Wednesday, December 21, 2005

Happy Holidays! Happy New Year! Cheers!

This is my last post for 2005. I will enjoy the season with family and friends from now, until January 3, 2006. Look for my next post in mid January! I would like to wish everyone that has visited the blog a safe, festive Holiday Season. All the best to you and yours in 2006!
Sincerely, Michael Stolarczyk

PS: Merry Christmas to all, and to all a great night!

Tuesday, December 20, 2005

Garbage In, Garbage Out - Data Formats Are Crucial

The purpose of any automatic identification and data collection (AIDC) system is to provide a quick and accurate way to enter data into an IT system. But the old maxim, garbage in, garbage out still applies. Without a consistent means to represent data within a bar code, RFID tag, XML, or other form of data exchange, there's no check on the quality of the data entering the system. IE; technology for technology's sake is a load of wasted time and money!

You have to fine tune the process and get your people invested in said process!

The proliferation of data standards appears to make trading partner data exchange more complex; but standards actually simplify it by establishing known formats that can be easily integrated into your own IT system. Here are 10 tips to ensure that trading partner data meets your organization's needs, as well as your upstream and downstream sources.

1. Investigate the data format and structure standards that pertain to your industry, and your customers' industries. You have to understand what these standards are before you move forward with your trading partners.

2. Determine whether your customers are aware of existing standards, and if they are capable of using them. Meet with them (Duh); see what they are doing internally and discuss how you can work together to make this happen.

3. Recognize that customers in different industry sectors may require different data standards. GS1 (formerly EAN/UCC), health care, automotive, government, defense, and other industry standards define the structure, content, and special features that are to be used in representing data. This is a maze full of careful, be aware, be flexible.

4. Learn about the standards that pertain to your data-entry method. Bar codes, for example, are covered by symbology standards that define how a bar code is to be printed. ISO/IEC standards apply to specific applications, and RFID standards are currently being developed. Because these standards may affect the data stream coming from a reader, your organization needs to understand do your clients. Don't take this for granted...

5. Understand that most data standards contain "overhead" characters. These characters are used to ensure that the correct data is entered into the system. Overhead characters should be stripped off before entering the data string into your IT system.

6. Educate IT personnel on the importance of conforming to existing standards. Make sure they are on top of this. Continual training is necessary, and required.

7. Insist that your suppliers conform to these standards. You want your IT system to be streamlined and standardized. Compliance is important, and required.

8. Become active in all relevant data synchronization activities and AIDC committees. Standardizing product descriptions facilitates data exchange at every level. Knowing what's on the horizon is important both for planning and to help ensure new standards are in harmony with existing high-level standards that you've implemented. Get engaged, get active!

9. Develop corporate policies to ensure compliance internally and among trading partners. This must come from corporate, or it will be difficult to enforce and implement a streamlined data collection and identification system.

10. Once you've completed #9, REPEAT! Be prepared for the evolution of standards as new capabilities and technologies become available.

The evolution will never stop, and your ability to guide your organization is tantamount to long-term success. Get it done in 2006! Good luck!

Wednesday, December 14, 2005

Done Deal! In Bausch und Bogen!

Deutsche Post completes Exel takeover

Deutsche Post, Europe's largest postal service and owner of DHL, today completed the acquisition of U.K. logistics company Exel, for 5.6 billion euros ($6.7 billion). Deutsche Post, based in Bonn, Germany, has 380,000 employees worldwide. Exel has 111,000 employees working in 135 countries. With the purchase of Exel, Deutsche Post will control about 10 percent of global logistics business. The enlarged logistics unit will operate under the DHL brand with two logistics brand areas: DHL Exel Supply Chain and DHL Global Forwarding.

"By bringing together these two powerful, high-quality organizations, we are creating the largest logistics company in the world. Our group will set the future pace in the forwarding and supply chain industries, enabling us to serve even better the global needs of our customers," said Klaus Zumwinkel, Deutsche Post's chief executive officer.

Well, I say "Alles lief wie am Schnürchen!"

Global Fortune 50 he we come!

Tuesday, December 06, 2005


TNT plans logistics unit sale

Dutch mail and global logistics provider TNT said today it plans to sell off its logistics unit TNT Logistics to focus on its mail, express and freight management sectors.

TNT did not disclose if it is in talks with any buyer, but said that it expects to complete the transaction, subject to shareholder approval, in the second half of 2006. TNT has appointed Goldman Sachs to assist in the sale.

TNT's share price on the Amsterdam stock exchange Euronext was up 6.34 percent to euros 24.99 ($29.48) at close of business today.

"While our logistics business is a strong operation with a talented group of employees and good customer relationships, it will no longer fit with our strategic focus going forward," said Peter Bakker, TNT's chief executive officer. "Given industry consolidation, we announce today our intention to sell our logistics business. The focus on networks and the exit of Logistics will allow simplification of our organization. In the next few months a plan aimed at further cost reductions will be put together."

TNT has logistics contracts in North America, Latin America, Europe, Mediterranean, Indian subcontinent, Far East and Australia.

TNT Logistics posted revenue of $5.5 billion in 2004, almost two-thirds of the group's total $17 billion operating revenue. Yet the logistics unit's $122 million operating profit only amounted to 8 percent of the groups total $1.6 billion operating profit for last year.

"We have come to the conclusion that high-quality networks have proven to be intrinsically more attractive than customer dedicated supply chains. In networks like Mail, Express, and Freight Management, TNT can drive increased volumes across infrastructures resulting in continually improving efficiency, operating leverage, and higher return on capital," TNT said in a statement.

ING analyst Andrew Beh mentioned UPS, Deutsche Bahn and private equity firms as potential suitors for TNT Logistics, according to Reuters. At the same time, TNT initiated a 1 billion euros ($1.2 billion) share repurchase program, which will recoup approximately 42.6 million ordinary shares.

TNT said it will use the proceeds from the sale of TNT Logistics "to make further share repurchases, pay dividends, or to invest in compelling value creating opportunities."

Is it UPS? Is it DB? Could DPWN make another huge investment after the Exel deal? 2006 is going to be a very interesting year...

Thursday, December 01, 2005

To 3PL or Not to 3PL?

Businesses need many qualities to succeed in today's global market, but agility, consistency, and flexibility are the most critical. Strong organizations leverage these qualities to capitalize on the economic benefits of worldwide sourcing and distribution, while satisfying their customers' needs -- whether the customer is around the corner or across the sea.

Top notch 3PLs share the same traits. They have a global footprint, with one-stop solutions that touch every component of the supply chain. They focus on reliable service execution, mindful that today's lean manufacturing processes rely on consistently meeting shippers' time-definite demands.

They are agile, using insight and foresight within an origin market to make proactive, positive decisions on behalf of their clients.

And they are flexible, recognizing the dynamic and global nature of their customers' supply and distribution networks.

Offshoring Impact
The value of 3PLs has intensified recently because of the increase in offshoring. This creates robust sources of supply, and opens up new avenues of distribution, as emerging markets gain wealth and buying power.

For now, offshoring's impact is specifically felt on inbound trade to the United States; by some estimates, U.S. import volumes in 2005 will be 8 percent to 10 percent greater than 2004's robust levels, with no end in sight.

But offshoring is not without risk to the supply chain. As the chain stretches further and further from production source, to market consumption, meeting or exceeding a customer's expectations (reliably and cost-effectively) becomes a huge challenge.

Without a well-conceived plan, organization's offshoring production to far-off locales may discover that the cost of shipping, customs clearance, inventory financing, security, and warehousing -- not to mention ill will from customers if delivery performance suffers -- erases the savings that drove them to offshore.

Recognizing these hazards, savvy manufacturers have diversified their supply networks and developed multiple production and distribution points to serve their end markets.

Companies manufacturing U.S.-bound products ,with variable demand and relatively moderate value, for example, can source in North America or Latin America, position products in domestic distribution centers, and deliver them, on-demand, via low-cost surface transport.

This strategy helps companies avoid the expenses, service disruptions, and delivery delays that can occur when goods move halfway across the globe and through congested U.S. ports. It also allows companies to react quickly to changes in demand in the U.S. market.

The appeal of producing in China or India, therefore, must be balanced against the time and complexity required to deliver finished goods across thousands of miles.

Global Challenges
As today's businesses expand their global supply and distribution channels, the scope and ability of a logistics provider's infrastructure takes on paramount importance. Helping shippers optimize inventory value, by accelerating distribution accuracy and velocity, while also consistently meeting the ultimate customer's delivery demands, are the dual objectives of global 3PLs.

So say, that the 21st Century company has become enormously productive and efficient, as the secular decline in inventory-to-sales ratio shows. Yet the absolute dollar value of inventory continues to climb, as a result of the escalating value of goods.

Twenty years ago, for example, the typewriter and telex were the office machines of choice. Today, it is the laptop computer, which retails for three to five times their cost. This translates into rising inventory carrying costs, which can be exacerbated by elongated supply chains that can accelerate product obsolescence and erode value.

Unless the trend is reversed, the cost to carry and warehouse inventory will consume 70 percent of total logistics expenses by the end of the decade, according to some estimates. To overcome this challenge, 3PLs' physical and IT networks must be more than mere transport facilitators. In fact, the mode and cost of transport is often irrelevant.

Ensuring satisfaction for shippers and their customers through rising service expectations is central to the 3PL value proposition. Delivering this satisfaction means offering near-perfect fulfillment rates and precisely timed deliveries supported by full pipeline visibility -- while also minimizing inventory glut and bloat.

3PL infrastructures must be aligned to move in concert with the shipper's needs. Not every product will have "made in China" stamped on it; businesses will produce and distribute to, from, and on every continent in the future (and for the most part, in the here-and-now).

Ultimately, consignee demands, product value, shifting tariff structures, and logistics partners' ability to reliably hit time-definite delivery benchmarks regardless of distance will dictate supply chain strategy and execution. Logistics providers' networks must reflect those realities.

To 3PL or Not to 3PL
As commerce extends in reach and complexity, businesses will look for partners that can deliver flexibility as well as goods. Asset-neutral providers, with a wide array of transport services at their disposal, possess powerful competitive tools. They can often strike the optimum balance between price, transit time, and capacity.

And they have the capabilities to expertly manage product and information flow from purchase order to point-of-purchase (yes, my acronym - PO to PoP once again), all through a single point of contact. Asset-based providers' "closed-loop" infrastructures, while formidable in many respects, may not be suitable for all transactions because the flow of goods must fit within their predetermined schedules.

Logistics companies come in all shapes and sizes. The best ones, however, share the common strengths of agility, consistency, and flexibility. Providing proper supply chain management requires meeting delivery targets and reducing costs. A 3PL must strive to align itself with their client, and their client's market(s) of choice.

But only when 3PLs fully understand their customers' business model can they provide and execute the best possible solutions. This must be done by actively listening, sense and respond to the origin and destination market's needs, and ultimately creating a process to meet the customer's challenge.