This week in SCDigest:
A 360 Degree View of Transportation
Supply Chain Graphic of the Week and Supply Chain by the Numbers
Cartoon Caption Contest Continues This Week!
SC Digest On-Target e-Magazine
This Week In "Distribution Digest"
New Expert Contributor: Voice Picking: Make it Simple, Not Simplistic
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  Newsletter Archives                Can't View In E-mail? August 18, 2011 - Supply Chain Newsletter

Featured Research from Chief Supply Chain Officer (CSCO) Insights

Supply Chain Executive Brief: Five Strategies for Reducing Supply Chain Network Inventories Supply Chain Executive Brief:
The Growing Imperative for 100%
Trading Partner Connectivity

The Value of Vendor

Compliance Optimization

Enterprise Software Applications -
Measuring the Value

Insights from the JDA Supply Chain
Assessment Tool 2011

The Stages of Value Delivery for
Enterprise Software



Understanding How Technology Improves the S&OP Process

A Step by Step Review of the S&OP Process and how Technology and Decision-Support Tools Improve Decision-Making at Each Phase

Tuesday, August 30, 2011


Building Next Generation Supply Chains for Discrete Manufacturers

Part 1: Segmenting Supply Chains
for Success

Featuring AMR analyst Matt Davis and Tom Kozenski, Vice President of Product Strategy for RedPrairie

Wednesday, August 31, 2011


Supply Chains in Motion: Driving Adaptability, Flexibility and Visibility

Part 1: Foundations For Operational Excellence in Healthcare

Featuring Denise Odenkirk, Vice President, Owens and Minor’s OM Healthcare Logistics and Tom Kozenski, Vice President of Product Strategy for RedPrairie

Tuesday, Sept 13, 2011

SAP Supply Chain Response Management, The New Benchmark for Supply Chain Leadership

This Week's Supply Chain News Bites
Supply Chain Graphic of the Week: The Biggest Cargo Ships Sailing the Ocean Blue

This Week's Supply Chain by the Numbers for August 19, 2011:

  • US Factory Utilization Jumps
  • American Axle Shutting Two Factories over Failed Union Contracts
  • FMSCA Says EOBRs will Drive Big Savings for Carriers
  • Ocean Carriers Costs Rising in 2011


Experience the Best of Both Worlds



August 8, 2011 Contest

See The Full-Sized Cartoon and

Send In Your Entry Today !


Weekly On-Target Newsletter
August 17, 2010 Edition

Top Industrial Supply Chains, Sears TMS BI, Maersk Doubling Down
and more

Holste's Blog: Complexity & Justification Are Key Issues For DCs Considering Automation

Top Story: Factors to Consider when Choosing Between Manufacturers and Systems Integrators for Conveyor System Projects
Top Story: Understanding Conveyor Industry Sales Channels Ecosystem and its Impact on Vendor Selection
Top Story: Building a Performance Culture in Distribution


By Scott J. Yetter
VoxWare, Inc.

Voice Picking: Make it Simple,
Not Simplistic


What is the only non-Asian port in the world in the top 10 in terms of container/TEU movement?

A: Found at the Bottom of the Page

A 360 Degree View of Transportation

MI was the keynote speaker this week at the Oracle Transportation Management Special Interest Group meeting in Philadelphia (thanks largely to Graham Page of Sears), an event that is basically like a user group conference, except that it is run by the users, not Oracle.

None of the presentations in my small stable of "of the shelf" materials seemed quite the right fit for this meeting, so I promised to deliver on a "360-degree View of Transportation." Then as usual I scrambled mightily to create this new presentation on time, finishing up with a good 2-3 hours to spare.


"Nearly every trucking company cited driver shortages as an issue in their Q2 conference calls. What will happen as the economy gets humming again? Real problems, that's what. "


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It seemed to be well received (I say with an admitted strong bias in favor of my own work) , and I am going to take this opportunity to summarize the key points in the limited space available in this week's column. Here we go, admittedly in mostly a US-centric mode:

The Freight Market Now: Data shows how connected overall freight movement is to industrial production, which collapsed in 2009 and while clawing back, is still not at pre-recession levels. The ATA freight tonnage index is now at 115, meaning total freight being moved on trucks is just 15% above levels seen in the year 2000 (that would make average annual growth of less than 1% per year).

Globalization and the flow of good across the globe is likely to continue to grow sharply over time - the question is, will it be "balanced?" If not, developed economies could embrace policies that try to achieve better balance. Note high flying Brazil just announced a series of measures to encourage domestic manufacturing, rather than China imports.

Truckers are getting smarter. First, they are being remarkably disciplined about adding capacity, perhaps more so than ever before. They are also driving much better utilization of their assets. There is now for the first time in a long time a big gap between the change in total miles driven and asset utilization, with utilization rising much faster. That's related both to the asset discipline and smarter networks and technology.

That said, trucking is a lousy business. Return on capital for the whole industry has averaged 3.9% over the last 10 years - well below what is needed to run a business. Truckload is challenged enough, but LTL is a basket case, with most carriers (Old Dominion the notable exception) running operating ratios (op expense/revenues) in the high 90% range and at times worse. Something has to give.

LTL carriers were successful is raising prices lately, and are pushing for more, but you may soon see coalitions to guide industry pricing, and one current such effort, though small in scale, was actually given the OK by the Justice Dept. a couple of years ago.

Rail is a different story, where pricing power and profits are strong. Revenues are up much more than volumes. That situation, however, is causing regulatory backlash, and we are likely to see some action there relative to "captive shippers" and bottleneck pricing before the end of the year.

On the truckload side, rates are clearly up of late with rolling pockets of capacity concerns. That said, there is strong growth in intermodal, a move that could continue if carriers can get drayage costs down. Could lead to growth in intermodal in the roughly 500-1000-mile mid-length haul area, especially making intermodal competitive in 500-700 mile hauls.

Oil Prices Heading Higher: Despite the frequent ups and downs, I believe the long-term trend will definitely be up. The data supports the "Peak Oil" concept that says we are finding less and less reserves, and that production in existing wells is tapping out. The "production to reserves" ratio is falling rapidly in the Middle East. Combine that with rapid growth in oil consumption in Asia and likely other emerging markets soon, and it is clear the trend line amidst the ups and downs in the daily price is heading up - well over $100 if/when the economy recovers, I believe.

It is also worth noting how the US dollar-denominated price of oil is closely tied to the value of the dollar - almost in lock step. Dollar falls, the price of oil rises - oil sellers want more dollars for a barrel if the value of those dollars decreases. Saving the value of the dollar for now despite the printing presses running full time is the Euro debt crisis. If that gets solved (a big maybe), the dollar could take a big hit and oil prices zoom up.

MIT's Dr. David Simchi-Levi showed in 2008 on SCDigest how rising oil prices can have a big impact on optimal supply chain network design, especially as prices start to get over $100 barrel. Companies need to follow the lead of P&G and other leaders in running scenarios at many different levels of oil to be prepared and not totally re-active as prices rise, or to adopt strategies that give the best risk-adjusted result across many price levels.

Data from Wolfe Trahan also shows the clear correlation between the change in the price of oil and diversion from truck to rail and vice-versa - a very close relationship.

Cap and Trade Potential: It's dead in the US through 2012, but don't think a cap and trade or carbon tax program as a reaction to the potential threat of carbon emissions is totally gone. The EPA, for example, is making its own moves without legislation. There is a Cap and Trade program coming next year in California. Australia just announced a carbon tax program starting in 2012.

This is a huge binary fork in the road. Without Cap and Trade or a carbon tax (the much better/simpler approach if you are going to do something), CO2 emissions reduction programs are simply a matter of company decisions on whether the initiative will save money or have important PR benefits. With one of these regulations, there will be a new cost/tax placed on our supply chains that will also be very complicated.

This will drive the cost of oil/energy higher, in ways we cannot predict now. It may also lead to calls for a "carbon tariff" to protect the domestic market from imports that are now even lower cost relatively if they are not subject to a carbon tax. But how such a tariff would be implemented is unclear.

Bottom line: educate yourself on what cap and trade and carbon taxes really mean (we have explained it here before) - you will surely impress your colleagues and company execs at some point.

Government Intersection with Logistics has Never Been Greater: While the transportation sector has always been highly intertwined with laws and regulation, it is more impacted right now than any time I can remember: the highway bill, infrastructure bank, hours of service, CSA 2010, electronic on-board recorders, expansion of FMCSA powers, railroad pricing, the battle over heavier trucks, and many more issues are now on the docket.

Two are especially worth noting, because they receive less media coverage: One is the potential for higher, maybe much higher, diesel taxes to pay for more infrastructure spending. That was part of the previous developing highway bill that was axed after the 2010 elections. The question is: at what point will the benefits of improved roads and bridges start to be no longer worth the cost?

More ominous, there was a GAO report this year that said truckers and shippers were hugely under paying the full cost of truck transport. Those unpaid costs were largely around "social costs" relative to congestion, emissions, and accidents. The implicit recommendation: taxes/fees on trucks need to rise substantially to make them pay the full societal costs.

The second is the on-going battle between the Port of LA and the ATA over a move to regulate transportation locally in the name of the environment, rather than nationally as is the case now to avoid a patchwork of local regulations. This is a hugely important issue, now again in a federal court after the ATA lost the last round in a strange decision.

This Time, the Driver Shortage is Real: Previous predictions for a driver shortage crisis proved a little overblown, but it is coming now. For really the first time, in a soft economy and lousy construction environment, workers are not moving back into trucking where jobs are available. Truckers as a whole age seeing an aging profile, and younger workers just aren't interested.

Nearly every trucking company cited driver shortages as an issue in their Q2 conference calls. What will happen as the economy gets humming again? Real problems, that's what. For every 6% increase in trucker wages, operating costs rise 2%. So if it takes 12%, that's a 4% rise in costs that will be passed on.

Transportation Talent: In this complex supply chain world, more than good "execution" and analytic skills are needed for success. Increasingly, transportation managers need softer skills (communication, collaboration) and to be able to speak the language of business effectively. Also requires new knowledge areas, like understanding supply chain finance.
Leading companies get this, and are continuously recruiting this kind of talent and developing those skill sets. There is both a company and personal dimension to this.

"Perfect Logistics": We are rapidly getting to a point where near perfect logistics will be commonplace and expected, and the real question will be how much it costs different companies to achieve it.

There is more, but alas on that tease I am out of space - the last point is something we will get back to very soon on these page.

What is your reaction to Gilmore's 360-degree view of current transportation issues? What would you add? Let us know your thoughts at the Feedback button below.


Dan Gilmore


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Feedback of the Week - On Rethinking  China Part 2

I appreciate reading your articles on China.  Thoughtful, complete and insightful.  And for people familiar with China .... most is "spot-on".

I've been in China off-and-on for the last 8 years.  For the last 6 months, I've been on-site in Shanghai, Jinnan, Taishan, Ningbo, Changhouz, and Minhang Technical Development Zone.  Over this time, I've gained a tremendous appreciation for the Chinese culture and behaviours.  For sure, China is large with diversity of thought.  Yet, in most instances,  China is of one mind.  They, and each of it's citizens, are bend on improvement.  Young family seek the means to make money, and accumulate wealth to send their child to the best schools.  People work in all hours of day-and-night to simple make a few extra RMB.  Businesses look for ways to use their income on the best projects and to develop their employees and young managers.  Governments work to enable businesses to prosper via straight-forward and rapidly implemented policies to incentivise local growth consistent with a national 5 year plan.    

As you routinely observe, the growth here is phenomenal.  In all matters of industry and government.  That is not to say China does not have problems.  Issues consistent with other countries such as pollution, safety, worker rights, women rights, taxes, economic disparity, social equality, corruption, etc. are all challenges.  Yet, China seems better positioned to meet these challenges.  Why, because change is pervasive throughout the country and has been for centuries.  

In my view the key difference in China is leadership.  I'll qualify my following comments.  As a general rule, the quality of leadership from local to national levels is exceptional.  There may be out-liers, but in general, Chinese leaders take their responsibilities very serious.  They look for steady progress to the future rather than "the big bang" theory.  They are focused on their particular business, rather than the business of others communities, or nations.  They are thorough in their approach to problems and challenges.  They are quick to accept responsibility for their actions, rather than deflect consequences to others.  In short, the Chinese leaders in business and government is very pragmatic.  They are intolerant of poor performance.  Perhaps if our political and business leaders were more intolerant, America would have fewer failed business, fewer incompetent legislators and a sustained GPD greater the3 %.

In summary, China will continue to grow, prosper, and likely remain inwardly focused on infrastructure, social well being, technology innovation and education.  They will likely spread their form of social responsibility worldwide.  Whether in medicine, finance, technology, business practices, governance, and leadership, the Chinese are changing at lightning speed.  I have no doubt, the western world will learn more over the next 25 years.    As China emerges on the world scene, I see a better place.

Steven D. Abbott


More on Rethinking China:


This goes to the heart of my main point in your January 2011 “Guru Predictions” piece (First Thoughts, Jan. 21).  The U.S. needs to provide a combination of incentives and legislation to repatriate some of the work which has been sent to China and other locals over the past decade.  The biggest concern of the U.S. voters is not the war in the Gulf or whether government went too far in the bailouts, but rather the need to get a job, a roof over their heads, and to put food on the table. 


I do agree with Mr. Fung’s statements that over time there will be a balancing caused by risings in China, but changes over 5 years are not going to produce U.S. jobs in 2011-12.  Nor will they help the current administration get re-elected.



Steve Murray

Principal Consultant and Chief Researcher

Supply Chain Visions



I say that it’s about time OUR pundits start shouting from the mountaintops how the U.S. is moving to reclaim/rescue its status as the world’s #1 economy.




McLain Oppy
Supply Chain Consultant
The Open Sky Group, LLC


I believe we all recognize that developed countries have ridden the wave of prosperity on the backs of developing nations. As we become one world we will inevitably see a leveling of wages, opportunities, etc. My hope is that we can raise the level for everyone while not drowning ourselves.


Jamie Elder


I think your arguments can be summarized in one phrase – “Sour Loser”. Supply chain is but a tool in the hands of the investor – the corporate giants who in their greed for more money and global market share have been sacrificing US jobs for the sake of corporate gain and all in the name of efficiency and globalization. Wasn’t it obvious when entire factories in the US were being closed and people laid off?


After enjoying low prices for almost 2 decades, I believe it is very unfair and selfish on your part to say that the west paid the money for Chinese growth as you have failed to recognize the humungous efforts put in by the Chinese workers who toiled in miserable conditions to enable consumers in the West to continue to buy goods at extremely cheap prices. Fact of the matter is that the Chinese earned their growth through hard labor and intelligent use of resources just like any other nation.


Yonus A. Siddiqui

Vice President Projects

e2e Supply Chain Management (Pvt.) Ltd.

Karachi, Pakistan.

Q: What is the only non-Asian port in the world in the top 10 in terms of container/TEU movement?
A: Rotterdam in the Netherlands, at number 4, in a list dominated by Chinese ports besides Singapore and Busan (South Korea) in addition to Rotterdam.
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