Friday, July 29, 2005

Lose Your Ego To Lead!

Empathy and Emotional Intelligence are not concepts, they are the two successful pillars of business culture.

Develop “Idea Practitioners” at every level of the organization, and let them drive the culture…

Empower them – they will be the link between the ideas and the action.

Focus on the people, process, and content – not on a new technology or fad.

Scale up, let go – at some point, you have to get out of the way and let others execute.

Delegate, let your people make decisions then support them 100%

NOTE: they will make mistakes…everyone does

Wednesday, July 27, 2005

Consolidation - It Ain't Over!

Activity in 2005 suggests that consolidation and "add-on" acquisition trends are set to continue (A. P. Moller / Maersk's bid for Royal P&O Nedlloyd and continued rumors surrounding Exel), although industry growth strategies continue to vacillate.

Mergers and acquisitions continue in road transport in Europe and the US (such as UPS's acquisition of Overnite Corporation) while, for its part, company's like Exel expect only to make fill-in acquisitions and concentrate on organic growth over the next few years. In mid-tier sectors, corporate activity may see strategic alliances and joint ventures take shape as well.

Last year saw mixed financial results from leading European logistics providers. Signs so far point to an equally challenging 2005. TNT reported a healthy increase in logistics revenues, although margins remain below 2002 levels. Exel's contract logistics organic revenue increased by 8.9% and freight management saw organic growth of 16.1%. Logistics revenues at DPWN (comprising DHL Solutions and Danzas Air & Ocean) increased by 15.0% as margins reached 4.2%.

Kuehne & Nagel's contract logistics operations increased turnover by just 0.3%, as gross profits fell by 1.6%. Rail and road logistics and freight operations recorded strong growth in turnover.
Wincanton's preliminary results (for the year to 31 March 2005) showed a marginal increase in turnover (2.7%), while Schenker reported a 17.3% increase in 2004 revenues.
Increasing the scale and scope of services enables logistics providers to enhance existing customer relationships and makes their service offering more attractive to new customers. The ability of providers offer operational scale and solution spread presents a compelling proposition as modern supply chains become truly global.

Whats next?

A. P. Moller Maersk Will Acquire Another Carrier
Leasons learned from the Sealand, and their tactical acquisition of SafMarine at the same time will be used again. Once the P&ONL shares have been purchased, look for the boys in blue to make another purchase. What are the targets? OOCL, Hamburg Sud, or maybe a regional 3PL organization to compliment their Maersk Logistics division.

CMA - CGM and Med Shipping will have to follow suit
To keep pace with APM, and to further bolster their Top Five positions, these two liner operations will have to make acquisitions as well...Hamburg Sud, Hapag-Lloyd, OOCL, or maybe a regional carrier like Crowley.

Finally, The Grand Alliance must cover the loss of P&O Nedlloyd
Grand Alliance members Hapag-Lloyd, Malaysia International Shipping Corp. (MISC), NYK Line, and OOCL have vowed to continue with the alliance, despite the impending takeover and possible alliance withdrawal of P&O Nedlloyd by A.P. Moller-Maersk.

Should there be any amendments to the composition of the Grand Alliance in 2006, the new vessels ordered by Hapag-Lloyd, MISC, NYK and OOCL will be deployed to meet the expected growth in demand, and services will be further enhanced to offer more options for customers, the carriers said in a joint statement.

It is very likely (bet the house on it) that Maersk Sealand will pull P&O Nedlloyd out of the Grand Alliance when it has secured control of the company, and after completion of a six-month withdrawal notice period.

The Grand Alliance does have a large enough fleet and sufficient partners to continue with one less carrier. But the result of a P&O Nedlloyd exit must surely mean less frequent services than now. The Grand Alliance currently operates 11 Asia/North America container services, eight Asia/Europe services and five U.S./North Europe services.

By comparison, Maersk Sealand presently operates nine Asia/North America services (not including slot charter services), eight Asia/Europe loops and four U.S./North Europe services.
Expect Maersk Sealand to move from having a less frequent service coverage to a more frequent one, relative to the Grand Alliance

What other moves will be made? Stay tuned...

Monday, July 25, 2005

The Square Root Law's Impact on Inventories - And you thought you would never use real math after college!

The Square Root Law states that The Total Inventory in a System is proportional to the Square Root of the Number of Locations at which a product is stocked. The Square Root Law was mathematically proven by D.H. Maister in his 1975, International Journal of Physical Distribution article entitled "centralization of Inventories and The Square Root Law." Whoa! I'm surprised I was even able to type that...

The significance of The Square Root Law is that a company operating five warehouses, which then centralizes into one warehouse, can theoretically reduce inventory carried in stock by 55 percent. This will reduce inventory carrying costs, which may be slightly offset by more costly transport options to meet a customer's service requirements.

Since I am someone who just knows enough to be dangerous on these type of issues, especially when working directly with mathematical minutiae, I am not equipped to review the detailed method of calculation. You simply have to trust the facts as stated.

There are large potential benefits to reducing the number of locations and on the flip side, also significant inventory increase penalties to adding to the number of stocking locations. However, it is important when looking at such opportunities, not to do so in isolation, but to take into account all aspects including DC Cost, Transport Cost, as well as Customer Lead Times and Replenishment before any final decisions are made.

Lets review two of these strategies. Specifically, Slow Moving Goods (SMG) and Network Centralization, just to give you some ideas where you may begin with direct application to your own organization (or client).

A Slow Moving Goods strategy consists of the seg&sort of a product range by velocity. Typically, Pareto's Law ( the 80/20 rule, which by the way, we need to discuss if it really is relevant in this day and age) can assist in this regard with the slower moving 80% of products which might represent 20% of sales volume being pulled from the current DC network. These SKUs would then be serviced from 1 or 2 more centralized Slow Moving Distribution Centers with the appropriate Square Root Law of Inventory applying depending on how many existing locations these products were held at. An example would be that these have been pulled back from four locations to one resulting in roughly a 50% inventory reduction, which is significant.

In addition, the picking productivity benefits can also accrue assuming all products were in a consolidated pick line in the previous four full line facilities. By pulling these SMG products out, and creating new pick lines, one SMG and four FMG (Fast Moving Goods) in each of the current facilities, both picking operations will be immediately improved. The FMG by reduced travel times due to not having to pass all of the previous SMG slots and the SMG by focusing on one pick slot within a more compact picking layout.

Slow Moving Goods network strategies can also be useful in addressing networks which are over capacity and require expansion with the SMG facility reducing the overall stock holding and space requirement in the existing full line facilities.

Network Centralization analysis may often result in significant benefits as well where multiple regional facilities are consolidated to only one or two locations. A determination of the appropriate centralized network strategy for a firm can also be completed by modeling the optimal intersection of number of locations, transportation costs and inventory carrying costs. This calculation must of course be governed by business defined customer service levels and can vary based on the product density and the relative value of different product lines.

It seems we are returning to the location issue (as referenced in last week's RFID missive), which again plays an important role in this decision process. How are you dealing with these types of challenges in your organization? How about with your clients? It would very educational to get some feedback.

Friday, July 22, 2005

Create a Culture, Empower the Believers, Share the Success

Utilize the S.T.A.R. Process to create a new culture within your organization, where you can empower the believers, share the success and ultimately surpass all the fiscal management, organizational development, and commercial achievement goals that have been established.

People are the center of any culture, they drive the S.T.A.R. process via these four simple words:

SPEED – exude a sense of urgency, thrive on change, desire to meet the situational requirements quickly, efficiently, accurately…every time.

TRUST – facilitate a sense of trust, reliability, and security in a person’s mind by being THE consistent, stabilizing factor in their business world.

ACCOUNTABILITY – empower every staff member and with that hold them accountable to reach service, sales, and budget targets.

RELATIONSHIPS – initiate, foster, and expand internal and external relationships through honest, open two-way communication.

The S.T.A.R. Process was recognized by FastCompany Magazine, in February 2002, as one of its inaugural Top 50 Innovations. Check it out on

Have a great weekend...

Thursday, July 21, 2005

How many PL's does it take to get that Abercrombie & Fitch T-Shirt from Fuzhou to Paducha?

What the heck is the difference between a 3pl and a 4pl organization? Their service offerings? Asset ownership versus non-asset ownership? Or, is there really a difference?

It is normally recognized that any firm which specializes in providing logistics service and is independent from any manufacturer's logistics division can be called a third-party logistics provider (3PL).

The term "4PL" was actually coined by the consulting group Accenture. In fact, they also hold the trademark to the name 4PL. Accenture defines a 4PL in the following manner: "A 4PL is an integrator that assembles the resources, capabilities, and technology of its own organization and other organizations to design, build and run comprehensive supply chain solutions."

The biggest difference (at least from my perspective) between 3PL and 4PL is the management (ownership) of assets. The 3PL organization has a core offering of one or more of the following services: warehousing, common carrier options (truckload, LTL, Parcel, Ocean, Air, NVO, etc.), forwarding, truck leasing, etc. Most logistics providers originally got into other areas to increase utilization of core products (trucks, warehouses, etc.) A pure 4PL play is mainly technology and integration. They become the knowledge (intelligence) hub that ties together services to meet a client's requirement. This allows the 4PL to, in theory and according to their claims, initiate the best services on behalf of their client base.

It should be noted, that the major players in 3PL, like Exel, TNT, DHL, etc have a much more robust brand acknowledgment, than the pure 4PL companies.

Is it this simple? Nah...ask ten people the above question, and you will get ten different answers. The above is my humble opinion...what is your definition?

Wednesday, July 20, 2005

What are the three most important issues surrounding RFID Technology? Location...Location...Location!

In retail, a store's location impacts sales performance more than any other factor. Quite often, great managers, great marketing programs, great price points, and even great products do not matter as much as a great location!

The quantifiable value of location is distinct. However, the ability to tap into location as a meaningful component of new business intelligence platforms or systems is a relatively new concept altogether.

Some estimates purport that 85 percent of all data used by businesses today, contains some type of location component. In other words, somewhere the data holds information that is tied to a geographic location.

Sometimes a location component is quite specific and spelled out...essentially "meta data." An example like an organization storing the latitude and longitude of its assets, customers and so forth in a database. Other times, the geographic meta data may be an address that can be pinpointed on a map, either manually or through a process called geocoding to determine longitude and latitude.

Location indicators can also be less obvious. IE; some companies can use the first six digits of a phone number that is, the area code and the three-digit prefix, to designate a record, to a specific place.

A natural fit for location meta data, which is easily accessible, is needed and required. By de-centralizing analytics and distributing decision-making tools to a large number of users, organizations work to break the bottleneck between inspiration and insight. The goal must be for systems users, and decision makers in every strategic unit of your organization, to have access to the data they need quickly, without the need to be experts in the use of legacy or distributed system based platforms.

Location awareness (intelligence) goes one step farther and provides an easy way for users to quickly analyze and visualize critical spatial relationships among data that, unless the user is a technical expert, would not be apparent.

In a hyper-competitive market (like retail) where every investment must generate a return, smart organizations realize that location turns out a fast, high-benefit reward. Early adopters of business intelligence software (supply chain visibility or demand planning) saw that, by publishing the data that defines their business across the organization, they could gain an advantage over the competition. Similarly, progressive users of this type of technology realize that, by revealing location within their core databases, they can positively alter the way they do business and never look back.

Obviously, the new technology currently taking hold in retail and manufacturing supply chains stands out as a great example of location meta data in action. Radio frequency identification (RFID) tags can solve critical problems related to supply chain management, store-level inventory, intuitive displays, homeland security, and other important processes. While the issue carries some controversy relative to privacy, industry standards and other issues, RFID also has great potential. Organizations as diverse as the Department of Homeland Security and Wal-Mart are deep into their pilot programs and have full-scale strategies to take advantage of RFID.

Hence, RFID is creating vast amounts of location meta data. For some who manage large volumes of data, the advent of this RFID technology creates the need to develop a whole new set of analyses. The process of creating data for tracking product shipments, inventory and even a customer's buying patterns begs for a powerful business intelligence tool. It must be powerful enough to allow analysts and operations managers to monitor and measure the status intuitively. Since every record in an RFID database also has a geographic component, the right business intelligence solution for the job should incorporate location meta data.

The fact that manufacturers and retailers desire to share data about inventory and supply, location intelligence gains even more importance. Using a location-enabled platform, retailers will allow suppliers to view and query reports describing the movement of product through warehouses and outlet centers. The supplier may require access, or need to view a map that breaks out the volume of shipments of a product by location. The map would show the location of warehouses and inventory in those warehouses, as well as outlets where shipments have already been delivered. It could even show the presence of shipments at indeterminate waypoints throughout the supply chain. Ocean carriers and air carriers will no doubt embrace this (many already have, to some degree).

Location meta data is positioned to be a modern day "lighthouse," which will unlock geographic understanding, extract the value of place (during a specific time, at specified waypoint), and integrate it with business intelligence systems. Its singular goal is to give organizations greater return on their investment in forecasting and demand planning, and to provide all staff with a means to interact with the meta data in a manner not previously available or even barely acknowledged.

There are only a few fundamental ways to measure, understand and analyze information, and several tools already exist to maximize the level of understanding. However, these tools often ignore altogether the critical components of location, location, location...and many organizations stand to gain great efficiencies by enabling it through RFID.

Can this be said of your organization?

Welcome to BlogOnLog

You know, I never thought that I would actually be able to secure the title "BlogOnLog" for my blog page. Surprise, problem, it was there for the taking. This is my first post and its just a quick introduction. It is my goal, and hope to utilize this space, in the future, to share information on the transportation, logistics, and supply chain issues of the moment. I will encourage comments, editorials, and opinions from all who will peruse (if anyone, that is, will) this space. My goal is to share ideas, create collaboration, and have some debate on the issues. It is my wish to remain positive and productive during this pursuit, and my only request is that the rest of you voice your positions in the same vain. Maybe we will create a more efficient way to handle a situation, maybe we will find a new way to utilize an innovative technology, maybe we will just blow off some steam...who knows. I am willing to give it a try. I hope you all are ready as well. Until my first official topic is posted, please accept my kind regards (and invitation to share new perspectives, ideas, and concepts)...MJS