Top 10 NewsTrends You Need To Know Michael Levans Editorial Director Logistics Management www.logist

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Top 10 News/TrendsYou Need To KnowMichael
LevansEditorial DirectorLogistics
Managementwww.logisticsmgmt.com
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Top 10 News/Trend Stories

• 1) The Hike in Freight Rates Across All Modes
• 2) HOS SagaThe Ups and Downs
• 3) Software Vendor Consolidation
  (Oracle/PeopleSoft)
• 4) RFID Initiatives Roll On
• 5) Diesel Fuel Price Roller Coaster
• 6) Continued Truck Driver Shortage
• 7) Growth in Global Logistics/Imports Continue to
  Climb (China)
• 8) Port Congestion/East Coast Diversions
• 9) Growth of Global 3PL Industry
• 10) CLM Name Change

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1) The Hike in Freight Rates Across All Modes

• Will be the predominant news story over 05
• Most recent story Logistics Outlook 2005 The
  Money Pit/LM Jan. 05
• Exclusive LM Research found that shippers feel
  they're being sucked into a vortex of higher
  prices, with no way to escape.

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1) Why? Its been a confluence of events

• Labor shortages (drivers), regulatory costs,
  record-high fuel prices, and rising demand that's
  outstripping capacity.
• Current conditions have pushed up carrier costs,
  forcing them to raise their rates
• No relief in sight We have a recovering economy
  with demand coming up, and we're out of capacity
  in every mode across the board, says Lee A.
  Clair, a partner in Norbridge Inc., a management
  consulting firm based in Concord, Mass.

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1) Rate Hikes

• In a December 2004 LM survey, shippers told us
  that theyre still struggling with rapidly rising
  freight rates and inadequate freight capacity.
• Theyre expect no relief from high rates in 05
• 52 percent blaming high fuel costs
• Half of the shippers said they experienced less
  availability of freight services during the fall
  quarter with only 14 percent reporting improved
  availability

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2) HOS SagaThe Ups and Downs

• Recent Story Meet the new HOS rules, same as the
  old rules/LM Feb. 05
• New Hours of Service (HOS) rules took effect
  January 2004
• Old Rules Drivers were restricted to 10 hours of
  driving time during a 15-hour on-duty period
• New Rules Drivers allowed to drive 11 hours
  during a 14-hour on-duty period

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2) HOS Saga

• Under the new HOS standards Drivers limited to
  60 hours on duty over seven consecutive days, or
  70 hours over eight consecutive days. Driving
  cycle may begin after a driver has been off duty
  for at least 34 consecutive hours
• However, drivers are continuously on the clock
  while on duty
• Goal Decrease driver fatigue, increase safety
• Impact Drivers under the gun, shippers need to
  be ready to reduce dock time to get drivers back
  on the road.
• In the first quarter of this year, truckload
  rates began to rise and carriers started billing
  shippers for higher stop-off charges and
  vehicle-detention feesand that was on top of
  already-increased fuel surcharges
• 75 percent of the respondents to a Logistics
  Management survey of truckload shippers,
  conducted in the first quarter of this year, told
  LM that their rates had risen since the HOS rules
  went into effect

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2) HOS Saga

• Last Summer Safety advocacy groups successfully
  challenged the rules, saying there was no
  scientific evidence proving that the rules
  increased driver safety. The U.S. Court of
  Appeals for the District of Columbia Circuit
  threw out the rules in response to a lawsuit
  filed by a coalition of safety groups
• Last Month The Federal Motor Carrier Safety
  Administration (FMCSA) republished the current
  rules and asked for public comment on how those
  rules could meet judicial concerns about the
  impact on driver health. What were asking is
  for public comment on what changes to the rules
  may be necessary to respond to the concerns
  raised by the court, said agency spokesman David
  Longo
• Safety groups say this wont do The FMCSA has a
  deadline of September 30 to resolve the matter.
  The new rules remain in effect.the saga
  continues

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3) Software Consolidation (Oracle, PeopleSoft)

• Recent Story News Section/LM Jan. 05
• While analysts say that the acquisition will
  create little more than a ripple in the 5
  billion supply chain software market, it could
  lead to a choice erosion for shippers
• In December, Oracle, known for its financial and
  database software, won its 18-month fight to buy
  PeopleSoft by raising the acquisition price to
  10.3 billion
• Oracle launched takeover bid just after
  PeopleSoft announced that it had bought software
  vendor J.D. Edwards Co.
• PeopleSoft Reputation in human resources and
  financial reporting
• J.D. Edwards Active in the supply chain software
  market

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3) Software Consolidation

• Prior to its bid for PeopleSoft, Oracle began to
  develop its own supply chain execution and
  planning applications
• Now it can offer those solutions as well as those
  from J.D. Edwards
• Impact So-called best-of-breed vendors have
  developed the execution programs commonly used in
  logisticswarehouse management systems (WMS) and
  transportation management systems (TMS). The
  so-called "best-of-breed" WMS and TMS could find
  themselves competing against the big ERP players
  (Oracle, SAP)
• "Everyone foresees Oracle merging these solutions
  into a common platform one or two years down the
  road," says ARCs Adrian Gonzalez.
• "SAP and IBM...have been unable to come up with
  anything. Most people are staying with standard
  WMS packages from folks like Red Prairie and
  Manhattan, says analyst Richard Armstrong
• The best-of-breed vendors will need to stay
  sharp and focused

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3) Software Consolidation

• Quick News Note Global finance giant JPMorgan
  bought Vastera in a deal worth some 129 million
  last month
• Vastera offers software packages to automate the
  process of global trade
• Vastera had begun offering services to shippers,
  taking on the duties traditionally associated
  with custom brokers
• Analysts believe that JPMorgan will try to sell
  software and trade management services to its
  roster of international clients, who already use
  the international bank for letters of credit

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4) RFID Initiatives Roll On

• Won the Most Ink award in 2004
• Recent Story Beaver Street Fisheries moves RFID
  upstream/LM. Feb 05
• Back in 2003, Wal-Mart announced its RFID
  initiative, mandating that its Top 100 suppliers
  be ready to ship RFID tagged cases and pallets by
  January 1, 2005
• Why Offers total visibility of its supply
  chain and offers ultimate inventory control
• Impact Suppliers asked, How much will this
  cost, wheres my ROI?

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4) RFID Initiatives

• The January 1 deadline date passed for Wal-Marts
  top 100 to begin tagging shipments to three Texas
  DCs, early perceptions and forecasts are turning
  into business realitiesand presenting a couple
  of surprises
• One misunderstanding was that the top 100 need
  to have 100 percent of their SKUs tagged.
• A recent ARC Advisory Group report found that
  Wal-Mart suppliers are tiptoeing into tagging,
  with most respondents reporting that theyre
  shipping fewer than a dozen tagged SKUs.
• A separate Logistics Management reader survey
  found that 61.5 percent of responding shippers
  taking part in the mandate are shipping less than
  25 percent of their SKUs tagged.

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4) RFID Initiatives

• Does this mean Wal-Mart is actually being
  flexible? Wal-Mart spokesman Gus Whitcomb told us
  last month that the mandate has been widely
  misinterpreted due to the excessive coverage,
  and top suppliers are implementing tagging
  programs that are actually realistic
• Beaver Street Fisheries (Jacksonville, Fla.) are
  bending the perception that mandate compliance is
  only for the rich and powerful
• Howard Stockdale, the seafood distributors CIO,
  called Wal-Marts CIO, Linda Dillman, and asked
  if Beaver Street could volunteer for the RFID
  program
• The companys is now tagging five percent of its
  SKUs it ships to Wal-Mart, making Beaver Street
  the first company outside the Top 100 to take
  part
• DOD, Metro, Target.the list grows

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5) Diesel Fuel Price Roller Coaster

• Recent Story The Money Pit/LM Jan. 05
• Rising fuel prices have affected shippers across
  all modes
• Truckload shippers experiencing sharpest
  increases
• Shippers have signed transportation contracts
  that allow their truckload carriers to pass on
  higher fuel costs in the form of fuel surcharges

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5) Fuel Prices

• Comments from the field Wayne Yee, president of
  Spectrum Transportation Consultants (Fall River,
  Mass., tells us that fuel represented 24 percent
  of his clients truckload costs on some lanes in
  2004
• Mike Regan, chief executive officer of Tranzact
  Technologies, a transportation software firm
  (Elmhurst, Ill.) told LM that hes seen
  surcharges of 16 cents per mile in some cases
• Shippers should count on paying more to move
  their goods over the highways even if diesel
  prices hold at about 2 a gallon

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6) Continued Truck Driver Shortage

• Most Recent Story News Section/LM Jan. 05
• Why Its a tough job. Finding good drivers and
  keeping them has already become the TL industry's
  top priority
• Driver turnover rates of 100 or more are common
  in the industry
• New drivers think its the ultimate freedom
  (Cowboy)
• In reality, youre a hard working, small business
  operator on the go
• It started around the second quarter of 2003, and
  it's become increasingly difficult due in large
  part to the continued success of the construction
  industry.

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6) Driver Shortage

• Quick News Note In December, Schneider National
  announced that it will raise pay rates for both
  its own drivers and owner-operators
• Schneider says it will raise rates for its 3,000
  independent owner-operators to 90 cents per mile
  plus fuel surcharges. Owner-operators
  compensation packages will include discounts for
  business expenses, such as fuel and equipment
• The carrier says its in-house workforce of more
  than 12,500 non-union drivers will receive an
  average pay increase of 4,000 per year as well
  as new shorthaul premiums and higher rates for
  such non-driving items as detention time
• Impact Could trigger a new round of wage and
  rate hikes as motor carriers scramble to compete
  for drivers in a tough labor market

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7) Growth in Global Logistics/Imports Continue to
Climb (China)

• MUST READ The two faces of Globalization/LM July
  04 Cover Story by Executive Editor James Cooke
• LMs State of Logistics Report 2004 covered this
  in great detail
• In short As production continues to shift to
  lower-cost manufacturing sites, U.S. companies
  will have to rethink inventory holdings and
  positioning while managing higher international
  transportation costs
• All indicators point to higher volumes of
  international shipments due to increasing global
  trade
• Impact on domestic capacity is immense, yet often
  overlooked as an issue
• (See 8)

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7) Global/China

• China China is the dynamo driving much of this
  trade growth.
• Economic growth seems unstoppable Its imports
  expanded by 40 percent and its exports grew 35
  percent in terms of value over the course of the
  last year.
• Almost every statistic points to momentum in
  sales revenues and market share nearly every
  headline trumpets greater opportunity for foreign
  investors
• Much has to do with deregulation initiatives of
  the central government in Beijing

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7) Global/China

• Chinas domestic logistics sector is enjoying a
  period of spectacular growth.
• Transport Intelligence Ltd. China Logistics
  Report, predicts compound annual growth rates of
  33 percent up to 2007
• This will be supported by the outsourcing of
  logistics functions as the practice gradually
  gains credibility and as more sophisticated
  logistics companies enter the market. (U.S. and
  foreign companies partnered/and partnering)

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7) Global/China

• However, many reports warns of the strong
  possibility of significant macroeconomic upheaval
• Soaring labor costs and consequent unemployment
  (particularly affecting state-owned enterprises)
  could badly hurt logistics companies that have
  invested significantly in China
• LMs 2005 China Logistics Conference Virtual
  event on Thursday, April 28
• State of Logistics Report The industry will have
  to find innovative ways to adapt to growing
  trade, rapidly changing supply markets, and
  constrained capacity. The new solutions will
  include ever-increasing information sharing and
  more individualized supply chain planning

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8) Port Congestion/East Coast Diversions

• Most Recent Story Tight Squeeze/LM Jan. 05
• Whats globalizations impact on the U.S.
  logistics infrastructure?
• Look no farther than the ports of Southern
  California
• By mid-October, as many as 40 container ships
  were anchored off the Southern California coast
• The ports of Los Angeles and Long Beach (LA/LB)
  were taken to task for having an insufficient
  number of dockworkers to handle the 12.8 million
  TEUs (twenty-foot equivalent units) that were
  projected to pass through their gates in 2004

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8) Port Congestion/Diversions

• Logistics Management surveyed readers in early
  November 58 percent of the respondents said they
  had been affected by the backup at West Coast
  ports.
• Those respondents reported experiencing an
  average delivery delay of 6.5 days.
• Sixty percent reported that their intermodal
  rates increased in the last quarter of 04 as
  capacity tightened and 38 percent predicted that
  the combination of all these factors would cause
  them to lose fourth-quarter sales.
• Of significant interest for the port community
  54 percent of the shippers who were experiencing
  delays were taking steps to lessen their
  dependence on their traditional ports of entry

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8) Port Congestion/Diversions

• For U.S. importers, port-of-entry diversions to
  the Pacific Northwest ports and shifts to East
  Coast all-water routes (through Panama Canal)
  were turning into permanent solutions
• Port diversion is becoming a viable, long-term
  answer to congestion because two necessary pieces
  of the transportation puzzle are now falling into
  place
• First, Gulf and East Coast ports are gearing up
  to handle double-digit growth in container
  volumes
• Second, the Panama Canalwhich in October and
  November saw a 7.1-percent tonnage increase over
  the same period in 2003is slowly but steadily
  developing the ability to handle more traffic,
  despite recent backlogs

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8) Port Congestion/Diversions

• Ports to watch
• Tacoma This month opened the Pierce County
  Terminal, a new 171-acre mega-container terminal
  built on 51-foot deep water of the Port's Blair
  Waterway. The terminal features five super
  post-Panamax ship-to-shore container cranesamong
  the largest in the world today. The cranes were
  purchased by Evergreen
• Houston Wal-Mart is about to open an 80 million
  distribution center (DC) near the Port of Houston

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8) Port Congestion/Diversions

• Ports to watch
• Mobile Construction will soon begin on Mobile's
  first container port, slated to open in 2007.
  We'll never develop into an L.A., but we can
  take a part of the load that's coming through and
  handle it cost-effectively, says Alabama State
  Port Authority Director/CEO Jim Lyons.
• Savanna In fiscal year 2003 during the West
  Coast labor problems we saw a 31-percent
  increase in containersand we thought we'd see
  that business going back to the West Coast in
  2004," says Robert Morris, GPA's director of
  external affairs. But they didnt. Not only did
  we keep that business, but we grew another 7
  percent on top of that."
• In October 2004, in fact, the Port of Savannah
  handled the largest monthly container volume in
  its history.
• To manage this Shippers will need to make
  intermodal more of a year-round solution to make
  sure theres capacity balance.Keep your eye on
  Panama Canal improvement news in 2005.

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9) Growth of Global 3PL Industry

• Most Recent Story Duel Perspectives/LM Jan. 05
• 7 and 8 and are key drivers
• To drill down the core Dr. Robert C. Lieb,
  professor of supply chain management at Boston's
  Northeastern University, and Brooks A. Bentz,
  associate partner at the consulting firm
  Accenture, surveyed logistics executives of U.S.
  manufacturers on their use of third-party
  logistics
• According to Lieb and Bentz U.S. manufacturers
  have become huge global players, and the scope
  and complexity of their outsourcing needs may
  exceed providers capabilities
• "The customers have become more global than the
  3PLs," says Bentz

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9) Global 3PL Growth

• Respondents made it clear that 3PLs need to boost
  their global capabilities
• Shippers typically prefer to use their current
  providers when entering new markets or expanding
  in existing ones
• That's putting pressure on providers as the
  percentage of shippers using 3PLs in regions like
  India, China, and Eastern Europe continues to
  increase
• Now that many Eastern European countries have
  joined the European Union, that area will be a
  testing ground
• Nearly one-third of the manufacturers said they
  would expand their operations in Eastern Europe,
  and almost all of them said 3PLs would be
  "important" or "very important" in supporting
  their logistics strategies there

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9) Global 3PL Growth

• The 3PLs are well aware of this trend
• Ten of the 23 3PL CEO respondents to the
  Lieb/Bentz study ranked "increased pressure to
  internationalize service offerings" among the
  most important industry dynamics in their
  industry.
• "Providers should be developing market-entry
  strategies, identifying potential alliance
  partners and acquisition targets in China, India,
  and the expanded EU, and defining the appropriate
  service package to be offered in those markets,
  says Lieb

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10) CLM's Name Change

• Most Recent Story CLM name change incorporates
  holistic view/LM Aug. 04
• On January 1, 2005 the Council of Logistics
  Management (CLM) changed its name to the Council
  of Supply Chain Management Professionals (CSCMP)
• Reflects the holistic role that modern logistics
  professionals play
• The organization will continue its efforts in
  logistics education, but will also focus on
  procurement, manufacturing, and sales and
  marketing
• People in our profession now have an expanded
  and more critical role within our companies than
  we did ten or even five years agoOur roles have
  evolved, which is why CLM is changing to reflect
  what's happening in the supply chain, says CSCMP
  President Elijah Ray.

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Read Logistics Management, surround yourself with
people who know what theyre talking about, and
ask questions.

• Feel free to drop me a line
• michael.levans_at_reedbusiness.com