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CSCMP's Annual Global Conference 2013 in review: the editorial teams of Logistics Management and Supply Chain Management Review were on the ground in Denver to cover the industry's foremost gathering of thought leaders. Here are some of the key insights they picked up along the way.

Editors' Note: We realize that our readers are juggling more responsibilities with less of just about everything they need--especially time. Knowing that many logistics and supply chain professionals can't easily escape the office as easily as they once could, Logistics Management and Supply Chain Management Review offer a few of the highlights that we we were able to gather during the three-day event that will help you fine-tune your logistics and supply chain strategy over the coming months.

CSCMP panel focuses on critical industry regulations


DENVER--The impact of regulations is a constant theme in the freight transportation and logistics sectors, whether a shipper's core focus is inside or outside the four walls. The subject of regulations was certainly front and center at the Council of Supply Chain Management Professionals (CSCMP) Annual Global Conference in Denver during a session entitled "Planes, Trains, and Automobiles--Regulatory Challenges in Transportation."

UPS Vice President Tom Jensen, the session's moderator, noted how myriad regulations have had a tangible impact on how freight transportation and logistics services providers treat customers and run their own operations.

James Burnley, a partner at the Washington, D.C.-based law firm Venable LLP and former Secretary of Transportation under the late President Ronald Reagan, addressed the subject of trucking regulations. "There are very significant changes going on in the trucking industry that are important because they're part of your business and part of your supply chain," said Burnley.

One of the most significant changes, according to Burnley, is the new motor carriers hours-of-service (HOS) regulation that took effect on July 1. He said that it might be too soon to assess its overall impact and how it could exacerbate the driver shortage, while noting that despite opposition of the rules from many industry groups, it's apparent that the new regulations will stick.

Burnley also touched upon CSA, which, he explained, in some cases is flawed. "If a truck is in an accident without regard to fault, that goes into the database," he said. "If a driver is distracted at a red light and hits somebody, that goes in. If a driver gets hit by somebody, that goes in. The industry believes that there are some ways to work through this, but there are those on the other side who say it's usually the truck driver that survives an accident so all incidents need to be recorded."

While industry stakeholders view many regulations as hindrances, Burnley described the status of the Highway Trust Fund as "one huge cloud" hanging over the federal role in the nation's highway system. The main reason for this, he said, is that the dollars coming into it don't support the level of spending.

"We last raised federal fuel taxes 20 years ago," said Burnley. "And through last year and beginning in 2008, when it went underwater, the federal government had to transfer $4 billion from the general revenue fund into the Highway Trust Fund just to prop it up and keep current funds going."

What's more, Burnley added that one thing both sides of the aisle agree upon is that they not raise the federal fuel tax. "The White House views that as a regressive tax and Republicans don't want new taxes on anything," he said.

Another issue is the pending expiration of the federal transportation bill, MAP-21, in September 2014, which, coupled with the ongoing funding issues related to the Highway Trust Fund (HTF), leaves the current predicament without a predictable outcome, explained Burnley.

"There are ideas focused on a federal infrastructure bank and vehicle miles traveled and other alternative funding mechanisms that would not replace the HTF, but would instead supplement it," said Burnley. "This is a real crisis, because the states are not in a position to step in and really replace the federal rules. We are all concerned. If you think our infrastructure today is not being properly maintained or improved, then just wait three or four years."

Peter Gatti, executive vice president of the National Industrial Transportation League, noted that while MAP-21 was a "new" bill it really kept things the same. Parts of MAP-21, such as the two-year study of truck size and weight limits, were more of a compromise among lawmakers than anything else, he said, joking that "there's a saying in Washington that if you study something enough it will go away."

With a finite amount of capital resources available for transportation, Gatti said that there needs to be a comprehensive overview in terms of ordering the priorities for resources spent on infrastructure and making America more competitive. "The only way to do this is to develop some type of comprehensive plan that deals with freight transportation," he said. "I'm not sure what it will lead to, but that's the premise and we'll have to see where that leads."

MAP-21, added Gatti, essentially kicks the "can down the road" leaving the door open for how to develop new sources of revenue, with pros and cons in terms of where to go in the next cycle, which begins when MAP-21 expires at the end of September 2014.

"I think we're going to see a game of political football again in terms of where to bridge that gap in the HTF," Gatti said.

New study released at CSCMP addresses "Big Data"


DENVER--The fact that we've entered the Big Data era was among the major themes surfacing at the recently concluded CSCMP Annual Global Conference.

When Capgemini analysts unveiled the 18th Annual Third Party Logistics (3PL) Study, they emphasized that shippers (97 percent) and third-party logistics providers (93 percent) feel strongly that improved, data-driven decision making is essential to the future success of their supply chain activities and processes.

However, shippers differ widely in their levels of interest, understanding, and adoption, says Melissa Hadhazy, Capgemini consulting analyst. "While other surveys have reported higher levels of participation, 30 percent of shipper respondents and 27 percent of 3PLs indicated that they are planning or currently undergoing big data initiatives," she says.

Interestingly, about half of each group disagree that Big Data fuels these decisions. In spite of this, shippers and 3PLs concur that Big Data can be leveraged in both functional and strategic aspects of supply chain operations and to support visibility and make supply chains more agile.

The 18th Annual Third Party Logistics Study--done in collaboration with Penske, Penn State University and Korn/Ferry International--also showed the continuing, positive overall nature of shipper/3PL relationships. Both parties view them as being successful, while shippers report they're seeing positive results again this year. According to the findings, when the relationships are working there's an average logistics cost reduction of 11 percent; average inventory cost reduction of 6 percent; and an average fixed logistics cost reduction of 23 percent.

According to the results, shippers agree that 3PLs provide new and innovative ways to improve logistics effectiveness and that they're sufficiently agile and flexible to accommodate future business needs and challenges. Despite ongoing churn in shipper/3PL relationships, in general, shippers are increasing their use of outsourced logistics services--and shippers and 3PLs now say that they're about equally satisfied with the openness, transparency, and communication in their relationships.

As suggested in last year's report, however, several ongoing factors are having an impact on the progress toward the advanced end of the maturity model for shipper/3PL relation-ships.

While gainsharing and collaboration with other companies--even competitors--to achieve logistics cost and service improvements would appear to be markers for advanced relationships, it seems that these approaches are more preferred in certain shipper-3PL relationships, and less in others.

Capgemini says that there are some encouraging results that suggest a slight increase this year in outsourcing of strategic, customer-facing, and IT-intensive logistics activities. Had-hazy and others involved with the survey observed that innovation--when it finally surfaces in the optimization process--is fast, but not disruptive. "And disruption is precisely what we need," concluded Hadhazy.

3PL CEOs are optimistic about growth prospects, according to survey presented at CSCMP


DENVER--A focus on growth, regardless of its pace, was a key underlying theme in the results of the 20th Annual Survey of Third-Party Logistics CEOs, which was released in conjunction with the Council of Supply Chain Management Professionals (CSCMP) Annual Conference in Denver.

This survey is conducted by Dr. Robert Lieb, professor of Supply Chain Management at Northeastern University, and sponsored by Penske Logistics, and is based on feedback from 34 3PL CEOs throughout North America, Europe, and Asia-Pacific, with cumulative revenues in 2012 at roughly $50 billion.

The survey found that the 3PL CEOs in North America and Europe forecasted three-year revenue growth projections of 14.6 percent and 10.3 percent, respectively, with Asia-Pacific CEOs calling for growth of 11.6 percent, down from 12.5 percent a year ago. What's more, the survey found that 52 percent of all CEOs surveyed met or exceeded 2012 revenue projections, which were off from 63 percent a year ago. But even with that decline, the survey found that more than two-thirds of these companies had a profitable 2012.

"Growth expectations for all three regions were somewhat surprising," said Lieb in an interview following the presentation. "The forecast for the industry in these regions is always substantially lower than individual company forecasts. The companies profiled in this survey are the 'big guys,' and it might be that they can capture very large contracts in these markets--which is far different for smaller 3PL players."

Lieb said that at the moment North American-based 3PLs are best positioned for future growth, whereas the slow recovery in Europe, especially southern Europe, and an increase in manufacturers shifting operations out of the Asia-Pacific region are having an impact on those respective areas to a degree.

Joe Carlier, vice president for sales at Penske Logistics, said that pressures on CEOs in Asia-Pacific and Europe remain intact, with shippers demanding more from their 3PLs and looking for alternatives and innovative approaches to reduce costs and inventory cycle time. "The difference I'm seeing over there is that discussion points relevant to strategy are gaining momentum compared to what it was like three years ago when more shippers were looking for more help on the technology side," he said.

Lieb added that today more shippers are less reliant on things like expedited and higher-end services and are looking for lower-cost alternatives. The topic of global near-shoring received a fair amount of attention in the survey, with 78 percent of CEOs observing that increasing labor costs in China are leading some companies to relocate manufacturing and export consolidation functions to Thailand, Vietnam, Indonesia, and Sri Lanka.

In North America, the survey cited how near-shoring continues to occur, with shippers moving from Asia-Pacific to Mexico, most notably in the automotive, technology, and pharmaceutical sectors for sourcing- and manufacturing-related activity. On top of that, the survey found that 87 percent of CEOs in North America who are active in Mexico say that their work there represents 9.3 percent of total U.S. revenues. That figure is expected to rise to 12.5 percent by 2016.

"Over the last few years, it has become clear that this is more than just talk," said Lieb. "Movements are taking place and being driven by a number of things like labor costs and benefit levels, resource costs rising, and transportation costs going up, too. There have also been supply chain disruptions due to natural disasters that are resulting in more companies moving their product closer to the point of consumption."

Other key trends cited in the survey included:

Talent Management: Finding and keeping talent, specifically managers, has ranked as one of the most significant market challenges in each regional response over the past 20 years. To ensure a bright future, third-party logistics providers must be competitive across multiple dimensions when it comes to hiring, and they must try to understand what the new generation of employees are looking for in an employer.

Forecasting Revenue: With slow economic growth continuing over the next year, North American 3PL CEOs expect there to be a greater emphasis on developing new financial and economic indicators to provide more accurate revenue projections.

Sustainability: The third-party logistics industry continues to get "greener," with 56 percent of companies launching new sustainability initiatives during 2012. However, these initiatives have not yet been linked to attracting new customers or keeping current customers.

Retail/ E-commerce: Shifting dynamics in the global retail economy towards omni-channel retailing has led to an expansion of reverse logistics activities in North America and increased popularity of e-commerce and e-fulfillment in Asia-Pacific.

Healthcare: Twenty-eight of the 34 companies surveyed provide third-party logistics services to customers in the healthcare industry. Many cited increasing regulations of the industry as being a major challenge in their efforts to grow business in that vertical.

CEVA Logistics CEO feels good about company's future prospects


DENVER--As shippers' businesses go the business operations of third-party logistics (3PL) services providers follow suite, according to CEVA Logistics CEO Marv Schlanger.

Speaking at a media breakfast at CSCMP's Annual Global Conference, Schlanger cited various drivers of CEVA's customers business that extend to the Netherlands-based 3PL, including market volatility which in turn makes supply chain control and visibility critical to customers.

"It's no surprise that the global economy is tough," said Schlanger. "There are very few sectors today where we feel comfortable with volume and margin pressure. This means we have to perform, provide better quality, and be more adaptive for both the products and services we offer. Today everything is global, especially our customers, and they need to know where their goods are at any given point in time. The demands of our customers' customers are increasing as well, which means we have to focus on quality, speed, and price. That puts pressure on us, because our customers are talking about procurement spend, needing flexibility in their operations, and about inventory optimization." Other factors playing a role in how 3PLs need to react to customer needs cited by Schlanger include costs and growing demand in emerging markets, as a 3PL's footprint becomes critical to customers and their ability to meet the requirements of their own customers as well.

Shifting over to CEVA's performance as a company, Schlanger said that 2013 has been an interesting year for the company, explaining that in many ways it had to rebuild the foundation of the company.

"This time last year, we announced a cost reduction program, taking 100 million Euros [$137.8 million] of costs out of the company in the fourth quarter of 2012 and the first quarter of 2013," said Schlanger. "We also announced the recapitalization of the company, where we rebuilt the balance sheet by eliminating 1.3 billion Euros of debt ($1.7 billion) and receiving a capital infusion of a minimum of 230 million Euros ($312 million) for investment in its business plan. That was very significant and important in order to build a strong financial future."

With a healthier balance sheet intact, Schlanger said that CEVA is now able to focus on growth for its customers, bringing in new services and investments to help support their business, which is being reflected in recent customer wins with large shippers, including Ford, Michelin, and IBM.

"We really have good traction in the marketplace, and we're happy with our position today," said Schlanger. "We're now focused on growing our footprint and our position in the marketplace. Our goal is to create value and logistics excellence, which is our theme and what our customers want. We feel good about the company, have put a number of issues behind us, and the company is well positioned for future success."

Armstrong & Associates releases 3PL guide during CSCMP


Which 3PL brands are the most recognizable? A session conducted by Armstrong & Associates, Inc. at the recently concluded CSCMP Annual Global Conference posited that direct sales activities and the involvement of procurement/purchasing personnel have changed the ground rules.

Their session titled "Third Party Logistics: Buying, Brands, and Benefits," outlined research on brand strength as well as an analysis of the RFP/RFI process. Now shippers can obtain additional perspective with the 21st edition of the leading third-party logistics providers guide, Who's Who in Logistics. The new edition, in two volumes, the Americas and International, has been expanded with in-depth profiles of 377 3PLs.

"Since our first publication in 1994, our guides have become a primary information source for third-party logistics market information," says Evan Armstrong, president of Armstrong & Associates. He notes that over half of the 3PL profiles highlight international providers. Each profile includes assessments of the 3PLs overall capabilities, strengths, and weaknesses and identifies 3PLs with the requisite capabilities necessary to be classified as Tier 1 global supply chain managers.

"These providers have extensive IT capabilities, over 5,000 employees, and provide service to 90 percent or more of the world's Gross Domestic Product (GDP)," says Armstrong.

Global supply chain services providers such as APL Logistics, C.H. Robinson, CEVA, DB Schenker, DHL, Kuehne + Nagel, Menlo Worldwide, Panalpina, Ryder, UTi, and Yusen Logistics are covered extensively.

In-depth profiles are also presented for continentally based major players GENCO, Jacobson, Kenco, Kerry, Mainfreight, Norbert Dentressangle, OHL, Toll and Werner among others. Important niche specialists like BNSF Logistics, Coyote Logistics, Echo Global Logistics, Freightquote, LMS, LuIs Simoes, ModusLink, TQL, and Transplace are also reviewed in detail.

Results of the 22nd Annual Study of Logistics and Transportation Trends (Masters of Logistics) shared at CSCMP


Editors Note: Our live presentation of this annual study, moderated by Group Editorial Director Michael Levans, was once again one of the best-attended sessions at CSCMP. What follows is an overview of this year's findings. To attend the Webcast of this session go to

Some have said transportation is a street leading to unlimited destinations. On this street, some are headed to a place where transportation is viewed as a commodity. Others have made a U-turn and are headed toward an end point of long-term commitment where transportation providers are viewed as critical partners. Meanwhile, the majority remains in the middle, parked in the off-ramps.

This allegory reflects a trend continued by a group of carriers and shippers towards the co-creation of value, and this group has moved further along the road to positioning transportation as a strategic value-add function. The results of the 22nd Annual Trends and Issues in Transportation and Logistics (Masters of Logistics) findings indicate that this "value-added" view of transportation directly relates to better company performance.

This year's findings reveal that the value-added approach is a two-way street where both parties are committed to the long-term success of the other.

A changing business climate

Over the past few years, various facets of the business environment have altered how shippers and carriers manage their operations. Study participants reported that foremost among these is changing customer requirements, followed by cost to serve and demand uncertainty.

Regardless of size of company or position in the supply chain, trying to meet performance expectations and customer needs is increasingly difficult. The environment is even challenging for carriers.

What this means for shippers and carriers alike is that flexibility is becoming more critical. The question for shippers is how they can increase their flexibility, especially from transportation providers?

One option is to use a wide range of carriers. If transportation is all the same, it really doesn't matter who moves the goods. This is the commodity perspective. Or, you could view transportation as a value-added service and work to develop relationships with carriers who work with you and provide flexibility. The big question is: which is the right one if capacity continues to tighten and transportation costs keep on rising.

Cost to serve

As a derived demand, transportation has reflected inconsistent demand patterns due to changing consumer requirements. The result is an increase in the cost to serve that is being directly felt in transportation expenditures.

This year's study results confirm that transportation costs increased at a brisk rate from the previous year. Companies who spent more than 5 percent of sales on domestic transportation grew from 26.8 percent to 30.9 percent from 2012 to 2013. While this shift was noteworthy, the largest swing occurred for those companies that previously had been spending 1 percent to 2 percent of sales on transportation and are now spending 2 percent to 3 percent, representing a 26.3 percent increase in the companies in this spending category--a difference that can translate into millions of dollars.

The data suggests that LTL, intermodal, and surface parcel are the beneficiaries of this multi-modal approach to meeting transportation needs.

Purchasing takes an increasing role

The way we manage and control transportation is changing. Part of this change is driven by who has the responsibility for transportation decisions.

Transportation/logistics is still the primary functional area with responsibility for managing transportation. However, when it comes to preparing and requesting quotes and bids, purchasing/procurement either solely, or in combination with transportation/logistics, leads this task in almost half of companies. Purchasing/procurement is also materially involved in carrier negotiations.

The "new" Masters

The phrase "Masters of Logistics" was coined during a time when the size of company (based on annual sales revenues) made a significant difference in managing logistics and transportation. Over the years, the impact of the Masters (companies with annual revenues greater than $3 billion) has ebbed as many of the critical difference-making elements has become more widely available to companies of all sizes.

The results of this year's study point towards a shift by the Masters of Logistics that is significantly different from smaller companies. The survey data indicate that the Masters are focusing on continuously improving their transportation processes in order to keep costs low.

Another key trend: The Masters aren't always the Masters of Performance. Smaller and medium-sized companies, also reported results that were better than competitors across factors such as firm profitability, return on assets, market share, and customer service levels. In the years to come, we believe that the "new" Masters will be dictated by the results they achieve, and not by their size.

Webcast: Now on demand

Results of the 22nd Annual Study of Logistics and Transportation Trends Study

Masters co-create value

Go to:

RELATED ARTICLE: IWLA chief shares advice for 3PL customers at CSCMP

Joel Anderson, president and CEO of The International Warehouse Logistics Association, spoke on "pesky regulations" at the recently concluded CSCMP Annual Global Conference in Denver. Now that he's announced his pending retirement, Anderson shared this "check list" for shippers wising to vet 3PLs promising "optimization."

Here are some of his observations:

1. Service expectations: The shipper needs to clearly define its market and service expectations. For example, if the shipper does not have any trading patterns outside of a defined area, look for someone with a proven track record of services and promises kept within that service area.

2. Data transparency: The shipper should always be able to get answers to the questions of inventory in storage, in transit, expected delivery dates, immediate notification of any delays, and expected resolution of the delays.

3. Did they ask the right questions? When presenting responses to an RFP, did the 3PL also ask deep questions about the shipper's supply chain and the shipper's customer requirements? Third parties provide substituted services for the shipper, and to provide at the same level or better, the 3PL must know all the "ins and outs" of the shipper's supply chain, including what the shipper's customers expect.

4. Innovation: Does the 3PL bring innovation to the shipper's supply chain? After examining the deep questions in #3, does the 3PL mull it over and then respond with an alternative approach that can reduce the time and cost and improve the reliability and efficiency of the supply chain?

5. Commitment: Does the shipper have the commitment of the senior management of the 3PL? Anderson has found that the most successful 3PLs that secure new business contracts are ones where senior management participates in the service offering. Nothing says "I care" better than senior management participating in making the proposal a reality.

--Patrick Burnson, Executive Editor
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Publication:Logistics Management (Highlands Ranch, Co.)
Article Type:Conference news
Geographic Code:100NA
Date:Dec 1, 2013
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