. Just the simple economist in me coming out.
Conference Board Report
Conference Board Report
Supply Chain Executives Define Social Media Too Narrowly
Supply Chain Executives Define Social Media Too Narrowly
A good post and one which I responded to. Please click on link and look for comment from Kevinaom. A very timely and interesting topic.
Learnings Through Logistics' Visits
I had a great week visiting with many logistics providers and trying to get insight into just exactly what is going on in this business. Some will tell you the business is collapsing due to low demand, some believe the transportation business is ripe for a great uptick in profitability due to constrained capacity (the jury is still out, in my mind, on whether this is artificial or not), some believe it is all just the same.. we are moving around the margins.
I get conflicting signals. For example, everyone tells me the driver shortage is wildly acute and we run the risk of just not having enough capacity to service the industry because of a lack of drivers. Many say if the GDP stays above 2.5% or greater then we will just not have enough capacity to service the shipper market. However, using "Econ 101" this would tell me driver wages should be increasing. That is not the case. Driver wages are flat.
The next question is whether the increase in intermodal actually is absorbing the otherwise demand for driver capacity? This seems to be a plausible answer. Container capacity is up 10% to 20% (depending on who you talk to) and this means those containers have to be filled. They will not let them just pile up in a container yard. Add to the fact that many shippers are lowering their point of indifference of choosing between trucks and IM (Indifference is the length of haul in miles where a shipper sees the two as interchangeable) and more shippers are choosing IM on more lanes. Obviously, this reduces the need for drivers on long haul runs.
So, data is really mixed. The analysts are all saying most of these companies (public) are "fairly valued" and the industry should not be overweighted in a stock portfolio. Projections for pricing have been reduced (early this year most were claiming a 4% price increase but that does not seem to be happening) and capacity has freed up.
The one caveat? Last year we were saying this same thing and the market for trucks and transportation went on fire in the first quarter. So, this post did not give you an answer (sorry) but may have provided some things to think about.
I get conflicting signals. For example, everyone tells me the driver shortage is wildly acute and we run the risk of just not having enough capacity to service the industry because of a lack of drivers. Many say if the GDP stays above 2.5% or greater then we will just not have enough capacity to service the shipper market. However, using "Econ 101" this would tell me driver wages should be increasing. That is not the case. Driver wages are flat.
The next question is whether the increase in intermodal actually is absorbing the otherwise demand for driver capacity? This seems to be a plausible answer. Container capacity is up 10% to 20% (depending on who you talk to) and this means those containers have to be filled. They will not let them just pile up in a container yard. Add to the fact that many shippers are lowering their point of indifference of choosing between trucks and IM (Indifference is the length of haul in miles where a shipper sees the two as interchangeable) and more shippers are choosing IM on more lanes. Obviously, this reduces the need for drivers on long haul runs.
So, data is really mixed. The analysts are all saying most of these companies (public) are "fairly valued" and the industry should not be overweighted in a stock portfolio. Projections for pricing have been reduced (early this year most were claiming a 4% price increase but that does not seem to be happening) and capacity has freed up.
The one caveat? Last year we were saying this same thing and the market for trucks and transportation went on fire in the first quarter. So, this post did not give you an answer (sorry) but may have provided some things to think about.
Friday, November 18, 2011
Home Construction Will Be Muted - Bad News for Logistics Providers
I think we have all learned over the last few years why home construction is always looked at by economists. It is probably the single biggest indicator of the health of the economy. When people buy homes all sorts of things happen:
This drives all sorts of logistics activities - warehousing and most importantly, transportation volume. Transportation is inbound into the manufacturing plants which gear up for the activity and outbound finished goods going to all those new homes.
OK, now we know why this is so important. This is also why it is depressing to hear home construction will be muted for a while - most likely 5 -8 years. The inventory is just too high and there are still a lot of adjustable rate mortgages to reset in 2012. Not a good sign.
For those of you who say, "Yes, but those staying in a home will remodel" I would say this "rule" (if it ever was one) does not hold up anymore. The reason is most people, intuitively, know they are now living in a depreciating asset and not an appreciating asset. Remodeling makes sense in the latter as it is much like a bank account. However, in the former remodeling is like buying a consumable product which has no sustainable value. People know this intuitively and will not, in total, increase dramatically their major remodeling (assuming they are sane and rational).
Sorry to be the bearer of bad news.
- Construction materials are bought
- People are employed en masse
- Peripherals are purchased (appliances, lights, drapes etc.)
- Landscaping is performed...
This drives all sorts of logistics activities - warehousing and most importantly, transportation volume. Transportation is inbound into the manufacturing plants which gear up for the activity and outbound finished goods going to all those new homes.
OK, now we know why this is so important. This is also why it is depressing to hear home construction will be muted for a while - most likely 5 -8 years. The inventory is just too high and there are still a lot of adjustable rate mortgages to reset in 2012. Not a good sign.
For those of you who say, "Yes, but those staying in a home will remodel" I would say this "rule" (if it ever was one) does not hold up anymore. The reason is most people, intuitively, know they are now living in a depreciating asset and not an appreciating asset. Remodeling makes sense in the latter as it is much like a bank account. However, in the former remodeling is like buying a consumable product which has no sustainable value. People know this intuitively and will not, in total, increase dramatically their major remodeling (assuming they are sane and rational).
Sorry to be the bearer of bad news.
Thursday, November 17, 2011
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