World Trade January 2011

TRENDS TO WATCH IN 2012

PG 24

JANUARY 2012 WWW.WORLDTRADEWT100.COM

NEXT-GENERATION

CLOUD TECHNOLOGY FOR THE SUPPLY CHAIN [ PG 18 ]

ALSO:

Intermodal: A New Level of Reliability pg 30

Fresh expectations.

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Inside

VOLUME 25

NUMBER 1

January 2012 18

FEATU RES COVER STORY

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Next-Generation Cloud Technology for the Supply Chain New cloud solutions are emerging, but not everyone is adopting them.

E XE C UTI V E B R I E F I N G 8 10 14 16

Green Matters e-Supply Chain Supply Chain Watch Tradewinds

U.S. REGION: SOUTHEAST

36 Talented, Trained Workforce is Crucial for Business Success The Southeast region is attracting expanding di companies and labor forces. By Ken Krizner

By Mary Shacklett

INTERNATIONAL REGION: SOUTHEAST ASIA

24 Trends to Watch in 2012

40 U.S. Manufacturers Find More Expansion Options in Southeast Asia If China is too expensive, companies can find low-cost alternatives throughout the region.

2011 held many lessons for the global supply chain. Here, we look ahead to see what 2012 will bring. By Martha Walz

30 Intermodal: A New Level of Reliability New partnerships usher in a more efficient age of intermodal transport. By Dan McCue

By Ken Krizner

INDUSTRY UPDATE: AUTOMOTIVE

44 Automobile Transport— A Trucking Solution Optimizing automobile trucking calls for a holistic approach to finished vehicle logistics. By Anthony Coia

COLUMNS INSIDE WORLD TRADE

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NLINE

Supply Chain Industry Podcasts Supply Chain Visibility and Inventory Management Trends in the Retail Industry Stephanie Miles, SVP of Commercial Services at Amber Road, discusses supply chain visibility and inventory management trends and best practices.

Management Dynamics is now Amber Road! Management Dynamics, provider of Global Trade Management solutions for importers, exporters, and logistics service providers, has announced that they are now Amber Road. Scott Byrnes, VP of Marketing, explains the reasons behind the name change, and sheds light on what exciting changes are still to come.

>>>> Download podcast of article at www.worldtradewt100.com/media/podcasts

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Looking Back, Looking Ahead As a new year dawns, it is prudent to look back to see what lessons we can take from the year that has just passed. By Martha Walz

REGULATORY UPDATE

12 Scores of Transportation Stakeholders Take Message to DC We need a productive trucking industry in order to have healthy supply chains and a healthy economy. By Brian Everett

EXTREME LOGISTICS

50 Crossing the Ice Two young Australian adventurers attempt to successfully walk from the edge of Antarctica to the South Pole and back without any assistance. By Chris Lewis

WORLD TRADE WT100 (ISSN 1949-9159) is published 12 times annually, monthly, by BNP Media II, L.L.C., 2401 W. Big Beaver Rd., Suite 700, Troy, MI 48084-3333. Telephone: (248) 362-3700, Fax: (248) 362-0317. No charge for subscriptions to qualified individuals. Annual rate for subscriptions to nonqualified individuals in the U.S.A.: $115.00 USD. Annual rate for subscriptions to nonqualified individuals in Canada: $149.00 USD (includes GST & postage); all other countries: $165.00 (int’l mail) payable in U.S. funds. Printed in the U.S.A. Copyright 2012, by BNP Media II, L.L.C. All rights reserved. The contents of this publication may not be reproduced in whole or in part without the consent of the publisher. The publisher is not responsible for product claims and representations. Periodicals Postage Paid at Troy, MI and at additional mailing offices. POSTMASTER: Send address changes to: WORLD TRADE WT100, P.O. Box 2144, Skokie, IL 60076. Canada Post: Publications Mail Agreement #40612608. GST account: 131263923. Send returns (Canada) to Pitney Bowes, P.O. Box 25542, London, ON, N6C 6B2. Change of address: Send old address label along with new address to WORLD TRADE WT100, P.O. Box 2144, Skokie, IL 60076. For single copies or back issues: contact Ann Kalb at (248) 244-6499 or [email protected]. W W W. WO R L DT R A D E W T 1 0 0 .C O M

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If you want to keep up, you better take giant steps. Through these uncertain times, we’re staying focused on billions of dollars in smart upgrades. Why? Like the ocean carriers ordering bigger ships and shippers building giant distribution centers, we know that tomorrow’s success depends on investments today. We’re not just ahead of other ports, we’re staying an leap ahead.

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Looking Back, Looking Ahead

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s a new year dawns, it is prudent to look back to see what lessons we can take from the year that has just passed. In this issue of WT100, we do just that. Industry executives tell us what they learned in 2011 and give us a look ahead into what trends they see developing for 2012. MARTHA WALZ Several natural disasters took place in 2011 that changed the way companies are looking at their supply chains. From the earthquake and resulting tsunami in Japan to the volcanic eruption in Iceland to the flooding in China, global supply chains were put to the test, and not all of them passed. Moving to multiple sources of supply and manufacturing are two ways in which the executives see companies are reacting to the supply chain disruptions felt this past year. Near-sourcing and implementing lean processes are also popular. Another common trend seen among the executives is a switch to intermodal transportation. Pending legislation restricting truckers’ hours of service combined with shippers’ intertwined goals of sustainability and cost savings are boosting intermodal as the mode of choice going into the new year. As such, in this issue, Dan McCue takes a deeper look into the high reliability of intermodal transport. Cloud computing exploded onto the scene in 2011, and its outlook for 2012 is much the same. Cloud will continue to grow as a way to gain visibility into the

entire supply chain and link disparate supply chain partners in the process. This month’s cover story, starting on page 18, delves deeper into what we can expect from next-generation cloud computing. What else is in store for the global supply chain in 2012? As we move closer to the opening of the expanded Panama Canal in 2014, new business opportunities are arising, especially in the U.S. Southeast. Ken Krizner takes a look at some of these potential opportunities in his regional profile starting on page 36. And, as previously mentioned, HOS and CSA legislation have the potential to transform the face of trucking in the new year, and not everyone thinks it’s for the better. Turn to page 12 for one group’s stance on this pending legislation. To be sure, the new year will also hold some surprises that cannot be predicted. It will be interesting to look back a year from now to see if the trends predicted here do indeed hold. Happy New Year to all of our readers from the team at World Trade 100!

Martha Walz, Editor in Chief [email protected]

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GREEN MATTERS AZ Goes Green AZ, a provider of transportation, fulfillment, and distribution services based in New Jersey, has announced that, in the interest of protecting the environment, it will begin to use a lashing system that is designed with polyester Cordstraps, rather than lumber, as it acquires and secures exports and cargo loads. Through its usage of Cordstraps, AZ has eliminated its need for wood blocking and bracing throughout the cargo transport process. Additionally, AZ’s new lashing system has been approved by the National Cargo Bureau for its effectiveness. The system’s Cordstraps are not only lightweight, convenient, and weatherresistant, but environmentally friendly as well. “By going ‘green’ with our new cargo restraint system, we will be able to save hundreds of trees each year,” states Richard Lombardi, president, AZ. “This process will allow us to continue to provide secure cargo transportation worldwide, while making conscious decisions to protect the environment.”

Carbon Calculator for Ports To help a variety of worldwide ports estimate their greenhouse gas emissions and develop new emission reduction strategies, the Port of Los Angeles has developed a carbon calculator. While using the calculator, ports will be able to detect the amount of pollutants that are actually released from sources associated with their own operations; in doing so, ports can then implement new tactics to reduce their carbon footprints on a longterm basis. As a software package, Carbon Calculator not only allows ports to estimate their emissions from their own direct sources, such as cranes

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CO2-Based Container Refrigeration System Carrier Transicold has unveiled the world’s first CO2-based refrigeration system—the NaturaLINE. While using CO2 as a natural refrigerant, the NaturaLINE has been developed to reduce shipping lines’ on-board power generation requirements, which will ultimately decrease the amount of fuel used to generate electricity. By reducing fuel usage, shipping lines will not only minimize their operating costs, but also curtail the amount of CO2 emissions they release on a daily basis. “The NaturaLINE design [will] provide the global shipping industry with the most environmentally sound alternative for refrigerated transport,” says David Appel, president, Carrier Transicold. “NaturaLINE [currently] stands apart as the only [refrigeration system] to offer a natural refrigerant-based solution.”

and fleet vehicles, but from indirect sources as well, including electricity—completely free of charge.

Hydrogen Fuel Cell Truck Researchers from RMIT Univ., a technology and design university based in Melbourne, Australia, have developed the nation’s first hydrogen fuel cell truck. Since its development, the truck has demonstrated the ways in which vehicle design, as well as new sustainable technologies, can improve the cleanliness and sustainability of freight transport. A small-scale model of the truck is currently operated by remote control. It was designed to imitate the performances of long-haul diesel trucks, which are typically driven from Melbourne to Sydney. “For [individuals who are] worried about fumes and noise, the prospect of a silent, zero-emission truck is exciting,” says Aleksandar Subic, head of RMIT’s School of Aerospace, Mechanical, and Manufacturing Engineering. “This innovation stems from our comprehensive research into sustainable mobility involving hydrogen technologies.”

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CSX Improves its Carbon Calculator CSX has launched an enhanced version of its carbon calculator, which was first designed to help worldwide businesses and patrons understand the ways in which the freight rail industry can improve the sustainability of supply chains every day. The calculator compares the amount of carbon emissions that are created by the freight rail industry to the emissions that are generated by long-haul trucks— all on comparable routes. To estimate the ways in which the rail industry can reduce carbon pollutants, CSX customers can calculate emissions through a wide range of variables, including the type and volume of goods that are transported in comparison to the actual length of shipping routes. “CSX’s online Carbon Calculator not only helps our customers make smart supply chain decisions, it also helps educate consumers about the path items take to get to store shelves or their front door,” declares Carl Gerhardstein, assistant VP, environmental systems and sustainability, CSX. “This tool dem-

onstrates our commitment to responsible business and helps consumers understand how freight rail positively affects the lifecycle of the goods they buy.”

Reduce Climate Impact Using GPS Scania, a European manufacturer of trucks and buses for heavy transport applications and of industrial and marine engines, has developed a cruise control system that uses GPS to determine a vehicle’s position and to predict the topography of the road ahead. The cruising speed is adjusted before entering an ascent or descent, helping the driver make the most of every drop of fuel. The system can deliver a fuel saving of up to 3 percent when driving on undulating stretches of road. Scania will start to deliver trucks with the Active Prediction system to customers starting next year. There is topographic map data available today for around 95% of the road network in central and Western Europe, which is also useful for operators that provide transit services from Eastern Europe, Turkey, and beyond. WT

AVAILABLE LOGISTICS PROPERTY PARCEL A Price

$3.7 Million USD Available for Sale or Long-Term Lease. State Incentives Available.

Acreage 18.7 AC Property Type Land, located within the City of Mobile’s corporate limits. Zoned 1-2 heavy industry. Access Frontage/Baker Street (I-10 Service Road)/ Yeend Street (Intersects Baker/I-10 Service Road). Adjacent to APM Terminals Mobile Container Facility. Adjacent to planned Intermodal Container Transfer Facility. Features Power/Telephone/Water/Sewer. Cleared and ready to build.

OOutstanding uttstandding ddevelopment evellopmentt tract tracts ts with wiith iimmediate mmeddiatte access to IInterstate ntersttatte 10, located just east of the Interstate 10 / Interstate 65 interchange. Adjacent to APM Terminals, the Port of Mobile’s new container terminal, these tracts are also in close proximity to the Port’s Intermodal Container Transfer Facility and Brookley Aeroplex (air cargo). Ideal for intermodal logistics, distribution or value-added industries. These cleared, level parcels are in the immediate proximity to the corner of Baker Street and Yeend Street, in the City of Mobile, Ala.

PARCEL B Price

$1.9 Million USD Available for Sale or Long-Term Lease. State Incentives Available.

Acreage 9.8 AC Property Type Land, located within the City of Mobile’s corporate limits. Zoned 1-2 heavy industry. Access Frontage Yeend Street (Intersects Baker/I-10 Service Road). Adjacent to APM Terminals Mobile Container Facility. Adjacent to planned Intermodal Container Transfer Facility. Features Power/Telephone/Water/Sewer. Cleared and ready to build.

FOR MORE INFORMATION CONTACT: Alabama State Port Authority James K. Lyons, Director/Chief Executive Officer 251- 441-7200 s [email protected] asdd.com

e-SC

[e-Supply Chain]

Explosives Trace Detector Implant Sciences Corp., a provider of systems and sensors for homeland security markets, has announced the first sale of one of its newest products— the Quantum Sniffer QS-H150 explosives trace detector—within its German market. The detector, distributed by D-TeC System Consulting GmbH, was purchased by First Class Zollservice, which will offer the detectors to air freight forwarders. The Quantum Sniffer is expected to be installed into vehicles that drive to freight forwarding facilities, to provide mobile air freight screening services to airports. “We are proud to see the portability, flexibility, and reliability of our QS-H150 help create cost-effective new business models for security providers,” states Glenn D. Bolduc, president and CEO, Implant Sciences. “By screening at the air freight forwarder, an additional layer of security and confidence is created before packages even reach the airport.”

pace than ever before, all while reducing the amount of tax payers’ dollars that are generally used towards road construction. Also, the department is determined to build future roads that do not negatively impact the state’s environment, which may ultimately improve the well-being of thousands of North Carolinians. By using the geographic data, the NCDOT has estimated that it may be able to save the state $500,000 per road construction project. In addition, by implementing light detection and ranging (LIDAR), which uses lasers to record distances, the NCDOT will be able to locate wetlands and streams prior to road construction projects to preserve natural resources.

GENCO ATC Improves Customers’ Productivity Levels GPS-Enabled Web Portal Four Soft (4S), which designs software solutions for logistics and transportation organizations, has launched a new collaborative Web portal, 4S Visilog. The portal utilizes GPS tracking devices in order to acquire real-time event information in regards to truck locations and transit shipments. In doing so, 4S Visilog allows its associates, business partners, and customers, among others, to remain in contact with one another throughout the entire supply chain process. In addition, by using Visilog, customers are able to identify fleet ineptitudes, improve their organizations’ operational effectiveness, reduce trucking fuel costs, and increase productivity. “[Four Soft is] excited to offer [its] new solution to clients that need to ensure their cargo arrives safely at destination,” says Rakesh Kumar Munigala, VP, product design and marketing, Four Soft.

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Munigala continues, “This technological innovation, which has now become available with our 4S Visilog application, enables manufacturer(s) [and] shipper(s) to have visibility of real-time status of movement of shipments [and] have [a] greater level of control of their assets during transit.”

Turkish Cargo Increases e-Freight Capabilities Turkish Airlines’ cargo division has protracted its partnership agreement with TRAXON Europe, which first began in 1999, for another three years. Through the partnership extension, Turkish Cargo will have access to Traxon’s Europe network on a worldwide basis. As a result, the airline’s cargo division will be able to further improve its e-freight capabilities; the airlines will also be able to conduct its various business practices with its logistics and industry partners well into the future,

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all on one constant platform— while utilizing host-to-host (EDI) messaging services. “The cooperation with TRAXON helps us to further streamline processes, simplify operations, and achieve a higher efficiency at reduced costs,” says Serdar Demir, manager, cargo handling contracts, Turkish Airlines Cargo. “The e-services offered by Turkish Cargo simplify the airfreight forwarder’s working day and help reduce mistakes.”

Geographic Data Improves the Environment With assistance from SAS Analytics, North Carolina’s Department of Transportation (NCDOT) has analyzed geographic data to decide which types of road corridors will be built throughout the state during the coming months. The NCDOT has acquired the data for various reasons. First, the department is focused on building more roads at a faster

By deploying Vocollect Voice for its customers, GENCO ATC, a 3PL company, has helped an array of organizations save thousands of dollars, while also improving their productivity levels. Vocollect Voice is a voice-centric solution for mobile workers designed by Vocollect, a business unit of Intermec, Inc. “Vocollect Voice has helped us provide significant bottomline payback to our customers,” says Crystal Welker, director of solutions design and continuous improvement, GENCO ATC. “It works well across multiple industries, with a [level of] flexibility and scalability that helps us easily integrate the solution with many different customer warehouse management systems.” Walker continues, “With our company’s Lean initiative, we are especially pleased that Vocollect Voice has helped us help our customers save hundreds of thousands, and even millions, of dollars every year.” WT

BLUEPRINT FOR SUCCESS: Proven Strategies for Economic Development in North Carolina

Proven, comprehensive economic development solutions in North Carolina. North Carolina’s Public Power communities are among the best places in the country to live and do business. ElectriCities’ seasoned, experienced Economic Development staff is dedicated to helping these communities continue to grow and prosper. We partner with our member cities to provide customized assistance with all aspects of economic development. Our comprehensive approach begins at project outset and continues through the site selection and building processes. We actively work with the N.C. Department of Commerce and site selectors and participate in national trade shows to recruit industries and bring jobs to our hometowns. What can we do for you? From site selection to targeted recruiting to grant assistance and marketing, we’ve got all the tools and expertise you need to successfully develop your business. To help us serve you better, let us know more about your needs and areas of interest.

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Economic Developer 800.768.7697, ext. 6325 [email protected]

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For more information, or to view available properties visit www.electricities.com.

R E G U L ATO RY U P D ATE

Scores of Transportation Stakeholders Take Message to D.C.

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BYBYDANIEL BRIAN GRISWOLD EVERETT

here’s a movement underway. It’s a movement, lead by NASSTRAC (a shipper’s association that provides advocacy, education, and provider relations to transportation executives) and the American Trucking Association. It’s also supported by many other diverse industry associations, including Transportation Intermediaries Association, the National Private Truck Council, Coalition for Transportation Productivity, RILA, Cleaner Safer Trucking, the National Industrial Transportation League, and the American Movers and Storage Association, to name a few. The movement is to engage scores of transportation executives to participate in a Washington Fly-In Feb. 1, 2012. Never before have so many industry associations teamed up to mobilize their memberships for a unified cause. What’s driving the momentum behind this effort? It’s simple, really. The trucking industry is the backbone of the nation’s economy. There are nearly seven million Americans working in

include the possible changes to existing truck driver hours of service rules, FMCSA’s potential overreach into shipper operations, truck size and weight limitations, CSA requirements, and the need for a long-term plan and funding of America’s infrastructure. NASSTRAC’s current advocacy concerns are built around these fundamental principles. Key issues that transportation and supply chain executives will be taking to Washington in this Fly-In include the need to: enact a multiyear highway bill that reforms the program and focuses funding on critical freight corridors; pay for highway infrastructure in the most efficient way—through taxes on fuel, including diesel fuel, and not tolls; and stop burdensome laws and regulations that impede productivity and increase the delivered cost of goods, including proposed changes to the truck driver hours of service rules. The message these transportation and supply chain stakeholders are taking to Washington is simple: “We need a productive trucking industry in order to have healthy supply chains and a healthy economy.” Unfortunately, these legislative and advocacy issues that have the potential to increase supply chain and transportation costs by more than 10 percent in 2012 alone— and that’s not going in the direction we can afford. The benefit of these industry associations and their members taking their message to Washington is that shippers and providers alike all can have a common platform to voice their opinions and positions under the safe cover of an industry association. Get involved in this Fly-In! There will be legislative and political briefings on Feb. 1, a dinner reception on Jan. 31, and coordinated meetings with key Senators and members of Congress. There’s no cost to participate in the event itself; but participants are responsible for their transportation, hotel, and related costs. For more information on this Fly-In and to register, visit www.StandUpForTrucking.org. WT

We need a productive trucking industry in order to have healthy supply chains and a healthy economy. trucking-related jobs, including approximately 3.5 million commercial truck drivers. Trucks moved $8.3 trillion worth of goods in 2007, and trucking industry revenues account for 4 percent of the U.S. gross domestic product. Approximately 80 percent of all U.S. communities depend solely on trucks to deliver their essential everyday products ranging from food, beverages, and clothing to office supplies and building materials. Unfortunately, if you damage or limit the productivity and efficiency of trucking, you do the same to corporate supply chains. Some of the key issues being considered that can have a potentially negative impact on supply chains 12

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Brian Everett, ABC, is executive director of NASSTRAC (www. NASSTRAC.org) and senior partner of MindShare Strategies, Inc. (www.MindShare.bz).

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SUPPLY CHAIN 3PL

CEVA Increases its LCL Focus CEVA Logistics is continuing to grow its less-than-container load (LCL) consolidation services by introducing an additional 30 new consolidation services worldwide. With strategically located consolidation points in America, Europe, the Middle East and Asia Pacific, new offerings include: Los Angeles to Shanghai, Singapore, Hong Kong, Sydney and Melbourne; Hamburg to Shanghai, Singapore and Dubai; Shanghai to Dallas, Singapore and Hamburg, and Nhava Sheva, India to New York. CEVA’s consolidation hubs are located in New York City, Miami and Los Angeles in the U.S.; Hamburg, Germany, Dubai, UAE and Antwerp, Belgium in Europe and the Middle East and Singapore and Hong Kong in Asia Pacific.

OCEAN

Crowley Launches First Ocean Class Tugboat Crowley Maritime Corp. has launched the Ocean Wave, the first of four Ocean Class tugboats under construction at Bollinger Shipyards in Amelia, La. Crowley’s Ocean Wave and Ocean Wind are classed as Dynamic Positioning 1 (DP1) tugboats and are twin-screw, steel-hulled tugs with an overall length of 146 feet, beam of 46 feet, hull depth of 25 feet, and design draft of 21 feet. The second two tugs of the class, Ocean Sky and Ocean Sun, will be classed as DP2 and will be 10 feet longer.

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The new tugs will be ideally suited to work with Crowley’s novel 455-series heavy lift deck barges, which measure 400 feet by 105 feet and offer increased stability for loads of up to 4,200 pounds per square foot. Additionally, the tugs will be outfitted for, and capable of, rig moves, platform and floating production, storage, and offloading (FPSO) unit tows, emergency response, and firefighting. These Ocean class vessels will also have the capability to support salvage and rescue towing opportunities. The Ocean Wave is scheduled for delivery in early 2012. The remaining tugs are expected to be completed by the end of 2013.

APL Expands Japanese Coverage APL has enhanced its Japan to Thailand and Philippines coverage as a slot operator in a tie-up with Mitsui O.S.K. Lines (MOL). The new service, named JapanThailand-Philippine (JTP) service, increases APL’s coverage of Japanese ports, in particular those of Tokyo, Yokohama, Shimizu, and Nagoya. The new service will link Korea to the Southeast Asian markets of Thailand and the Philippines. Port rotation for the JTP service will be: Tokyo, Yokohama, Shimizu, Nagoya, Pusan, Laem Chabang, Manila, and Tokyo.

MSC and CMA CGM Sign Partnership Agreement The world’s second- and thirdlargest container shipping companies have signed a major

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agreement. Two family-owned companies, the Swiss-Italian MSC and France’s CMA CGM, have agreed to form a broad-based operating partnership spanning several trades, including AsiaNorthern Europe, Asia-Southern Africa, and all of the South American markets. The agreement, which is designed to improve the two partners’ respective performances, will help to drive extensive operating synergies while also enhancing customer service. On a certain number of trades, the partnership will also enable the groups to deploy the best ships in each of their fleets, while increasing the number of ports of call and the frequency of sailings.

West Coast Stevedoring Operations APS Stevedoring LLC, a new auto and general/breakbulk cargo stevedoring company headquartered in Long Beach, Calif., has begun operations in the Port of Richmond, Calif. Current customers in Richmond include Subaru, Honda, MOL, Act Maritime, K Line, and NYK. The company plans to expand throughout the U.S. West Coast as opportunities present themselves. “We see great opportunity with the synergy of all aspects of the logistics chain, including stevedoring, terminal handling and auto processing,” says John Hering, APS president. APS has extended capabilities and services though its relationship with AWC, North America’s largest auto processing company with operations at 22 port,

plant, and rail locations in the U.S. and Canada.

57,000 DWT Bulk Carrier Vessel Winland Ocean Shipping Corp. successfully delivered and placed in service its first new 57,000 DWT bulk carrier vessel, Fon Tai. Fon Tai was constructed by Jiangsu New Hantong Ship Heavy Industry Co., Ltd. As a 57,000 DWT bulk carrier vessel, it is considered to be the most flexible and economic vessel in the ship market. To be more convenient to transport around China and the world, Fon Tai’s port of registry and flag is Hong Kong, China. It was registered in Nippon Kaiji Kyokai (ClassNK), which is one of the top ten ship classification societies in the world.

WAREHOUSING

West China Cold-Chain Logistics Center Ground has been broken on the construction of West China’s largest cold-chain logistics center, which will be located in the Qingbaijiang district of Chengdu, Sichuan province. Chengdu Silverplow Lowtemperature Logistics Co., Ltd. has invested 2.5 billion yuan into the Chengdu Silverplow Cold-Chain Logistics Center for Agricultural Products which will consist of cold storage with a total capacity of 300,000 tons, a 160,000-square-meter distribution center, high-temperature storage, and general warehouses covering 100,000 square meters and supporting facilities such as railway lines. WT

When one of the world’s largest producers of wind turbines needed a port with quick access to deep water, where did they turn?

Por t Freepor t. Easy Breezy.

Resting just 3 miles from deep water sits a wide-open port only 50 miles from all the infrastructure perks of the fourth largest city in the country. And with over 7500 acres of room to grow and expand, a burgeoning company like Suzlon is free to ride the winds of change as they see fit. Whew.

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TRADEWINDS THE LATEST TRENDS IN THE WORLD OF TRADE

Asia IntraRegional Trade to Grow

By the Numbers U.S. Imports and Exports by Value

Rising costs in China are prompting high-tech companies in Asia to explore alternative sourcing locations within the region as well as in North America. As part of this shift, half of all high-tech trade lanes in five years’ time are expected to involve intra-Asia movements. The survey, conducted by IDC Manufacturing Insights, revealed that 19 percent of high-tech company respondents plan to source supplies and raw materials from North America in the next three to five years. Shifts in sourcing strategies will occur within the Asia Pacific region as well. Although China and Japan will continue to supply to most high-tech companies, survey findings show a significant shift of supply sourcing to both emerging and mature Asia Pacific countries in the next three to five years.

Freight Transport Volume in Argentina Rises GROWTH IS SEEN ACROSS SECTORS Total volume at the Port of Buenos Aires is set to rise by 4.7 percent in 2012 to reach 13 million tons. Box handling will also grow by 4.7 percent to 1.2 million TEUs. Air freight volume growth in Argentina is set to grow by 5.0 percent to 175,100 tons in 2012, with average annual growth of 4.2 percent during their forecast period. 16

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Value ($ Billions)

ASIAN HIGH-TECH COMPANIES SHIFTING SOURCING

Source: Zepol Corporation

Argentina’s rail freight hauled in 2012 will grow by a modest 2.0 percent to 22.7 million tons, with average annual growth of 2.0 percent during the forecast period.

Smart Transportation Systems Increase GLOBAL INVESTMENT WILL TOTAL $13.1 BILLION THROUGH 2017 According to a new report from Pike Research, smart transportation systems, also sometimes known as intelligent transportation systems (ITS), will see increased investment in coming years because it is seen as a way to maximize existing transportation systems without making major new capital investments. The key enabling factor for smart transportation is embedded intelligence, which allows the vehicle or infrastructure to communi2 0 1 2

cate with other transportation assets and to respond to outside management and external conditions. Cities, transit operators, fleet managers, and other owners of transportation assets see smart transportation technologies as tools to help them enhance mobility, reduce fuel consumption and emissions, improve safety, and strengthen economic competitiveness. Pike Research forecasts that global investment in smart transportation systems will total $13.1 billion between 2011 and 2017.

DOT Bans Handheld Cell Phones INTERSTATE TRUCK AND BUS DRIVERS AFFECTED The U.S. Dept. of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) and Pipeline and

Hazardous Materials Safety Administration (PHMSA) have handed down a new joint rule prohibiting interstate truck and bus drivers from using handheld mobile phones while driving. Regarding employer liability, the rule states that carriers are responsible for the actions of their employees and will generally be held accountable (with a maximum penalty of $11,000) for handheld ban violations that occur when drivers are carrying out company business or otherwise acting on the employer’s behalf. In regards to enforcement methods, the FMCSA felt it unnecessary to make recommendations, choosing instead to clarify that an employer having a written policy in place is not deemed a method of enforcement, and, if a violation occurs, the employer will still be held accountable for its employee’s actions. WT

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The people – Attended by thought leaders shaping the logistics industry for today and tomorrow The access – Opportunities to meet industry and non-industry leaders, share best practices and gain new perspectives The quality – The best program and participants for more than 40 years, making this a must for the shipping professional Don’t miss this opportunity to change your game. For more information or to register online, visit gaforeigntrade.com.

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COVER STORY

CLOUD TECHNOLOGY NEXT-GENERATION

FOR THE SUPPLY CHAIN

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New cloud solutions are emerging, but not everyone is adopting them.

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BY MARY SHACKLETT

he next generation of cloud technology for the supply chain will enable easier supply chain management and raise the consciousness within organizations about what can be possible with these new approaches and how to capitalize on them. The interesting thing about any “next-generation” technology is that there are always organizations in the present that are already in the next generation—while most companies are still getting their feet wet with new technology concepts. This article takes a look at what the next-generation cloud is likely to deliver—and also at the thinking behind corporate supply chains that must emerge to keep pace in global markets. The cloud’s present state

First, let’s take a look at where cloud technology is in businesses today. Overall, whether the application is supply chain or something else, IBM’s recent survey results indicate that 55 percent of CIOs interviewed were implementing or planning to implement cloud technology. That left 45 percent who had no specific cloud plans. The 45 percent who were on the fence cited security worries about their information and the loss of control over their own applications as primary concerns. Those forging ahead with cloud initiatives, especially if they were large enterprises, were looking at developing their own internal private clouds so they could apply cloud concepts such as on-demand provisioning of resources to end users. They planned to accomplish this by using internal IT staff, since internal IT skill pools were known quantities, and they could rest assured that the security and governance standards that they and their auditors demanded were going to be there. At the same time, this group was beginning to see the value of subscribing to commercial cloud solutions that addressed business issues that internal systems were illpositioned to solve. Because of this, nearly everyone envisioned a hybrid cloud scenario in the future where they both maintain internal private clouds and subscribe to and integrate with commercial cloud offerings. Beyond the CIO’s office, however, the value of cloud to other business executives was primarily couched in cost savings and capital investment and risk reductions. “The market in general still doesn’t fully understand cloud, and specifically, cloud and the supply chain,” says Greg Kefer, marketing director at GT Nexus, which provides a cloud-based automation platform for the supply chain. “If you’re not a CIO, you may not understand the nuances of what cloud means. Instead, you look at it as an application you don’t have to maintain yourself, which reduces your potential costs and risks. You see the cloud as a pay-as-you-go technology service, instead

of as an owned asset that the organization sustains over many years.” Kefer says that this current thinking about cloud is “only the tip of the iceberg” when it comes to cloud’s potential for the supply chain—and that one of the battles for company executives is “getting through all of the hype” from technology vendors and the press so they can define just exactly how cloud should fit into their corporate operations and what it can deliver to the supply chain that present solutions can’t. Cloud’s next generation

Because companies are growing in their understanding of the cloud and what it can do, next-generation cloud technology is likely to be a combination of many solutions that are already available and an expansion in corporate knowhow as to how to best take advantage of these. Just where are businesses today in their thinking about cloud—and what transformations will next-generation thinking and cloud technologies bring to the supply chain? “The evolution of the cloud will be to a network model where you have multiple companies collaborating with each of their vendors, customers, and partners,” says Vincent Biddlecombe, CTO at Transplace, a 3PL and technology provider. “Each of these organizations in turn will have its own network of collaborators. This implies interoperable, open systems in the cloud that are capable of moving large amounts of data quickly.” This is how it works: A company and its suppliers, logistics providers, trading partners, etc., all participate in an external cloud-based supply chain network that consists of a single database which is accessed by everyone. This database contains data that has been normalized, or cleaned, so that it is the same for everyone using it, which eliminates data quality problems that can arise when each company uses its own data. Each organization applies its own business, governance, and security rules to its data in the cloud. In other words, if a company wants to grant supplier A unlimited access to certain information but not supplier B, it can set those security permissions. The database, which is maintained by the supply chain cloud provider, has standardized access, which virtually allows any company to access the data through any means—whether by a highly sophisticated system-to-system integration or a fax machine. Because suppliers can join this cloudbased network at minimal charge, a manufacturer often finds that 80 percent of its supplier base is already on the cloud. This eliminates the painstaking process of one-byone onboarding of new suppliers through lengthy EDI (electronic data interchange) certification processes. Since the one-to-one, serial approach of traditional EDI is no longer needed in a cloud environment that offers one-toW W W. WO R L DT R A D E W T 1 0 0 .C O M

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Nextgeneration cloud computing is built around models that emphasize collaboration.

many communications, everyone can collaborate on issue resolution at the same time. This speeds the supply chain’s time to market. How important is this? “Companies have been working with traditional supply chain solutions that feature serial style communications between supply chain parties over EDI or VANs (value added networks) for over thirty years, and it’s still not working for them,” says Kefer. “When you get to newer cloud services built around multi-tenant networks that use a single source of data in the form of a common data repository of supply chain information with business rules, the communications can be many-to-many. While companies are still struggling with this concept of a single network that allows many-to-many communications, some 3PLs and carriers are beginning to understand the value of a multi-tenant communications network, and transportation carriers are fairly mature in how they interact with cloud logistics platforms to service hundreds of their top customers through a single e-commerce hub.” Next-generation cloud computing is built around data quality and social networking models that emphasize collaboration and one-to-many communications—and the velocity that this combination of high quality, single source data and multi-party collaboration can bring to the supply chain. The reason that this is not a slam dunk in understanding for many businesses with supply chains is that by custom, they have looked in other directions to solve their supply chain problems. “Cloud computing solutions for the supply chain differ significantly from what companies are used to obtaining 20

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from their internal ERP systems,” says Biddlecombe. “With classic ERP, you run your entire business with the software, and you customize the system to fit the specific needs of your business. Cloud comes in from the opposite direction with its focus on standardization and collaboration between trading partners.” Biddlecombe says that many organizations continue to focus on more traditional areas for supply chain improvement such as the transportation management system (TMS) or integration with the warehouse management system (WMS). In the future, he sees increased activity in the projections of inventory levels, the managing of orders, and the development of reports and analytics for forecasting. All of this will require much greater levels of integration with both TMS and WMS. Does this eventually eliminate ERP? “Pragmatically, what we might be looking at is discrete pieces of cloudbased functionality that interoperate with internal corporate ERP systems,” says Biddlecombe.

Where companies are

Companies, meanwhile, are struggling to grasp the implications of these new cloud networks that can potentially revolutionize the supply chain. “The concept of cloud for most companies is still whatever they want it to be,” says Biddlecombe. “Cloud has evolved from software as a service (SaaS) to almost anything you want to define it as. It can mean a remote hosting solution, or a specific application, or a complete IT infrastructure ecosystem. Over the next few years, there will be further definition of what

cloud means to the supply chain, because more supply chain functions will be available to companies throughout the cloud that are not yet here today.” These capabilities will include mobile applications and the evolution of rigorous sets of SLAs (service level agreements) for commercial vendors that will begin to sound very much like the SLAs that companies impose on themselves. “Regardless of the evolutionary path that cloud takes, companies have to approach cloud supply chain solutions like any other technology,” cautions Biddlecombe. “You begin by understanding your business strategy before you even consider the IT. Next, you come up with a supply chain information strategy that can support the business strategy. You phase in the solution and you adjust for strategic changes that occur along the way, understanding that you must always support the end business goals and that you must also find ways to remain synchronized with corporate financial objectives.” Biddlecombe should know. Over the past three to four years, Transplace has embraced cloud concepts in its own IT strategy. It has virtualized almost its entire infrastructure into a private cloud, and it now has only eight of 600-plus servers as physical platforms. “We base our technology on standard technologies like VMware, Windows, and Linux,” says Biddlecombe. “A next logical step might be to consider a commodity cloud solution like an Amazon or a Google for applications development, but I’m nowhere

ready to do that at this time. We have a high quality staff, and we like the idea of managing our servers ourselves. We know that no one is going to care about what we do more than we do.” Biddlecombe also worries about vendor lock-in. “When you talk to about common cloud solutions that everyone is familiar with, like Amazon E2 or Google Whole Applications, they initially sound very attractive because these vendors are presenting end-to-end solutions that do away with many of the internal IT costs, with the caveat that you use their technologies,” says Biddlecombe. “The catch for companies is how much they want to tie themselves to a specific solutions provider….Historically, we used to talk about this as vendor lock-in and proprietary solutions. There are still problems with cloud providers delivering total reliability, even if the costs seem less. Recent episodes of outages at both Microsoft and Google appear to substantiate this. If I were a company with a supply chain to manage, I wouldn’t be comfortable locking into anyone’s solution.” Many CIOs agree with Biddlecombe. They are likewise adopting cautious but forward-moving strategies for cloud in their supply chains. “There will always be a debate in the supply chain as to whether you want to insource or outsource your technologies and operations,” says Biddlecombe. “This is why it’s important for solutions provider like us to tailor our solution sets to the needs that our customers have. We work hard at this by keeping the

If you’re in the bats and balls business, so are we. We may be in shipping, but your business is our business. No matter your Domestic LTL needs, OD is ready. With over 200 service centers nationwide. With best-in-class on-time delivery and one of the lowest claims ratios in the business. And with a determined team of friendly people who know we deliver more than your products. We deliver your promises. Think of it more as our favorite pastime than our job. odpromises.com/domestic

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COVER STORY

dialogue going with our customers. We dedicate account teams to our larger customers, and have a customer advisory board as well as an annual symposium where we can get together with customers to talk about transportation and the supply chain.” How a cloud supply chain makes a difference

Next-generation cloud for the supply chain isn’t necessarily a technology burst that everyone is waiting for. There is reason to argue that these advanced capabilities are already available—but that many companies have not yet reached a point where they understand how the cloud is going to make a difference beyond cost savings and not having to invest in “hard” computing assets. One example is a large manufacturer of heavy equipment that must assemble the equipment at the factory and then break it down so it can be placed in large containers for shipping. Once the equipment arrives at its destination, field crews are then employed to reassemble the equipment. To facilitate the entire business, the manufacturer actually has to utilize three different supply chains—one for parts used in manufacturing; one for finished goods that must go out in parts; and one to support the flow of spares to construction sites, mines, etc. The manufacturer has struggled with supply chain software and has now gone to the cloud for communications with its suppliers, customers, and logistics partners. The move to a supply chain cloud solution now allows the manufacturer to see its entire chain of custody for goods in the field as the parts and finished goods are moving. The cloud gives the manufacturer the ability to share a single version of supply chain 22

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truth with its suppliers and business partners, because all parties work off the same, unified database of information that is resident in the cloud. The manufacturer now has control over its external supply chain. This gives it the agility to make and act on timely decisions. “If you contrast a network of suppliers working off a single database with traditional EDI, you have people opening files, repackaging them, and then resending the files to each individual partner in the supply chain,” says Kefer. “It is difficult to compress this serial exchange of data into information within even a twelve-hour window.” This complicates decision making. For a large equipment manufacturer that has order delivery commitments and is trying to determine whether a ship will show up in time to transport an order or whether it will have to incur greater expense by having to ship the equipment instead by jumbo jet, having a single version of data on a shared network that every authorized stakeholder can see is critical. It cannot be matched by the serial, one-to-one communications that characterize traditional EDI. By going to a networked, cloud-based supply chain solution with its supply chain partners, the large equipment manufacturer was able to take three days of inventory out of its supply chain because it no longer had to buffer its inventory to minimize risk. The manufacturer was also able to increase the velocity of its supply chain by a factor of five. Next steps

Even with an economic recovery, the demands of a global marketplace and the downward pressures on prices and costs are going to continue. With this, the margin for error

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in the supply chain will also constrict. “As a 3PL, we focus on technology and operations as they impact transportation,” says Biddlecombe. “Our customers are asking us to help them reduce their transportation spend, and we can do this by delivering greater efficiencies in on-time deliveries and lowest cost transport. We provide not only operational solutions, but also business engineering and thought leadership to help them meet these goals. Cloudbased SaaS is a key ingredient in our strategy.” Biddlecombe expects that the availability of mobile applications in the cloud will foster more supply chain cloud adoption because businesses are looking for agility and flexibility. “The correct IT infrastructure, the functionality of applications, and the delivery of information will form the pillars of this,” says Biddlecombe. “Because we are a SaaS provider, our infrastructure will benefit from being virtual. Our emphasis will be on applications that work in the mobile environment, and our focus will be on data warehousing and reporting.” GT Nexus’ Kefer says that the ability of companies to implement effective change management for rollouts of cloud applications will also be critical. “This begins with education that has to happen at the top of the company,” says Kefer. “Today, the average worker is coming from Facebook or Google exposure at home, and he’s going into companies with infrastructures that seem old and clunky. One key to getting employees onboard with new technology is to find ways to utilize what they already have

familiarity with in their personal lives. There is likely to be an acceleration of cloud solution adoption in the supply chain as older workers retire and are replaced with younger decision makers who grew up with the Internet and are Twitter and Facebook power users.” For companies managing supply chains, next-generation cloud technology is going to mean transformation in supply chain thinking as well as the adoption of new supply chain technology that is available in the cloud. This realization begins with the fact that internal systems that have been used for many years to manage supply chains in their entirety were never designed for the world of business that occurs outside of corporate walls. Because of this, organizations have continued to function with problems that raise costs and cost them market opportunities. Conversely, cloud is not necessarily a total answer, either. Most likely, next-generation social-network-based cloud offerings will run alongside corporate ERP systems, with each set of systems performing what it was intended and designed to do in a best-of-class way. For companies, the key now is to evaluate both sets of technologies and to place these capabilities alongside what they expect to accomplish as businesses with their supply chains, their costs, and their revenue streams. WT For reprints of this article, please contact Cindy Williams at [email protected] or 610-436-4220 ext. 8516.

If you’re in the rockets and radar business, so are we. We may be in shipping, but your business is our business. When your product needs to get there right on time or just plain fast, OD makes it happen, guaranteed. And while OD employees choreograph trucks, planes and schedules at warp speed in over 200 service centers across the U.S. and beyond, you can track along online and on your phone. Because it’s not just a delivery we’re making. It’s a promise. odpromises.com/expedited

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GLOBAL SUPPLY CHAIN

TRENDS TO WATCH IN

2 12 2011 held many lessons for the global supply chain. Here, we look ahead to see what 2012 will bring. BY MARTHA WALZ

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he year 2011 was an instructive one for the global supply chain. From the earthquake and subsequent tsunami in Japan, to the volcano eruption in Iceland, to the floods in Thailand, Mother Nature forced companies to scramble and showed us that the globalization of the supply chain has made it more vulnerable. These natural disasters showed us exactly how tenuous the links in the supply chain are. As such, companies are rethinking their supply chain policies and strategies going into 2012. “De-risking will become a key supply chain agenda item in 2012,” says Jim McAdam, president, APL Logistics. “Globally, manufacturers and retailers are taking a renewed interest in re-designing and re-engineering their supply chains in the wake of these events.” The No. 1 message that 2011 taught us is that visibility is more important than ever, and having more flexible supply chains will lessen the impact of future supply chain disruptions, be they natural or man-made. “The Japan earthquake and the Thailand flooding…are having Wall St. level implications on a number of very large companies,” explains Greg Kefer, director, corporate marketing, GT Nexus. “This tells us that supply chain control and agility will be even higher on the C-suite radar than ever before.” “[Companies need to] focus on end-to-end supply chain management to enable efficient and cost effective supply chains on a global basis,” says Kim Wertheimer, EVP, CEVA Logistics. “This involves being able to provide integration

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with various partners across the supply chain allowing for flexibility and agility.” Companies will also look to implement lean processes to minimize the effects of supply chain disruptions. “Many companies are tightening down their global supply chains; refining their enterprise systems; and collecting, identifying, and providing easily accessible data that aligns with their business objectives—all in support of rapid decision making,” says Danny Slaton, EVP, SMC3. “Also, many organizations are aggressively adopting lean processes. As their ‘just in time’ and ‘made to order’ processes change, their quality initiatives are evolving, too, which means they need a flexible, cross-trained, high-quality workforce.” “There will also be an increased interest in understanding total costs, including potential hidden costs in production sourcing decisions,” says Brian Newton, VP of strategy, Exel. “The simultaneous need to lower costs and increase service levels will continue the focus on core capabilities (driving the rate of outsourcing growth), and an expanding interest in internal/external collaboration.” “Uncertainty and concern about fuel costs, supplier capacity, raw materials shortages and availability, and labor limitations… [have] resulted in an increased interest in making supply chains more agile, improve visibility across the customer’s entire supply chain ecosystem, and in taking a harder look at current operational systems to ensure that they are able to support these new realities,” agrees Alan Gold, VP, marketing and business development, Kewill Inc. It is also recognized that consumers need to be taken into

account with new supply chain models. “Supply chains need to be realigned to a new consumer demand-driven model,” explains Gene Nusekabel, worldwide industry lead-wholesale distribution Smarter Commerce, IBM Software Group. “‘Pull versus push’ has been discussed for years, but now with all the technology options available to end consumers to fulfill their purchasing needs in both B2C or B2B worlds, consumers are ‘pulling,’ and organizations need to design their supply chains to seamlessly integrate from supply point to consumer, end-to-end.” Below, we take a look at other major emerging trends for 2012. Mobility and the cloud

The use of mobile devices took off in 2011 and will only continue to rise in 2012.

“The use of M2M (mobile-tomobile) technology is exploding,” says Christian Schenk, VP of product marketing, Xata. The cloud, too, will continue to expand its reach into the supply chain. “2012 will be a big year for ‘cloud supply chain,’” explains Kefer. “Cloud is disruptive…By leveraging a Facebook-like information model, cloud is doing for SCM what social networks have done for consumers.” “Supply chain technology vendors will seek ways to use the cloud to facilitate application integration and data visibility, and work with material handling equipment manufacturers to bring MHE automation closer to real world application,” says Newton.

If you’re in the gloves and scrubs business, so are we. We may be in shipping, but your business is our business. Choosing OD for your Domestic, Expedited and Global freight means choosing proven technology that reduces costs, increases efficiency and ensures better service. And you won’t be alone. InformationWeek chose us too, as the top logistics and transportation company in their 2010 InformationWeek 500 ranking. That means a lot of promises kept to our customers, and to theirs. odpromises.com/technology

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Intermodal transport

All modes of transportation will face challenges, and this will drive the adoption of intermodal transport. “Intermodal rail is increasingly becoming a compelling proposition in North America against the backdrop of evertightening trucking capacity and high trucking rates,” says McAdam. “Conversely, intermodal rail has dramatically narrowed the gap both in terms of transit time and predictability over the recent years.” “In transportation, ‘intermodal’ is the buzzword,” agrees Tim Osmulski, supply chain manager, The Raymond Corp. “More supply chain managers are looking at intermodal transportation as a way to reduce fuel costs, increase the speed of delivery, and have less reliance on the over-the-road (OTR) trucking industry. Some freight carriers are already deeply involved in creating a sub-category of bi-modal transportation.” “At some point, capacity will go from a minor issue to a major one. Any uptick in the economy will set off a chain reaction,” says George Abernathy, president, Transplace. “The improvements in rail infrastructure in the eastern part of the U.S. will assist in moving freight in that area of the country off of trucks and onto railroads.” Trucking capacity issues

With pending CSA and HOS legislation, the trucking sector will face capacity challenges in 2012. “We’re seeing trucking companies and private fleets addressing these issues head-on by implementing software and hardware solutions that keep their operations DOTcompliant and cost-effective,” says Schenk. “We’re seeing a pronounced driver retention challenge,” says Slaton. “And yes, we will continue to see a trucking capacity crisis with driver shortages, as government policies and corporate hiring practices impact the quantity and quality of drivers hired. For the most part, carriers are continuing to try to maximize their existing equipment/assets and improve yields—particularly in the face of rising equipment costs.” 26

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“The enlightened approach calls for planning, full engagement of capacity providers, and being proactive about making your freight, processes, and practices carrier-friendly and your premises driver-friendly,” agrees Jim Butts, SVP at C.H. Robinson. “Shippers are mindful of the likelihood of a truck capacity shortage and are implementing strategies to take advantage of SaaS technology, alternate modes (intermodal), and optimized shipment structures,” explains Abernathy. The capacity crisis has a real human element as well. “Drivers are retiring, and younger people do not see trucking as an attractive career,” explains Nusekabel. “I certainly believe that will be the case if the trucking industry and shippers/consignees do not make it a more attractive and realistic career option. Who wants to drive across the country and have a consignee tell the driver to unload? Drivers are paid to drive and, yes, that is their expertise.” Partner integration

Disparate supply chain players will come together to form partnerships and work together to benefit the entire supply chain. “Partner integration in the trucking industry is really starting to take off, as each solution provider can focus on just what they do best,” explains Schenk. “Integrating partner applications provides customers with a palate of functionalities they need, while ignoring (i.e. not paying for) what they don’t need.” “Success in today’s competitive economy requires strategy,” explains Butts. “Integrated relationships are the way to long-term, sustainable competitive advantage. Often times, the 3PL acts as the architect, the orchestrator, and administrator of the relationships, through people, process, and technology.” “Choosing your customers and your partners intelligently—with a mutual commitment to long-term collaboration—is still the best formula for riding out economic downturns,” agrees McAdam. “To bring as much certainty as possible to bear, the logical thing for the customers to do is to look for common and bilateral commitments to rates and capacity, commit on the volumes, and stick with the chosen carriers or service providers.”

Other industry experts agree. “Smarter commerce requires seamless integration with all partners in the end-to-end supply chain, particularly in the complex global supply chains of today,” says Nusekabel. “As a trend, many organizations have far to go to become supply chain leaders who use technology solutions to collaborate, integrate, and reduce costs. Leaders are improving supply chain visibility, execution, and analytics to be more agile. Today’s smarter consumer and the global economic realities demand seamless partner integration to break down supply chain silos, internal and external.” Systems integration is not the only integration that is important going forward. “We see a continued focus on partner integration, not just on systems but process integration as well,” explains Wertheimer. “There is tighter integration between our customers’ suppliers and partners enabling a greater flexibility and agility across the supply chain process. There is also greater integration across functions within the customers’ organization where as historically each group optimized their individual processes but there was a lack of communication across the functions.” “To have an efficient supply chain, you need to have visibility and communications in place to collaborate, inform,

react among partners,” says Gold. “Finding ways to integrate across various layers of the relationship (business, execution, technology) is being seen, with increasing frequency, as a competitive advantage and a best practice.” “[Integration] is a key part of the cloud story described above,” explains Kefer. “ With cloud (like Facebook), a partner connects to the platform once, and then can work with multiple customers on that same platform, share data feeds, and take advantage of a community-wide approach to data quality management. The work of one can benefit the whole community. The days of one-off partner-by-partner integration will come to an end thanks to cloud. This already in place with all of the world’s top ocean carriers and 3PLs today. Eventually other transport modes will reach also critical mass. And gradually global suppliers will become members of the big cloud supply chain platforms.” Near-sourcing

Some of the lessons that Mother Nature taught in 2011 will lead companies to consider bring their suppliers and manufacturing plants closer to home. “Near-sourcing will likely increase [in 2012],” says Slaton. “Unstable oil prices, rising labor costs in China, the successful resurrection of the cross-border trucking program with Mexico, our proximity to Canada (we are their largest trading partner), the removal of trade barriers, and the exploration of U.S.-Mexican trade corridors are all helping that to happen.”

If you’re in the global wine and dine business, so are we. We may be in shipping, but your business is our business. And if that business happens to include products moving abroad, that’s OD’s business too. Our LCL and FCL services extend seamlessly to points throughout Asia, Canada, Mexico, Alaska, Hawaii, Puerto Rico and beyond. So whatever you import or export, our technology, global logistics experience and people will ensure a promise made is a promise kept, in any language. odpromises.com/global

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GLOBAL SUPPLY CHAIN “In the automotive sector, more transplants will happen in the North America Free Trade Agreement (NAFTA) corridor. Consequently, this will lead to higher North-South traffic along the NAFTA corridor,” says McAdam. “All signs point to an increase in near sourcing in 2012 as companies have wrestled with the challenges of operating a global supply chain, particularly with increased labor costs abroad, higher energy and transportation costs, and potential disruption of supply, all resulting in higher inventory levels needed to satisfy local demand,” agrees Joe Gallick, SVP of sales, Penske Logistics. “This bodes well for U.S. manufacturing which has seen signs of resurgence in parts of the country, and also for Mexico, as evidenced in recent reports of NAFTA trade growth.” “Mexico will be an ever-increasing manufacturer and trading partner,” agrees Abernathy. “Shippers that utilize technology to provide transportation visibility and optimization will have an advantage.” But not all industry experts see eye to eye on near-shoring. “We could see this in some areas,” says Kefer. “China is getting more expensive and long supply chains have a lot of risk associated with them. However it could just as easily move to other ‘far shore’ locations like Vietnam, Pakistan, or Kenya.” “Some customers are looking at South America as a destination of near-sourcing, while others are limiting the ‘near’ to Mexico and Central America,” says Osmulski. “Brazil has become a favorable destination of near-sourcing and is

seeing major expansion by the 3PL industry. Near-sourcing will increase with North American-based supply chain operations if Latin America can compete on costs with Asia.” Looking to the future

Overall, 2012 promises to be an interesting year for the global supply chain. New technologies will come to the fore that will transform the way the supply chain is handled. “We are in very interesting times,” says Gold. “It seems clear that the global recession’s lingering effects, the capital market’s volatility, debt pressures all around the world, natural disasters (global warming or not—you choose), and regional instabilities all apply pressure to company’s supply chain. To succeed, a supply chain needs to be efficient, predictable, and responsive to changes without breaking. That in turn requires thoughtful automation and integration as well as forward-thinking management.” “We are looking forward to 2012,” says Kefer. “Sometimes unpredictable economic climates force change. It forces the establishment to look beyond the way they have always done it and to seek new alternatives. Economics and tight budgets force the issue.” WT For an expanded version of this article go to www.worldtradewt100.com.

For reprints of this article, please contact Cindy Williams at [email protected] or 610-436-4220 ext. 8516.

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GROUND

Intermodal: A New Level of Reliability New partnerships usher in a more efficient age of intermodal transport. BY DAN MCCUE

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immy Buffett built a career on singing the virtues of changes in latitudes and changes in attitudes; a similar mindset—albeit without the inevitable frosty, fruit-based drink—seems to have now come to define North America’s intermodal sector. Gone are the rivalries that used to divide the rail and motor carrier communities. Instead, and particularly in the past three to five years, there’s a growing acknowledgement that to prosper, firms in both camps need to work together. And those efforts have been a boon to reliability in both freight movement and cargo handling. “Ten years ago in intermodal, an on-time delivery rate

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of 70 percent was not an unusual level of service, and 90 percent was considered exceptional,” says Dave Howland, VP for land transport services at APL Logistics. “Today, 98 percent is the norm, and a ‘bad lane’ would be one that performed at 92 percent,” he continues. The key, Howland says, is a dramatic shift in philosophy by the rail carriers who once longed to have containers move from highway to railcar, but now better understand the underlying values that can make that desire a reality. “While a number of things have happened in the intermodal sector in recent years, I think the most dramatic has been how the railroads have gotten so much

better at dedicating train capacity and box capacity in this area,” Howland says. “Frankly, that’s been a game changer, and as a result the overall reliability of intermodal has improved significantly. Whereas once, you couldn’t even think about putting overthe-road freight into an intermodal environment, now we’re even moving a lot of just-in-time freight that way.” Rail carrier improvements

Zach England, VP of the domestic intermodal division at C.R. England Global Transportation, boils the new reality down to four main actions that he feels have had a direct bearing on the improved reliability in the sector. “The first thing I’d point to is they now have very consistent train starts,” England says. “They are moving when they say the freight is going to move, and they are arriving at their destinations when they say they are going to arrive. That’s different from how it used to be. “The second thing is the frequency of trains. They are running trains every single day for the most part in the key lanes that we want to move freight on,” he says. The third change England points to is a new sensitivity in the area of equipment handling. In the past, he says issues with rough handling of reefer units frequently led to power outages and other issues that forced C.R. England to claim the load as a loss. “And the fourth thing for me is communication,” England says. “After all, this is transportation. There are going to be problems. But now, we can depend on them from a communications standpoint; we know that when problems occur, they will be communicated to us in a timely fashion so that we can talk to our customers about it.” When asked for his perspective on the shift that has occurred in the intermodal arena, Howland offers a twopart answer. “[Ten years ago] the railroads used this [intermodal] service to build up their network and generate positive cash, but it was never a huge revenue stream,” Howland explains. “What they realized over the last 10 years, however, is that if they provide a reliable on-time service, they can squeeze the spread between intermodal and over-the-road. “So the better the service has gotten, the more reliable it’s gotten, the more they’ve been able to leverage their rates up toward over-the-road rates, and obviously, the more they’ve leveraged those rates up, the more profitable the business has been.” Unlikely partners

Mike McClellan, VP of intermodal at Norfolk Southern Corp., agrees with the motor carriers’ assessment that things have indeed changed. In explaining why reliability has increased so dramatically in intermodal, he says the underlying motivation is simple business common sense: shippers want reliability, and if you give it to them, you naturally have access to more freight. “At the end of the day, shippers are really looking at three things when deciding how to move their products,” McClellan says.

“The first thing they look at is whether there is even an intermodal service available. After all, there are millions of truck lanes across the country, compared to, probably, thousands of intermodal lanes,” he says. “That’s the first hurdle, and it is something that we are very aware of—it’s why we are going to continually add more and more lanes to our network. You expand the ‘net,’ you catch more freight. “The next decision point is, ‘Is intermodal’s pricing competitive with whatever my current available option is?’ Generally, people do not use intermodal if it is more expensive than truck,” McClellan continues. “The third factor is transit time and reliability,” he says. “The reliability has improved dramatically and continues to do so.” McClellan continues, “Today all truckers—at least the ones we know of—are at least asking the question, ‘Should we be in intermodal and if so, under what kind of strategic positioning should we have in intermodal?’ “And there’s a full range of responses there,” he continues. “One is going all-in, like Hunt has done, where intermodal is their primary business and they’ve made a huge investment in it. At the other end of the spectrum are firms who are using intermodal as a line-haul substitution product when say, they don’t have a driver available to take a load to Chicago on a given day. So it’s more of a tactical relationship. “I think it’s interesting that not only are motor carriers and railroads are working together better, but that we are

Intermodal’s reliability has improved dramatically over the past 10 years and continues to do so.

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GROUND need for more land, bigger terminals, more productive terminals, and faster service,” he says. “I also think it illustrates another reason motor carriers are getting more interested in intermodal—we listened to them. When they said, ‘If you want to convert this freight, this is what you have to do,’ we responded with new services, new capacity, and more competitive transit times.” Technology investments

Motor carriers now put their cargo on rails with a degree of confidence they didn’t have in the past.

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doing so in a number of different ways,” McClellan says. “From that perspective, reliability has been an enabler for the motor carriers to use us.” Warming to the subject, McClellan lauds motor carriers generally, saying that historically, his counterparts in over-the-road delivery have provided “really high levels of service both in terms of speed and reliability.” “So as a result, they don’t want to jeopardize their account position by doing something risky, and a decade ago, putting your trailers on a railcar might have been perceived as risky—particularly in terms of reliability,” he says. “Now, I think the reliability is—while by no means perfect—so much better than it was even five years ago, that motor carriers feel they can put their cargo on rails with a degree of confidence they didn’t have in the past,” McClellan adds. Using Norfolk Southern’s recent history as a guide, it’s clear that the nation’s railroads continue to have the lion’s share of the market when it comes to the transcontinental and long-haul markets. Where they see the biggest growth opportunities—and where their intermodal business is critical—is in capturing hauls ranging from 550 to 1,500 miles. “That’s where the majority of drive-share is on the highways,” McClellan says. “Getting into the market requires more the things we’ve already talked about, better products, better reliability, and a better economic structure.” It also, evidently, requires a bit of soul-searching and honest, face-to-face discussions with both customers and other industry professionals. “Over the past decade, we went through and had very detailed conversations with shippers and motor carriers and discussed a whole range of issues that boiled down to a simple question: What degree of speed and reliability would you need to convert freight from highway to rail?” McClellan says. “What we got from those discussions was a better understanding of what the needs were in terms of transport lines and terminals, and that’s when we launched a series of corridor initiatives. “All of these things are a response to our customers’ JA N U A R Y

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Motor carriers have responded in a number of ways, not least of which is making dramatic investments in their own operations. “What the railroads have done—in terms of their commitment to intermodal—has been very impressive, and not only does that give us confidence in utilizing their services, it gives us the peace of mind to grow and to invest in additional assets as well, ” Zach England says. Last year, C.R. England invested in 300 refrigerated containers, doubling the size of its intermodal fleet. “That’s indicative of just how comfortable we’ve come to feel about our railroad partners,” England says. The company has also invested in telemetric units to give it the ability to monitor and communicate with reefer containers in transit via cellular networks. “That gives us the ability to monitor temperature, both in terms of the actual temperature and what our setting is at, where the cargo is located, and we can even turn the unit on or off, remotely, from our Salt Lake City headquarters,” England says. “It allows us to offer our customers a greater sense of product integrity and another level of detail we can communicate to them, which is huge,” he says. For Howland, the evolution in rail operations has lead to APL striving to be ever more connected through technology with its intermodal partners, and he says that’s significantly changed the dynamics of communication with clients. “It used to be that you set appointments for delivery with clients when the railroads notified you the cargo was on the ground at whatever ramp it was headed to,” he says. “It was the only way you could be sure the cargo was actually there, and then it became a matter of when the client could take it—sometimes the next day, sometimes three days out. “Now we make appointments for the delivery when we actually make the pickup on the other end,” Howland says. “So, if you want to talk about a change in behavior, now the customers are getting far earlier notification of when their stuff will arrive, the draymen are getting far earlier notifications so they can plan their capacity, and you can handle a lot more of the process electronically, which eliminates a lot of overhead expense while speeding up the velocity of the service.”

Download a podcast of this article at: www.worldtradewt100.com/media/podcasts

The rise of the new and improved intermodal has also helped motor carriers deal with the perennial issue of driver shortages. “It’s really hard to get long-haul drivers these days,” Howland says. “The lifestyle is horrible. So a lot of trucking companies are moving to intermodal because it’s a lot easier to get a driver for a dray: the driver is home every day, so [he] can actually have a life. “The other thing is, the equipment, the tractors, are always home at the end of the day, so it’s easier to service and maintain them,” he continues, adding that there is another side to all this—intermodal being “greener” than traditional trucking. “So customers shipping with intermodal are reducing their carbon footprint, reducing their CO2 emission, and that is good for everybody,” he says. Increased flexibility

England says the evolution of intermodal has also tracked well with changes in how shippers are dealing with the economic crisis, in effect opting for just-in-time delivery of smaller amounts of goods at a time. “What the heightened efficiencies in intermodal amount to is a greater confidence among shippers that they can ship x amount of freight by rail, and it’s going to be where they need it on time. They don’t have to worry that freight is going to get sidetracked, so they can make the changes they need to their supply chains

to keep themselves afloat in a time of economic uncertainty,” he says. The question is what happens to all these gains in reliability when the economy heats up again and capacity once again begins to get tight. “I guess what I hearken back to is the situation we had with fuel back in 2008,” England says. “Fuel prices went crazy, and carriers did everything they could to cut their fuel costs. Then, when fuel prices normalized, they looked at the strategies they had adopted and saw that if they just kept at it, they’d be better and leaner than they were before the fuel crisis. So I think a lot of the improvements in intermodal that we’ve seen in recent years will carry over.” But, he admits, he does worry that as the railroads get busier, they may begin to bog down as they have in the past. “We’ve already started to see that to a certain degree,” he says. “Now, from a carrier standpoint, I think we will be fine. But I do wonder whether as volume comes all the way back to 2006 levels, things are going to function as well as they have recently.” WT For an expanded version of this article go to www.worldtradewt100.com.

For reprints of this article, please contact Cindy Williams at [email protected] or 610-436-4220 ext. 8516.

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U.S. REGION SOUTHEAST

Talented, Trained Workforce is Crucial for Business Success The Southeast region is attracting expanding companies and labor forces.

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BY KEN KRIZNER

The Port of Charleston, one of the busiest container ports in the Southeast U.S., is considered critical to the success of economic development in the Charleston metro area and throughout the state of South Carolina.

here are many reasons why companies decide on one particular metro area over others for its site-location project. One of the most important reasons is the ability to recruit a skilled, well-educated workforce—both locally and from other parts of the country—to make the expansion a success. “Talent is the No. 1 driver for new businesses,” says Gregory H. Wingfield, president and CEO of Greater Richmond Partnership Inc. Not only do companies need to be able to recruit a workforce, they also need to train that workforce. The states of the Southeast U.S. have the workforce that expanding, growing companies need to compete in the global economy. And many have workforce training programs that help offset the costs of training. Companies cannot afford for expansion projects to fail—the investment is just too big. They need workforces that can positively contribute to their bottom lines from day one of operations. States in the Southeast U.S. afford companies the ability to have such workforces.

Orlando becomes business destination

The Orlando, Fla., metro area, long a tourist destination hotspot, has established itself as a hotspot for attracting expanding and relocating companies. While the metro area cites a favorable

Photo courtesy of Charleston Regional Development Alliance

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tax climate and a strong, established workforce as two of its primary business strengths, education is the asset that ties everything together. “We have a strong education base, as well as great collaboration between state government, the private sector, and educational sector,” says Brian Walters, EVP at the Metro Orlando Economic Development Commission. “There has been a constant alignment of our education system (K through 12 and colleges) with where our economy has demands for talent. We do this perhaps better than any region in the country.” At the forefront of this alignment is the Univ. of Central Florida (UCF), which Walters describes as the “jewel” of the region. UCF has become an academic and research leader in numerous fields such as optics, modeling and simulation, engineering and computer science, business administration, education, science, hospitality management, and digital media. Many of these fields are the types of industry sectors that the Orlando metro area is trying to attract. “UCF does a great job in bringing value to economic development,” Walters says. “It has a good base of scientific and engineering talent. The system is built to make sure we have a productive, educated workforce that targeted companies need.” In addition, the Lockheed Martin/Univ. of Central Florida Academy for Mathematics and Science is a private-public partnership that aims to improve math, science, and technology education. Lockheed Martin is a major employer in Central Florida. State and local workforce training programs help expanding companies by facilitating training specific to the jobs created. Logistically, with more than 50 million visitors a year to Central Florida, Orlando International Airport (OIA) has an infrastructure that is more significant than those in similar-sized metro areas, Walters says. The airport has the third lowest fare structure in the country relative to the 100 largest markets, and its international connections increase each year. Orlando-based companies also take advantage of the metro area’s proximity to ports on both the Atlantic Ocean and Gulf of Mexico. When taking into consideration interstates 4, 95, and 75, Orlando becomes a base in which manufacturers can distribute product efficiently and quickly throughout the Southeast U.S., Walters points out.

Boeing helps transform Charleston

It is often said that a metro area is just one site-location project away from transforming itself. For the Charleston, S.C., metro area, the much sought-after Boeing expansion was that project. “It transformed us from a regional economy to an international business destination,” says David Ginn, president and CEO of the Charleston Regional Development Alliance. Boeing began operations at its 787 Dreamliner Final Assembly building in North Charleston in June. The facility features 642,720 square feet of covered space, roughly the equivalent of more than 10 football fields. It is one of only three locations in the world that can manufacture commercial wide-body aircrafts (along with Boeing’s Everett, Wash., facility and the Airbus complex in Southern France). When operations began at the facility, it culminated a nearly decade-long sitelocation process that originally prompted communities and regions in 30 states to make bids. “Boeing’s requirements included a deepwater port, multi-interstate and multirail access, an international airport, and a competitive location to attract top clients and talent,” Ginn says. “Plus, it needed the land to manufacture the product.” The Charleston metro area is trying to use the Boeing facility, along with an existing cluster of seven other OEMs and 15 supplier-companies in the aerospace/aviation industry, to grow the sector. Another emerging sector for the metro area, wind energy, will get a boost later this year with the launching of Clemson Univ.’s Wind Turbine Drivetrain Testing Facility (WTDTF), as part of a growing energy R&D complex. As the largest of only three such facilities in the world, the facility will be fully operational by the end of 2012. The nearly $100 million project (a $45 million federal grant and $53 million in matching funds) is a joint partnership between the Dept. of Energy, Clemson Univ., state and local agencies, and private-sector companies. While it will be the world’s largest quality control center for offshore wind turbines, Ginn says it will accommodate other industries as well, including aerospace and automotive, which have similar composite needs as the wind industry. The metro area also is trying to grow the advanced security/information technol-

ogy sector. Efforts to increase this sector are helped by the presence of the Space & Naval Warfare Systems Command (SPAWAR Atlantic) in the region, which attracts a number of Dept. of Defense contractors and private-sector software companies. Ginn describes the Port of Charleston as the biggest asset to the region and state

of South Carolina. It is one of the busiest container ports in the Southeast U.S. Cargo valued at more than $50 billion was transported through the port in 2010. South Carolina State Ports Authority (SCSPA), operator of the port, plans to invest nearly $1.3 billion during the next decade on capital projects. The agency’s fiscal year 2012 capital plan calls for $81.7

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U.S. REGION: SOUTHEAST

Download a podcast of this article at: www.worldtradewt100.com/media/podcasts

Photo courtesy of Metro Orlando Economic Development Commission

Orlando International Airport has an infrastructure that is more significant than those in similar-sized metro areas, thanks to Central Florida’s attraction as one of the leading tourist areas in the country. million in the development and enhancement of new and existing facilities. To support the expected surge of postPanamax ship traffic once the Panama Canal expansion is complete, a post-45foot deepening project is underway. Charleston also counts its workforce as one of its primary business strengths. According to a September 2011 article in the Wall Street Journal, the Brookings Institution, using 2010 U.S. Census data, said the Charleston metro area had the greatest percentage-point increase in the nation during the past decade in the portion of residents who hold bachelor’s degrees, growing 6.9 percentage points during that time period to 31.9 percent. The South Carolina Technical College System operates readySC, which provides well-trained employees to qualifying companies that invest in the state. readySC includes recruiting, screening, and training in a comprehensive process that is tailored to a company’s needs. The South Carolina Technical College system is comprised of 16 community-based technical colleges throughout the state. “We’re a market that is attracting new talent but also has a good base of educated residents,” Ginn says. Richmond has East Coast location advantages

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area. Thirty-one percent of the workforce has a college degree (the second highest concentration in the South behind Raleigh, N.C.), and an additional 20 percent have either attended a four-year college or community college. “It’s a skilled, educated workforce,” says Greater Richmond Partnership’s Wingfield. It is also a workforce that has experience in advanced manufacturing, thanks to the presence of DuPont, Honeywell, and Philip Morris. “People are used to working two- and three-shift operations,” Wingfield notes. Based on its location and the workforce, the Richmond metro area is targeting five industry sectors for growth: healthcare services, including biotechnology, medical devices, and life sciences; logistics; advanced manufacturing, including aerospace and electronic assembly; professional and creative services; and FIRE (fire, insurance, and real estate). The Virginia Biotechnology Research Park and a teaching hospital on the campus of Virginia Commonwealth Univ. are helping to expand the metro area’s capabilities in healthcare services. Eleven Fortune 1000 companies call Richmond home—one of the highest concentrations in the country on a per capita basis. Their presence is the foundation for a significant business support system— legal, accounting, banking—that is based in the area, Wingfield notes.

The metro area, located about 100 miles from the Northern VirginiaWashington, D.C., area, also targets government-related agencies looking for a location for redundant backup data centers. Amtrak connects Richmond and Washington, and the region is developing a high-speed rail system. Richmond’s East Coast location and low cost of doing business makes it a potential site for European companies pondering an expansion into the U.S. “Europe is just five or six hours away [from Richmond] in terms of time zones,” Wingfield says. “The ports [in Norfolk and Portsmouth] are just two hours away, as is Dulles [International Airport]. It’s a soft landing for a European company looking toward the U.S.” Richmond also benefits from the stability of the commonwealth of Virginia. The costs of living and business are moderate, and the commonwealth hasn’t raised the corporate income tax rate (6 percent) since 1972. “We’re not trying to balance the budget on the backs of businesses,” Wingfield says. Workforce training assistance in Virginia is provided through the Virginia Dept. of Business Assistance’s Virginia Jobs Investment Program (VJIP). VJIP provides customized recruiting and training services to companies that are creating new jobs or experiencing technological change. The program offsets a company’s recruitment and training costs and connects it with all available resources to help with workforce development efforts. WT

Supply Chain Partners Carolina on Your Mind? ElectriCities Can Put It on Your Desk. BRENDA DANIELS MANAGER, ECONOMIC DEVELOPMENT ELECTRICITIES OF NORTH CAROLINA, INC. 1427 MEADOW WOOD BLVD. RALEIGH, NC 27604 PHONE: 919-760-6363 FAX: 919-760-6060 EMAIL: [email protected] WEBSITE: WWW.ELECTRICITIES.COM

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As easily as flipping a switch, site selection professionals can order a detailed report on North Carolina sites, from mountains to coast, that precisely match a business’s specifications. Within 48 hours of a request, ElectriCities of North Carolina will send profiles of locations that meet a company’s requirements. The not-for-profit government service organization ElectriCities represents cities and towns that own electric distribution systems within this state, which ranks among the nation’s best places to live. They serve more than 1,000,000 customers and also include members in South Carolina and Virginia. The agency knows well the capabilities of its more than 90 member communities, from site availability and infrastructure to quality and number of golf courses. Using ElectriCities as an introduction to North Carolina, site search managers have a turnkey or “flip-switch” information source. “They find all the information they need in one place,” says ElectriCities’ economic development manager Brenda Daniels. While investor-owned utilities provide information only on their own electric services, ElectriCities’ staff produces a full profile, with photos of sites and buildings of carefully selected candidates for a company to consider. The process is fast, easy, cost-efficient, and entirely confidential. Services to communities and their corporate citizens go far beyond producing the right information. This innovative agency has developed two Prime Power Parks in the cities of Albemarle, located in the Piedmont’s lake country, and Gastonia, just off I-85, 15 miles from Charlotte. “These new industrial parks are NC Certified Sites with 4 megawatts of onsite backup power generation,” says Daniels. “If a company has a critical operation that can’t risk a power outage, they have a backup available, and don’t have

to spend the money to purchase a generator.” This is a highly valuable opportunity for such industries as metalworking, automotive manufacturing, some pharmaceuticals, or for any high-intensity electricity user. In the case of plastics, Daniels says, “if you’re down for three seconds, it jams up the machine and you lose thousands of dollars of product and have to start over.” The backup, like the rate-lowering services to all ElectriCities’ customers, will provide an ongoing incentive for locating here. North Carolina draws people and companies with its universities, its beaches and its Blue Ridge Mountains, the booming biotech and research facilities, the low cost of living and doing business, and a four-season temperate climate. The state also has ElectriCities to offer. While there are small counterparts in some other states, “we’re doing more than anybody else,” says Daniels. “At conferences and meetings, they’re always eager to hear what we’ve got going on.” To learn more, please contact ElectriCities of North Carolina.

I NTE R N ATI O N A L REGION: SOUTHEAST ASIA

U.S. Manufacturers Find More Expansion Options in Southeast Asia If China is too expensive, companies can find low-cost alternatives throughout the region.

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BY KEN KRIZNER

The Saigon River cargo port in Ho Chi Minh City.

he economy of China is evolving. The cost of manufacturing in the world’s most populous country—notably in the coastal regions—is getting more expensive as the skill level of its workforce continues to increase. Manufacturers, especially those in lowmargin industries, have begun to investigate other options for Southeast Asian expansion projects. And there are a number of viable alternative options coming to the forefront to help improve their bottom lines. “There is always more than one factor, but cost of labor is important,” says Daniel L. Gardner, CEO at RF International and Ocean World Lines, subsidiaries of Pacer International, Inc. “Over time, coastal China and Hong Kong have seen their economies evolve to higher value-added-type industries with higher skills. So, you see a shift away from more labor-intensive industries.” Those labor-intensive industries, such as textiles, toys, and apparel, are finding new, lower-cost manufacturing homes in a number of countries, including Vietnam, Bangladesh, India, Cambodia, Thailand, Indonesia, and the Philippines. Inland China, hundreds

of thousands of miles from the more economically developed coastal region, is also attracting manufacturers in these industries, although logistics times are longer for manufacturers considering plants there. Low costs

Southeast Asian nations have had front-row seats to the development of the Chinese economy during the past three decades, and they’ve seen how the country has been able to attract U.S. and other Western manufacturing investment projects. Their goal is to replicate, in some way, the success of China. As a result, many countries have instituted capitalistic practices, shown a willingness to be sensitive to intellectual rights, mandated English as a second a language, and established transportation infrastructure projects to improve logistics. They have joined the World Trade Organization and negotiated free-trade agreements, both regionally and with countries from around the world. One of the leading advantages for a U.S. manufacturer considering an investment in a Southeast Asian nation is the low cost of land and labor. “There is an ease of doing business and acquiring land, as well as low labor costs,” says Jessica Mahre, VP at A.T. Kearney Analytics and Procurement Solutions Group. For example, the average productivity adjusted wage for Vietnamese and Thai manufacturing workers is 30 to 35 percent of the average worker wage in the U.S. These wages have historically risen relatively slowly compared with the U.S. overall, especially in contrast to China, says Michael Zinser, a Chicago-based partner at The Boston Consulting Group. China’s productivity adjusted wages are projected to rise by 9 percent per year through 2015; Vietnamese productivity adjusted wages are expected to be flat, and Thai productivity adjusted wages are expected to rise by 4 percent. Stepping up to attract investments

However, these countries do have challenges that manufacturers need to consider in any site-location decision, most notably dramatically smaller working populations. China has nearly 60 percent more industrial jobs than 40

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the industrial workforce of Southeast Asia and India combined, Zinser says. The relatively limited skilled labor pool can quickly be depleted, and competition for scarce labor can lead to high turnover and can increase the risk of wages growing more quickly than projected, he adds. Infrastructure is more limited in many emerging Southeast Asian nations—for example, Vietnam has only 1/35 the port capacity of China—as political instability is of greater concern, and, in many cases, the supplier network in Southeast Asia is relatively underdeveloped. Many Southeast Asian nations, such as Vietnam and Cambodia, are focused on relieving the bottlenecks that continue to hamper their supply chain efficiencies. Airport, road, rail, and port infrastructure capacity continues to lag behind demand, although there have been improvements, says Hans Hickler, CEO of the Asia Pacific region at Agility, Inc. The road network is proving to be a vital artery for manufacturers looking for

“Every country’s ambition is to rise out of the labor-intensive, low-value-added industries.” —Daniel Gardner

access to Asian economies and avoiding bottlenecks at ports and airports. Crossborder trucking volumes are growing dramatically as demand increases for door-to-door services. In addition, many industries, especially producers of products for export, continue to rely on imported materials for spare parts, Hickler says. There is a need for stronger support industries, which would improve domestic competitive capacity, add value to local products, and be essential for strengthening competitiveness in the global economy. And some countries target specific market segments with incentives and low-cost labor (i.e., apparel in Cambodia and apparel and footwear in Indonesia). More business options

Gardner says when contemplating an expansion project in any Southeast Asian nation, manufacturers need to put the Chinese economy into its proper context. More than 30 years ago, reform efforts initiated by Deng Xiaoping led

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I NTE R N ATI O N A L R E G I O N: S O UTH E A ST A S I A

Southeast Asian Nations Look for Business Investments Here is a sampling of how some Southeast Asian countries are trying to attract Western manufacturers.

Vietnam Lower land and labor costs are part of the attraction of Vietnam. It also has a youthful population, with 50 percent of its residents under the age of 30. Vietnam has Most Favored Nation status from the U.S. Because of its Communist government, Vietnam is the Southeast Asian nation that is most closely trying to parallel China. “It still embraces Communism but hasn’t shied away from the principles of capitalism,” says Daniel L. Gardner, CEO at RF International and Ocean World Lines. “The country has taken on the semblance of capitalistic practices.” The country once had a poor reputation for transportation infrastructure, but that has begun to change with a greater airport capacity throughout the country and new deepwater ports. “As demand for quality rises, Vietnam has been successful in attracting investment and is developing a reputation for quality higher-end production,” says Hans Hickler, CEO of the Asia Pacific region at Agility, Inc.

Cambodia and Laos Cambodia and Laos are increasingly seen as

to “Communism with Chinese characteristics,” especially in South China, and were the launching points for what China can offer international companies today. China built its economic foundation on low-skilled, low-wage industries. But as the country’s workforce has increased its skill levels, its manufacturing foundation in the coastal areas has evolved into high-skilled, high-wage industries. That has opened the door for other Southeast Asian nations (and inland China) to compete for the low-skilled jobs that Coastal China no longer wants, Gardner points out. And he believes other Southeast Asian nations can follow a similar economic evolution path that China has 42

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countries that are ready for business investment, says Chris Devonshire-Ellis, founder of Dezan Shira & Associates. Both countries continue to open up their interiors, allowing access across lands previously unattainable, and they lie directly between the growing consumer markets of Singapore, Thailand, Malaysia, and China. Cambodia is expected to implement a no double tax treaty agreement (DTA) by the end of 2012, Ellis says. Laos has signed DTAs with China, Kuwait, North Korea, South Korea, Thailand, and Vietnam.

India India’s working population is young, and it is less expensive than China, Ellis says. The Indian government is trying to push through tax reform, meaning that, eventually, it will be less expensive to operate a facility in India than it currently is, he notes. Legislation to drop the corporate income tax rate from the current rate of 45 percent to 30 percent is pending. “That will be a major trigger for investment into India,” Ellis says. This reduction, when added to low labor and mandatory welfare costs, will help India become a serious competitor to China in the bid to attract Western manufacturers. For the moment, politics is standing in the way of the bill’s passage, Ellis says.

There are far more options in Southeast Asia today. established. “Every country’s ambition is to rise out of the labor-intensive, low-valueadded industries and create higher-paying jobs for more people across a diverse base of industries,” Gardner notes. “It is not too far-fetched to say the economies

Similar to the U.S., India is divided into different states, and an election will occur in India in 2012. So, the tax reform legislation might not pass until 2013, though Ellis is sure it will become law. “No one will vote against decreasing taxes,” he points out.

Indonesia Indonesia has been successful in recent years because of its political and currency stability, making it an attractive location for expansion projects. Indonesia is showing significant and sustained improvement from U.S. manufacturers, especially in the apparel industry, where the country offers significant labor cost advantages, as well as good labor skills within specific niches that require more intricate stitching, Hickler says.

Inland China China is putting a lot of emphasis on infrastructure development further inland. Given the high labor rates and increasingly constrained supply of labor available in the traditional Yangtze River Delta manufacturing region, China is investing heavily in inland ports and other infrastructure projects to facilitate easy transfer of goods from inland areas for export, says Michael Zinser, partner at The Boston Consulting Group.

of [Southeast Asia] can eventually diversify their industries, getting into more highly skilled, value-added manufacturing in the next 10 to 15 years.” What these Southeast Asians have done is give U.S. manufacturers more options when they are considering an expansion project in the region. More options mean lower costs for the expansion project, leading to a better bottom line. “In business, you want as many options as you can get,” says Chris Devonshire-Ellis, founder of Dezan Shira & Associates, an independent business adviser and tax consultant. “Companies can keep their business costs lower. There are far more options in Southeast Asia today than there were 10 years ago.” WT

I N D U STRY U P D ATE: AUTOMOTIVE

Automobile Transport— A Trucking Solution Optimizing automobile trucking calls for a holistic approach to finished vehicle logistics.

O

BY ANTHONY COIA

U.S. Manufa cturers Find More Expansi on Options in Southe ast Asia

Over-the-road car transporters typically handle varying quantities and types of automobiles and trucks.

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ne of the key industries in the global economy is the automotive sector, which, in 2011 produced a record of nearly 78 million vehicles worldwide. Vehicle manufacturers use multiple modes for transporting their finished vehicles internationally en-route from factory to dealership. The most widely used mode due to its speed, flexibility, and ability to serve dealerships directly, is the over-the-road car transporter. For automobile manufacturers, the key to optimizing trucking efficiency is to balance the crucial elements of cost and customer service. Cross-border transportation of finished vehicles requires adherence to the regulations of the transit or destination country such as a car transporter’s dimensions, which can be challenging if there are different restrictions among the countries. For shippers, advances in operations methodology and technology are enabling them to work more effectively with their car carriers and other logistics service providers. Among the priorities of vehicle shippers are to maximize the percentage of available space used on a carrier (known as the load factor) and to reduce the lead-time from the factory to the dealership. At Volvo Logistics Corp., Christ De Baere, SVP, global logistics operations outbound, says that its main objectives are improving its costs, lead time, and quality. Quite often, there needs to be a tradeoff among these parameters, and that depends on what the customer puts forth as its first priority. Transport providers are limited by their requirements for delivery precision and lead-time.

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Maximizing load factors

One way that Volvo Logistics tries to improve its trucking efficiency is by maximizing its load factor. For example, De Baere says that from Ghent, Belgium to Germany, its carrier has empty capacity. If it had more yard dwell time, then it could increase its load factor. Conversely, if a manufacturer requires vehicles to leave its premises within 24 hours, the transporter has few possibilities to combine or balance that with incoming volumes in the same area. Some OEMs link their invoicing to when the vehicle departs the gate; thus the financial process influences the distribution chain. “OEMs focus on optimizing their assembly but not their outbound logistics,” explains De Baere. “We plan our distribution by ensuring that vehicles that are destined for low volume areas are built on the same day.” He says that for low volume routes, optimizing loads involves the distance between the drop-off points and the number of empty kilometers before the truck is emptied. Mazda North American Operations depends on its carriers to build its loads and to maximize its load factor. This entails combining its imports with domestically produced Mazda vehicles on the same truck or perhaps with vehicles from other manufacturers. “For example, the route from Los Angeles to Phoenix would not contain a full truckload of Mazda vehicles; there would be two to four Mazdas and other vehicle manufacturers on the same truck,” says Scott Mize, manager, national transportation. “We consider

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I N D U STRY U P D ATE: A UTO M OTI V E

perspective, according to De Baere. He says that confronting the plants with the facts would enable open debate on how to improve the forecast. Lead time issues

Automobile manufacturers try to improve their trucking efficiency by maximizing load factors.

where the assembly plants are located and try to match up shipments.” One of the leading ways to improve the load factor is to reduce empty miles—that is trucks traveling without cargo. Mazda tries to achieve this by putting together backhauls. “Our plant in Flat Rock, Michigan ships to the East Coast and then picks up imports from the Port of Newark going west. However, in most case, backhauls are a challenge because we tend to ship oneway shipments,” explains Mize. High-density corridors

In North America, Mazda imports new automobiles to the ports of Tacoma, San Diego, Newark, and Jacksonville. Mize says that its main objective for truck transport is to provide fast and consistent service from the port of arrival to its dealerships. This means positioning its trucking fleet in high-density, fast-moving corridors. For Mazda, these include Tacoma and Seattle, New York and New Jersey, and Jacksonville to Atlanta and South Florida. Another is from Los Angeles to San Francisco or to Phoenix or Albuquerque. Says Mize, “Outside of these corridors, we encounter problems with trucking. If we cannot achieve high-density loads, we would use rail to the Midwest or Texas, and from east of the Rocky Mountains, we would ship by rail to the Mississippi River.” Recently, Mazda has been increasing its efficiency and is also achieving lower trucking rates. On the East Coast, it 46

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changed from one carrier to multiple carriers from Newark and Jacksonville due to service issues. “We found that we could reduce costs. Due to the fragility of the truck industry, we did not want to invest too heavily in one carrier,” explains Mize. Forecasting accuracy

An essential factor of trucking efficiency is forecast accuracy. De Baere says that for new releases, or if a part is missing, it goes down. If the manufacturer produces less, it goes up. Furthermore, financial holds placed when cars leave the plant are not part of the forecast. “Thus, it is volume driven instead of process driven. The financial process is terrible for the distribution process,” says De Baere. Another issue is that forecasts are not precise enough. Says De Baere, “Say that we receive a forecast for distribution to France for 100 vehicles. The forecast does not say whether it is northern France or southern France, which is a big difference in terms of mileage. Thus, the three problems in optimizing lead time that hinder carrier planning are quality holds, financial holds, and forecast detail level. This means that some carriers can plan only when the vehicle is available.” Output forecast from the factories remains an action point with a lot of OEMs. Sometimes the vehicles are coming out fairly on schedule, but because of several reasons, vehicles are on hold and are as such ruining the forecast from a carrier

A primary objective for Mazda is to reduce its trucking lead time. Imports are on board the vessel for fifteen to thirty days, which makes efficient delivery that much more important. Mazda identifies high-priority vehicles and relays this information to the port contractor. Mize says that it provides consistent and early communication with the port contractor and carriers. Recently, Mazda launched its e-Port System which schedules vehicles through the facility and out to the truck carriers. The goal of e-Port is to reduce lead time. “e-Port makes our vehicles much more accessible to the carriers. Then, the carrier is consistent on delivery and provides reliable ETAs to the dealerships,” says Mize. “The key to success is standardization among facilities, which we did not have in the past.” For Volvo Logistics, not much can be done about reducing the lead time, except securing a good releasing forecast from the factories or compounds, according to De Baere. He adds that for multi-leg distribution set-ups, real-time arrival reporting and automatically booking the transport for the next leg is crucial to squeeze out waste from the process. “We are prototyping an application for smartphones to speed up reporting in certain circumstances and reduce waste in the process, especially for multi-leg set-ups,” he reveals. Technology developments

As logistics players focus on reducing lead time, German vehicle carrier Hoedlmayr International implemented a storage management system using RFID to locate cars within a storage yard, thus saving time and money. Konrad Zwirner, SVP international sales and business development, says that its goal is to implement standards so that vehicle manufacturers are using the same type of RFID technology. Among current RFID users are Ford in Cologne, Germany. Zwirner notes that Ford wants to use RFID all the way through from factory to logistics hub to dealer. Kathleen McCann, president of United Road Services, Inc., says that the flexibility of its ERP system, OVISS, enables United Road to integrate its solution with its cus-

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tomers’ platforms and with those of other finished vehicle logistics providers. “This gives us visibility into the upstream pipeline such that our asset position and utilization is efficiently planned and deployed,” says McCann. Additionally, its systems provide real-time reporting at the location of the events such as pre-inspection, loading, and delivery. “We have patented technology specifically around vehicle transport load optimization. Our system takes into account variables associated with finished vehicle transportation and continuously analyzes existing inventories and other physical constraints in order to create the most efficient load factor possible in real time,” says Matt Cartwright, CIO at United Road. He says that the system considers the plurality of inventory at multiple ports or a single port and the various assets available. It recommends how to build loads based on how quickly the vehicle must ship, how best to fit on a vehicle, and the profitability of a group of vehicles. “We must consider the entire network,” he points out. Consistent visibility

To ensure compliance with international trade regulations, United Road provides

information to both OEMs and customs agencies prior to border crossings so that documentation requirements are streamlined, prepared, and sent prior to border arrival. OVISS automatically generates and sends the data. McCann says that automating these procedures enables United Road’s delivery professionals and dispatch teams to focus on delivering its customers’ vehicles on time and damage free. For the majority of United Road’s customers, the flow involves the movement of new vehicles from assembly plants on either side of the U.S.-Canada border to consolidation points, rail ramps, and direct delivery to dealerships on the other side. Cartwright says that visibility is the biggest issue for United Road, especially for imports, because it does not have as much insight on production. A crucial component in streamlining the cross-border process is receiving advance information of pending vehicle build levels so that the planning for and deployment of requisite equipment is made to provide capacity as needed. McCann points out that for ocean imports, one does not have the level production releases that it has from plants.

“There could be disruptions if vehicles in transit are placed on hold. This means that our fleet is available, but 20 percent to 30 percent of the shipment has not been released,” she says. For Volvo Logistics, the solution for optimizing trucking efficiency for finished vehicles requires it to find a good balance between reengineering the flows and robustness of the entire system. “We have achieved the cost savings targets of our customers almost every year. By focusing on quality and delivery precision, we have been gaining efficiency. Changing your flows too often leads to other problems. If you change your trucking partner too often, new EDIs must be set up and the beginning delivery level is not as high,” says De Baere. Whereas transporting finished vehicles by truck is a fast and flexible method, it is also a complex process that is even more challenging for international shipments. The goal for most vehicle shippers is to maximize carrier efficiency while also optimizing service to the dealerships through a combination of planning and technology. WT For an expanded version of this article go to www.worldtradewt100.com.

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EXTREME

LOGISTICS

Crossing the Ice THE LOW-DOWN: Throughout the history of the world, no one has ever successfully walked from the edge of Antarctica to the South Pole and back without any assistance. However, since this past November, two young Australian adventurers have been attempting to do just that—all within a three-month time span. James Castrission, better known as Cas, and Justin Jones, nicknamed Jonesy, have set out on the adventure of a lifetime to not only rewrite history books, but also defeat a disease that has ended millions of lives. By raising funds for Sony Foundation’s You Can, a campaign focused on minimizing teenage cancer diagnoses and deaths in Australia, the pair will use their passion for adventure to further a cause that is far

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BY CHRIS LEWIS

more significant than any historical expedition. “In doing this expedition we are [determined] to help create a better future for young Australians with cancer,” states Castrission via his blog, casandjonesy.com.au. To successfully complete their journey and acquire $15 million for the development of Australian-based cancer facilities, Cas and Jonesy will need to overcome countless challenges, including weather conditions. While enduring regular temperatures of -50° F or less, Cas and Jonesy will also have to ski approximately 2,220 km and sled-haul gear, food, and other materials that weigh more than 200 kg each. As if such pressing concerns were not enough, before the journey even began, the team had another challenge that was

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impossible to ignore—logistics. How could the pair possibly transport over 400 kg of cargo from Sydney, Australia, to the Antarctic Shelf? Fortunately, through the logistical services of two organizations—Travelscene American Express and LAN Airlines—Cas and Jonesy received the support they needed to ensure their journey had a successful beginning. Travelscene American Express arranged the adventurers’ flight from Australia to Buenos Aires with assistance from LAN Airlines, which is based in Santiago, Chile. Once Cas and Jonesy— along with their 400 kg of luggage—landed in South America,

they were able to board a Russian cargo plane known as the Ilyushin 76. The plane flew the pair from Buenos Aires to Union Glacier, Antarctica. Upon arriving in Antarctica, Cas and Jonesy boarded a Twin Otter and flew to the edge of the Ronne-Filchner Ice Shelf, where their expedition began. “Getting ready for a recordbreaking polar expedition has so many levels of planning involved,” says Castrission during an interview with Travelscene American Express. “Knowing [the transport] of 400 kg [of cargo] to South America was taken care of made [a] world of difference.” WT

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