On hiatus

Sorry folks...too much work to do, not enough time to do it! Sound familiar? No kidding! I will be on hiatus for the next two weeks. Don't worry, I'll catch up with ya in mid-October

Samskip - Sell something / Buy something / Keep growing!

Samskip to buy Odiel Bilbao’s short-sea activities

Samskip continues growth trend through acquisition...and they bulk up their "Containerlogistics" activity.

Recent consolidation in the European short-sea industry continues with Icelandic carrier Samskip reaching agreement to take over Spanish line Odiel Bilbao SA from its Madrid-based holding company Naviera del Odiel SA. No financial details were disclosed.

Eimskip, owned by the Avion Group, has also purchased the remaining 30 percent equity stake in Lithuania-based European short-sea container shipping line Kursiu Linija, becoming its wholly owned parent.

Effective Oct. 1., all of Odiel Bilbao's staff and short-sea activities will transfer over to Samskip's newly established subsidiary, Samskip Multimodal Containerlogistics SA.

In late 2003, Odiel Bilbao and Geest North Sea Line, acquired by Samskip last year, started a joint service linking Bilbao with Tilbury in the United Kingdom and Rotterdam, in the Netherlands.

"The establishment of the new business reflects the group's ambitions to continue strengthening its position in the European 45-foot container market, whereas Naviera del Odiel wishes to focus on its activities in other segments of the shipping industry," Samskip said in a statement.

"Increasing volumes of cargo are originating in Spain and the Spanish market still relies on trailers to a great extent," said Gerard de Groot, Geest's commercial director. "Furthermore, with road haulage costs ever on the increase, Spanish manufacturers need other options for their shipments to the U.K., Ireland, Benelux, Germany, Scandinavia, Baltic and Russia, so the provision of efficient short-sea alternatives is vital. Due to our ability to meet the needs of the market I believe the business has great potential for growth."

Samskip will later this year drop the names of Geest and Seawheel, the U.K. company it also bought last year, to operate under a single brand, before transferring all of its international operations into a new building in Rotterdam's Old Port area early next year.

With Kursiu Linija, Eimskip has since May been gradually increasing its share in the company from 50 percent to 70 percent and now finally complete ownership. The Reykjavik-based company said it paid 8 million euros ($10.2 million) for the entire 100 percent stake.

Kursiu Linija operates six vessels ranging from 300 to 650 TEUs calling on three services: between the Baltic States and Poland and the United Kingdom and Benelux; between Germany and Kaliningrad; and between Germany and Lithuania and Sweden.

Other notable transactions of late include Antwerp, Belgium-based Delphis' takeovers of Portlink from A.P. Moller-Maersk subsidiary Safmarine Container Lines and Team Lines, North Europe's second-largest feeder operator, from Finnish carrier Finnlines.

Bean Counting and Logistics Costs Don't Add Up!

Does you company actually have true fiscal visibility throughout the supply chain? Many claim they do...very few really do...what should you do?

Supply chain management (SCM) is one of the key drivers in today's business world with offshore sourcing, foreign competition and global markets. The responsiveness required to keep the inbound supply chain flowing with materials and products and to keep store shelves filled is demanding. SCM requires reducing costs, increasing inventory velocity and compressing cycle time; and some say these three may not be compatible or consistent.

Doing all this "and doing it well" takes creativity and management skill. However there is a factor that limits the design, development and implementation of such supply chains. That factor is accounting (ie; bean counting), and how it recognizes, and treats, logistics costs.

My view, is accounting is an impediment for logistics, whether for supply chain management, both international and domestic, for lean and for outsourcing. This is a fact, not because of accountants, but because companies simply do not understand how to fiscally account for their supply chain!

Generally accepted accounting principles create the foundation so that every company reports its financial data the same way. Or so they say...

This financial snapshot is consistent then from firm to firm (or it should be). hence, this makes analysis of the data and comparisons possible.

These accounting standards have a long history. They date back to Henry Ford and the Model A. Companies then may have been vertically integrated with a primary focus on domestic sales, sourcing and production. This business model has become nearly extinct, especially for large companies, that source internationally. As a result, accounting rules have not kept up with present business operations and practices.

Some differences with supply chain management and accounting are:

Process versus Transactions
SCM flows across the organization. As a process, it flows across many of the organization's departments and boundaries. Accounting is transaction-oriented, with its focus on identifying and summarizing vertical sales and make-or-buy activities.

Organization Direction
Supply chain management is horizontal and crosses departments and organizational boundaries. Transactions are vertical and are consistent with organization silos.

Scope
SCM extends into suppliers and logistics service providers to gain inventory velocity and to reduce cycle time. Accounting stays within the company facilities and boundaries and looks inward.

Outward or Inward
Supply chain management looks both inward and outward to deal with suppliers, transport firms, warehouses and other logistics service providers. Collaboration is important when managing the complex, global supply chain. Accounting is traditional and focuses within the corporate boundaries.

Continuous versus Discrete
SCM is ongoing. Product is always flowing. Accounting looks at different summaries which create supply chain disconnects. Logistics costs are organized individually, not recognized at all, or recognized in different places.

For example, freight and warehouses show on the income statement and are recapped monthly.

Inventory appears on the balance sheet and is presented annually.

ARRRGH! I am already driving myself nuts with this post! Just think what its like in a multi-national organization!

So three key logistics elements are dissected and shown in different financial reports!

And nowhere does "actual time," a vital business driver and the action that creates inventory and service, appear on any financial statement. Add time and to a great extent, this view of logistics costs makes accounting obsolete for supply chain management.

Dynamic versus Static
Supply chain management is constantly changing--as suppliers, customers, plants and warehouses, shipment sizes and order mix and as store locations change. This contrasts with accounting which has the historical perspective of what has already happened.

As a result, accounting does not understand changes in transportation costs, for example, because of changes in the distance inbound and outbound shipments must travel, or in the shipment size or in the mix of commodities being shipped. Or, for the time it takes...

These differences make it difficult to develop meaningful performance metrics for supply chain management that are recognized in the board room and that are aligned with the company strategic plan. Financial metrics, while commonly used, have limited application to supply chain management performance improvement.

For example, inventory velocity, inventory turns and inventory yield maximization (all time related) are important to achieving the best returns on inventory and on the capital that it represents.

Cycle time, from purchase order to sale or time within the total supply chain, are measure of company performance with strong bottom line implications. Yet none of these are part of traditional accounting measures which are rooted in the past. What about the present? What about the future?

Today's business world is focused on the customer. The perfect customer order is a key performance metric for gaining and maintaining customers and for achieving deeper customer penetration. These are not standard, traditional financial measures!

Similarly developing unique supply chain programs that differentiate by A versus B versus C inventory, or by customer, or by product family segment, or any other delineator are not supported by accounting!

Financial standards do not readily recognize such stratifications.

Sourcing right decisions are also restricted by accounting which has blinders as to the potential impact of the outsourcing decision on the company and transforming its processes, operations and results.

These limitations also impact the success of lean program development and lean success. Waste, non-value added, actions do not conform to traditional accounting. As a result, time and inventory waste identification run counter to how accounting sees these manufacturing and supply chain processes and sub-processes.

Incremental and continuous improvement with its flow and pull are part of adapting to the new business model of faster and better...even less expensive. Unfortunately cost accounting practices are enablers of the old ways, not the new ways of business and business models.

Accounting professionals have recognized the limitations of accounting in today's business. Activity based costing is one way they try to adjust to the new world. But ABC is not incorporated into income statements and balance sheets, which still reflect an antiquated way of summarizing business financials and performance. Frankly, most of the old boys on the board wouldn't know how to read or interpret this new fiscal game plan anyway!

At some point, Accounting must step up and stop band-aiding a bad system. It must redefine, reinvent, and reinvigorate itself...so it can be part of the global business world.

Until that happens, companies will continue not to properly measure and improve their performance, operations and results. Their supply chains will be fragmented...just as their outdated financial documents are...

Emma Maersk Too Big For the Panama Canal! What Does This Say About The Future Plans of A P Moller Maersk and the Industry?

Hmmmm...what do you make of this press release and somewhat stilted admission from our friends at Maersk Line? I love this statement..."we could build some more ships with one row less, or something like that, if necessary..."

Look out world...you are being cut in half by the "big blue." As we move into this lull in the ocean container cycle...over tonnage/low rates/further consolidation...keep an eye on the moves of Maersk. They have had a long history of success in anticipating the market, but this move may be the boldest yet. Is it the right one? You tell me!

New Maersk ship too big for enlarged Panama Canal

Maersk line has acknowledged that the "Emma Maersk," at 56 meters wide, would be too big to use the third set of locks proposed for the Panama Canal in 2014-2015, which are only scheduled to be 55 meters wide.

Speaking at an exclusive press viewing of the new vessel in Rotterdam Wednesday, Eivind Kolding, new joint chief executive officer of Maersk Line, said the new PS class ships are needed for the Asia/Europe trade.

"The new locks at Panama are still some eight years away," he pointed out, explaining that Maersk’s plan was to build eight of the large ships now to form a single loop calling at Rotterdam, Bremerhaven, Algeciras, Yantian, Hong Kong, Ningbo, Xiamen, Hong Kong, Yantian, Tanjung Pelepas and Bremerhaven. The loop will be phased in some time next year when an optimum number of the new ships -- one to be delivered every two months, are in service -- he said.

"When the new Panama Canal locks are built we could build some more ships with one row less, or something like that, if necessary," he suggested.

"Emma Maersk" has 40 to 45-foot cargo bays of mostly 22 rows wide and 18 rows high. Her maximum container intake is clearly somewhere very much closer to adjusted minimum expert estimates of 14,800 TEUs than the official figure of 11,000 TEUs used by Kolding. The ship’s captain refused to comment even on the design deadweight figure of the vessel (her cargo-lifting capacity), saying only that the actual deadweight figure was "still being calculated."

"Emma Maersk" has a service speed of 22 knots on the main engine alone and a draft of 14 meters. Because of her exceptional length, up to 11 shore gantry cranes can work on the ship at one time. The engine installation is the largest, most powerful and most fuel-efficient in the world, driving the largest ship’s propeller ever made.

Samskip - Making Bold Moves / Charting to Blue Water

Listed below is a press release from Samskip. Michael Hassing has been making some bold moves as of late and is charting the organization to blue waters.

Niche players, short sea companies, and reefer cargo operators better take note...Samskip is positioned for long term success and will keep the pressure on via acquisitions, innovations, and plain old hard work. We will keep an eye on them in this space...

Hassing speaks about Samskip sale of TECO
Samskip Chief Executive Officer Michael Hassing on Tuesday commented on his company’s sale of its 50 percent stake in short-sea operator TECO to Tschudi Shipping, saying the TECO did not fit in with Samskip’s "core strategy of focusing on the door-to-door market."

"The sale will have only positive effects on Samskip’s continued growth within our core markets, of which the Baltic region forms part, and the development of our focused products," Hassing said in a statement.

"The TECO disposal will enhance our growth prospects. An example of our commitment to the region was expressed through the recent establishment of our Klaipeda (Estonia) office and weekly vessel call. It was furthermore felt by both TECO partners that the TECO business would be better developed under one owner due to its focus on the feeder business and the subsequent competition with other feeder operators."

Possible Storm Clouds Ahead for Logistics Industry?

This is strait from the GIL website...and it is kind of sobering...to be honest, I am not buying into this type of analysis just yet. What do you think?

Companies specialising in providing logistics services have done well in recent years, but the future prospects for the industry are not so certain according to independent market analyst Datamonitor's (DTM.L) latest research "Logistics Benchmarking and Profiler 2006."

The report reveals revenues for third-party logistics providers (3PLs) have continued to rise, driven by an improved economic climate and companies outsourcing non-core activities to try and reduce costs.

However, the report concludes that knock-on effects of economic factors, oil and the collapse of the Doha round of trade discussions may cause significant problems for this sector in the near future. Moreover, while the unique Global Scorecard included in the report rates each logistics company and shows there are clear leaders, it also reveals that a number will have to alter their strategies in the future in order to survive.

Following the significant effect on economic growth and international trade from set-back of September 11th and the SARS virus in 2003, the major economies have recovered well. This has had a significant effect on global trade as demand has increased in the majority of the affluent countries. However TDG and TNT Logistics recorded year-on-year declines due to operational difficulties – worryingly this was the third successive year-on-year fall for both.

Furthermore, even the companies who have seen large increases in revenue have not necessarily translated this into an improvement in their bottom lines, as average operating margin slipped from 3.4% in 2004 to 2.7%.According to Chris Morgan, Datamonitor logistics analyst and author of the report, there are two main drivers for this.

The first has been the dramatic increase in oil prices, which has raised transportation costs. "Although a proportion of this rise has been passed on to customers, some of this has inevitably eaten away at profitability," says Morgan.

The second problem is the low pricing power of the 3PLs. "Even after the latest wave of M&A, the logistics market is still highly fragmented. Datamonitor's research shows that only four European players have a global market share in contract logistics of over 1%."

West Virginia and Virginia Tackle Supply Chain and Evacuation Scenarios

Last week, public safety officials from Virginia and other states likely to receive refugees from a disaster in the Washington area have agreed to work together on regional evacuation plans.

They attended a conference this week in West Virginia, where they discussed how to provide food, fuel, medical attention and other necessities during an evacuation that could reach numbers of into the millions.

West Virginia Military Affairs and Public Safety Secretary James Spears says he and counterparts from neighboring states are creating a work group to tackle regional evacuation planning.

Spears says the group will discuss "very specifically" all of the potential problems of refugees -- including transportation, housing, feeding and caring for them in metro areas such as Richmond, Virginia; Columbus, Ohio; or Lexington, Kentucky.

Sadly, it is about time that we start to look at these type of issues...hope for the best, but always prepare for the worst. I wouldn't mind being a part of these discussions. How about you?

Fiscal Visibility in the Supply Chain Saves Money!

The globalization of commerce has made sophisticated logistics technology not just a luxurious expense for the Global Fortune 500, but a necessity for companies of all sizes and in all industries.

A typical apparel company, for example, might source fabric from China, manufacture garments in Malaysia, send them to Italy for custom design work, then ship final products to a 3PL warehouse in the United States for delivery to major department stores around the country.

And it must do all this in time to get a hot fashion item on store shelves before A-listers move on to the next trend. Good luck coordinating this multi-party process with phone, fax, e-mail, and spreadsheets.

The need for advanced solutions may seem obvious, but a surprising number of companies still have a long way to go when it comes to global supply chain technology sophistication.

On average, large companies report their global supply chains are only 50 percent as automated as their domestic supply chains.

The interesting news continues -- only six percent qualify their global supply chains as highly automated, and a full 90 percent of all enterprises report their global supply chain technology is inadequate to provide timely information required for budget and cash-flow planning! This is the single most frustrating topic that I continue to harp on within BlogOnLog.

Companies claim they want supply chain visibility, but what they really need is fiscal visibility within their supply chain!

How did companies fall so behind? Who fell asleep at the wheel -- supply chain managers? IT directors? Technology vendors? YES. YES. AND YES...but more important...their CEO and CFO are also asleep at the wheel!

The global supply chain has been relatively ignored because it was traditionally a small part of companies' businesses. Companies focused their technology efforts on domestic applications instead. Then the world changed -- business became globalized, and companies realized their IT systems are not set up to support that...nor are their fiscal models.

With international shipment volumes growing at a rapid clip, many companies have been caught off guard, and are now scrambling to plug the technology gap. Without automated systems or fiscal models to account for costs throughout the systems, and, in most cases, without additional staff, global supply chain managers face an uphill battle.

Global supply chains are more complex than domestic supply chains...which is a given...more parties are involved -- contract manufacturers, 3PLs, a company's own factories, customs agencies, brokers, and multiple carriers. That complexity is a major difference.

There is a bright spot in this picture. The global supply chain technology void affects logistics managers' the ability to finally deliver crucial financial data -- particularly for Sarbanes-Oxley compliance -- CFOs/CFOs have taken notice and are now joining the technology crusade. Tying technology investments to a business case outside the supply chain often helps logisticians get the global commerce tools they need. The money trail doesn't hurt either...

Once a /CEOCFO realizes a problem impacts financial performance and risk levels, it's easier to push technology requests through the system. 3PL's are a great platform to help create this fiscal knowledge.

After a company decides to invest in technology, the next question is whether to develop solutions in-house or partner with a technology provider or 3PL. Increasingly, organizations choose to forego proprietary solutions and seek outside help...3PL's are the way to go!

Many companies still currently use in-house applications to manage their global supply chains, but many seeking to implement new technology say they least favor in-house solutions versus collaboration with 3PL's.

These organizations plan to use either a best-of-breed on-demand or a licensed software vendor; an ERP vendor; or a 3PL's technology solution to manage their global supply chain.

Most supply chain organizations haven't had budgets to buy external technology. Now, companies realize multi-party collaborative practices are not a core competency for their internal IT organizations. So, they kick in the money...

Companies can spend two or three years building an in-house solution, or use an on-demand option and be up and running in two to three months. Before 3PL outsourcing, the choice was between building an internal solution or taking eight months to implement an installed system.

In that case, companies were often willing to wait the extra months to build in-house, but the two-year gap between an in-house and on-demand solution requires them rethink their strategy.

Companies that continue using in-house technology solutions also face the challenge of keeping up with the speed of developments -- in both supply chain technology and global business practices. Keeping data from an increasing roster of partners connected and synchronized is a labor-intensive challenge -- and, sometimes, a guessing game.

We are essentially in the early days of reinventing our business processes for globalization. many companies can't build a technology solution today and be confident it will support their needs five years from now...the landscape is too riddled with uncertainty and risk.

What can companies do to combat technology inefficiencies? Pinpointing the area of their global supply chain that can benefit most from a quick technology hit is a good place to start. My suggestion is on how to fiscal account for the total supply chain...not just international inbound or domestic distribution...you got it...my favorite saying...from PO to PoP!

It is unrealistic to try to solve every problem at once. For most companies, advanced supply chain visibility, from the fiscal perspective, is the biggest need; for others, it is trade compliance enhancements, or collaboration-based systems.

It is an oversimplification to say technology is the magic fix for global logistics problems and will make a supply chain organization the corporate star....yeah, I know Mike...technology for technology's sake is nothing...it has to have the people and process behind it!

A major retailer started out with global visibility technology, and was able to quicken cycle times and reduce inventory investment, and the CFO is so happy with the progress, he is now knocking on the global logistics director's door, saying, "Why aren't you moving faster to implement that compliance technology?"

So don't be surprised if your CEO or CFO soon knocks on your door with a technology request. Pick up the phone and give me a call...we can collaborate on the solution!