C-TPAT Survey - Be careful what you ask for...

C-TPAT survey gives members chance to sound off

Are companies who participate in the Customs-Trade Partnership Against Terrorism really achieving tangible efficiencies by partnering with the U.S. government to secure their international supply chains?

That is the question Customs and Border Protection will attempt to answer when it electronically distributes a survey to thousands of companies on Dec. 1 designed to quantify the voluntary program’s return on investment and measure its performance.

One of the main challenges CBP faces is showing companies that extra efforts to bolster controls over their shipments and holding their suppliers accountable for implementing approved security measures are generating payoffs in the form of reduced inspections while meeting government goals for preventing terrorist attacks using shipping containers.

Importers and logistics providers have pushed the agency and the Department of Homeland Security to provide tangible evidence that the extra handling costs, delays and the inconvenience of adhering to the voluntary security program are paying off in enhanced security as well as indirect benefits from greater supply chain efficiency and visibility. The more companies that participate in C-TPAT, the more potential business partners that are available for those seeking minimum inspection levels for their shipments. Private-sector officials argue that providing data on the program’s benefits can help convince more companies that committing resources to make their facilities, and those of their suppliers and transport providers, secure results in business gains, and will help build further industry support for

C-TPAT.

But trying to quantify the effectiveness of government security programs has proven harder to measure than sales or production activities in the business world. At the heart of the problem is defining performance criteria that go beyond simply measuring industry compliance rates from a regulatory perspective, which does not necessarily equate to enhanced security.

CBP turned to the University of Virginia to help design and conduct the survey. CBP selected 24 C-TPAT members to work with the university on developing the data collection tool. Questions that are likely to be included in the survey are how much money a company has spent on implementing security measures, and whether companies have experienced a reduction in security exams and improved supply chain efficiency.

On Nov. 1 CBP completed the Web portal through which the survey will be distributed, and subsequently conducted a pilot Web survey with 15 companies in preparation for a full production run on Dec. 1, when more than 6,000 companies will receive a message telling them to access the survey.

Businesses will have six weeks to complete the voluntary survey and CBP hopes that the majority of companies will be interested in providing feedback.

CBP tentatively plans to issue a final report on the survey results by mid-spring, 2007.

Meanwhile CBP, in consultation with the National Customs Brokers and Forwarders Association of America, plans to wrap up the second -- and possibly final -- draft of C-TPAT security criteria for customs brokers by early December as it continues to shift from a model based on loose guidelines to one in which each industry sector has its own clearly established standards. The first draft of security standards for marine terminal operators is scheduled for completion about the same time. Once standards are issued for those two sectors, program officials will turn their attention to developing criteria for non-vessel-operating common carriers, freight forwarders and third-party logistics providers.

CBP already has upgraded security criteria for importers, ocean and highway carriers, railroads and foreign manufacturers in Mexico and Canada.

Teams of U.S. Customs security specialists will audit supply chains in Tunisia and Madagascar for the first time beginning in December to make sure that C-TPAT certified companies are following through on security controls and are eligible for the maximum reduction in inspection levels, Owen said. In 2006, CBP inspectors visited 16 countries, including Pakistan, Sri Lanka, Oman, Jordan, the UAE and Cambodia, for the first time.

Inspection teams will also conduct one more so-called “blitz” operation by the end of the year in the Philippines. The measure entails sending multiple inspection teams to verify many different supply chains in concentrated fashion during a single trip. CBP is finalizing the locations where it plans to conduct “blitz” operations in 2007, Owen said.

More than 3,500 companies (57.5 percent of the program’s membership) have been validated as meeting C-TPAT criteria in key trade lanes, up from 3,200 companies (52 percent) in mid-September, Owen said. CBP continues to maintain that it will complete validations on 65 percent of certified applicants by the end of the year and be at 100 percent coverage by sometime in 2007. As spelled out in the recently enacted SAFE Port Act, CBP will then begin revalidating companies through on-site audits of a second supply chain to make sure security standards are being met. CBP plans to revalidate companies every four years.

It seems the import-export industry did a good job meeting the Oct. 1 deadline for updating corporate security profiles via the new C-TPAT Web portal set up to automate communications between the agency and program members.

There are more than 6,000 companies that have been certified to join C-TPAT, and 93 percent fully completed or substantially updated their account information. CBP is working with the remaining companies to help them finish filing the information, but a few companies have not honored their commitment and will have their C-TPAT benefits suspended...any of my readers in this boat?

CBP has suspended or removed 185 companies from C-TPAT, up from 175 two months ago and 151 in June, for various types of security breaches. Trucking is the sector with the most problems, with 121 highway carriers (up from 115 at last report) having been sanctioned since the start of the program, usually for drug smuggling issues. So far, 216 companies have achieved Tier 3 status but the number of companies eligible for the most preferential customs clearance has tapered off...must be an over-all industry trend.

CBP has also begun developing requirements and standard operating procedures for a pilot project testing the feasibility, cost and benefits of using outside auditors to carry out validations of importers’ foreign suppliers and whether they have systems in place to maintain shipment integrity, CBP officials said. The SAFE Port Act signed into law by President Bush in October requires DHS to implement by mid-February a limited, one-year test to augment C-TPAT verification capabilities with third-party validators.

CBP officials contend that subcontracting supply chain inspections could be used in areas such as China where government regulators lack access, not as a way of supplementing C-TPAT resources to speed up validations. Owens said the C-TPAT program has reached its manpower goal of 156 specialists and will soon be able to process new entrants without a backlog.

Under the voluntary pilot test, C-TPAT members can opt to pay for certified inspection services to review their overseas security processes and facilities.

There are 335 C-TPAT importers that source 75 percent or more of their merchandise from China and 59 of those procure 100 percent of their products from that country...this is a clear indication of the potential universe of companies that may be willing to pay for third-party inspection services. Exel / DHL should pursue this market...

C-TPAT companies are grouped in three tiers based on whether they have been through the validation process and the level of security best practices they implement. Companies that go the extra mile beyond the minimum-security criteria are granted Tier 3 status, entitling them to very infrequent cargo exams.

CBP will include a conflict-of-interest clause to keep importers from validating their own work through the use of affiliated companies.

As C-TPAT matures, more business opportunities will present themselves...will you be ready to capitalize on the opportunities?

Working at TRU.com

Sorry folks...too much work to do, not enough time to do it! Sound familiar? No kidding! I will be at the TRU.com building for the next two weeks. Don't worry, I'll catch up with ya in early December. Hope you all have a great Thanksgiving holiday!

Deutsche Post + Deutsche Bahn = De Big Bucks!

Germany to sell up to 49% of Deutsche Bahn

The German coalition government has agreed to sell up to 49 percent of state-owned rail and logistics giant Deutsche Bahn, parent company of Schenker and BAX Global, after agreeing not to include any of the track in the spin-off, Bloomberg reported.

Constitutional rules forbid a sale of more than half the shares in the railway.

During months of negotiations, the Social Democrats in the coalition demanded that Deutsche Bahn be allowed to run the 30,000-kilometer (18,600-mile) track network for profit while retaining it in state ownership. Chancellor Angela Merkel’s Christian Democrats had pressed for the state to run the track, splitting it off completely from the company.

Transport Minister Wolfgang Tiefensee said Deutsche Bahn will be allowed to operate the track for a limited period and to include the asset in its annual statement. The network would remain the property of the government, while debt accrued by the company would remain a company responsibility, he said.

Deutsche Bahn’s Chief Executive Hartmut Mehdorn was quoted in June saying that a sale of 49 percent of the railway without its track may be worth as much as 9 billion euros ($11.5 billion).

Just between you and me...if DPWN goes after DB...if the EU would approve of the sales...it would be a huge impact on the logsitics and transportation world...I hope it happens!

Maersk the Fastest? Ja! Tak!

Maersk container ships biggest and fastest?

A.P. Moller-Maersk declined to confirm the service speed of a series of seven 4,150-TEU ships being built at its Volkswerft Stralsund Shipyard in Germany, which are thought to have a service speed of 29 knots making them the world's fastest containerships.

Maersk Line already has the biggest containership with the “Emma Maersk” having a declared capacity of 11,000-TEUs but believed to have a physical capacity of about 14,800 TEUs.

Hanjin Shipping’s series of eight 6,655-TEU containerships from Hyundai Heavy Industries -- of which three have been delivered so far -- were thought to be the fastest containerships with a 93,000 hp engine giving a service speed of 27 knots.

Two of the Volkswerft ships, “Maersk Boston” and “Maersk Baltimore,” were delivered earlier this year and are deployed on the weekly Asia/U.S. East Coast TP7 loop along with six ships with speeds ranging from 23.5 knots to 24.5 knots.

The TP7 has a port rotation of Hong Kong; Yantian; Kwangyang; Miami, Fla.; Savannah, Ga.; Norfolk, Va.; Miami; Manzanillo, Panama; Yokohama; Kobe; and back to Hong Kong.

All of the ships from Volkswerft are to be owned by the London-based Maersk Co. Ltd. and will fly the British “Red Ensign” flag.

An industry source told American Shipper that once all seven ships are delivered -- expected by spring next year -- the TP7 will operate as an express Hong Kong/Yantian/New York service with an 18-day transit time. Not only will the faster ships allow Maersk to save one ship on the service, they will attract time-critical cargo that moves to the U.S. East Coast by more the more expensive mini-landbridge from the West Coast.

Thomas Oerting Joergensen, group senior vice president, and head of sales, marketing and communication at Maersk Line, did say: “We are continuously developing more efficient vessels to offer second-to-none service for our customers. Efficient container handling must be achieved through the whole shipping and distribution process. Innovation, terminal handling and infrastructure are at least as important in this matter as faster vessels.

“Likewise, we review our network on an ongoing basis, including vessel deployment, to ensure the best service to our customers. This also includes the TP7 service. However, we have at this point not taken any decisions as to future changes in the vessel deployment,” he said.

Undskyld! Ja! Ja! Tak! Farvel...

Deutsche Post’s 3rd Quarter Profit Up 30%

German mail, express and logistics giant Deutsche Post World Net reported a net income of 537 million euros ($691 million) in the third quarter, up 30.3 percent compared to 412 million euros in the same period 2005.

Third quarter operating profit improved 40.1 percent to 1.03 billion euros ($1.3 billion), from 735 million euros last year. Revenue improved 35 percent to 14.9 billion euros ($19.2 billion), compared to 11 billion euros in the third quarter 2005.

“The integration of logistics service provider Exel and financial service provider BHW as well as organic growth drove this increase,” Deutsche Post said.

Deutsche Post’s enlarged logistics unit now operates under the DHL brand with two logistics brand areas: DHL Exel Supply Chain and DHL Global Forwarding.

Operating income at the logistics division rose 70.3 percent in the third quarter to 189 million euros ($243 million) with revenue up 100.6 percent to 6.1 billion euros ($7.85 billion).

“Business continues to develop well in terms of integration, performance and growth,” the company said of its logistics performance.

For the year to date, Deutsche Post posted net income of 1.27 billion euros ($1.63 billion), down 6.3 percent compared to 1.36 billion euros after nine months last year. Operating income was up 7.5 percent to 2.58 billion euros ($3.32 billion) while revenue jumped 35.9 percent to 44.2 billion euros ($56.9 billion).

Looking ahead, Deutsche Post said it expects operating income of at least 3.9 billion euros ($5 billion) on revenue of about 60 billion euros ($77.2 billion) for the full year 2006.

In 2005, the company posted operating profit of 3.8 billion euros ($4.9 billion) and revenue of 44.6 billion euros ($57.4 billion).

Now the French Want Our Ports! Sacre Bleu!

French CMA CGM Group interested in P&O Ports North America

France’s CMA CGM has formed a consortium with investment bank Morgan Stanley to prepare a bid for P&O Ports North America, reported London’s The Business. No one from the Marseilles-based company could be reached for comment. Dubai state-owned company Dubai Ports World is being forced to sell off the company after security fears among U.S. politicians about a foreign company controlling U.S. ports. It is thought that CMA CGM is a minority partner with Morgan Stanley. DP World acquired P&O Ports North America in March as part of its $6.8 billion takeover of London-based Peninsular and Oriental Steam Navigation Co. Deutsche Bank, which is running the process for DP World is calling for final bids by the end of this month. Reports suggest that bids have been received above the $700 million evaluation.

Rockin Your DC With Pick Zone Punches!

Nothing is more frustrating for DC managers than seeing unused, dust-covered pallets wasting away in a prime picking zone.

Those 1,000 Rockin Sockin Robots your buying department purchased a decade ago, for example, take up valuable space. Being greeted by the blue and red robots every morning for the past 10 years is a reminder that proper storage slotting is essential.

Here are some strategies to consider for maintaining a lean storage profile in your DC operation.

Eliminate the Cause
Work with your organization's buyers regularly and strengthen communication - make them partners in the inventory storage process. Have buyers visit the DC at least once each quarter and show them the wasted space devoted to unused products. Buyers often better understand the process after seeing the raw storage space their items require.

Another effective trick is to do a quick study on the buyers' behalf. (They are often too busy ordering the next "hot" item to look back on previous bad purchasing decisions.) Run a report on how many Rockin units were sold during a three-month peak season, and extrapolate that across all the units stored in the DC.

Present buyers with a graph showing the number of units and the years of inventory those units represent. Use decades or even centuries if years don't cut it! Then, forecast how many future generations of Rockin Sockin Robot enthusiasts you'll need to serve (by the way, I am one, if you must know).

Add captions to the graph highlighting compelling factors about how the products will hold up over time. Use bold face type with words like "POW!" "BANG!" "SMASH!" "CRASH!"

Smart Slotting
Classically trained DC managers have been taught to focus on reducing travel time for pickers when slotting inventory. But some key considerations are absent in this philosophy.

DC managers typically have insufficient open slots to profile product the way they desire - more than 60 percent of DCs were operating at greater than 95 percent capacity during their three busiest months, according to a 2005 industry survey. Instead, managers choose the best available open slots.

At their peril, few warehouses have proactive reslotting programs that continually shuffle pick locations. Sales constantly change and your facility has to be a living, breathing reflection of that fact. The less open space you have, the more critical it is to achieve. Reslot inventory in the off-peak season if you don't have time for a regular reslotting routine.

Talk to your Manhattan rep...PKMS is for you!

Strategies that Work
One company, for example, freed up several hundred active carton pick slots by keeping one unit in each bin, and palletizing dead carton stock mixed onto bulk pallets in remote locations. The labor to potentially break the pallet for future picks - which may never happen - was more than offset by gaining valuable prime picking slots.

Many warehouses use product velocity codes - a value of the inventory turn, or cube and turn of a product - but few have location velocity codes or zones. To keep it simple, DC managers should assign location velocity codes within prime picking areas such as the first rack in the shipping zone, away from dead storage areas such as a mezzanine overhead location.

But that's not the only element to consider when assigning slots. Basic rules such as utilizing prime pick areas - fondly called gold zones - with high-volume picks, and placing rarely ordered products deep within your storage dungeon are basic rules of engagement on the war against inventory fluff.

"Gold Zone" is a tired term...can we not find a better one in the 21st century?

Many operations slot inventory based on "cubic velocity." The concept is sound and works well for some warehouses.

Using the dimensions of each SKU - length, width, and height - establish a product's cube, and multiply that result by a "pick velocity" factor, or the number of trips a picker makes to a product's location. Cubic velocity may differ from sales volumes if you bulk pick or run multiple waves. Just use sales numbers if you want to keep it simple.

The next step is to sort SKUs and assign them to location velocity codes. Don't forget about clustering products that are ordered together - keep Rockin boys with say, Twister...close by.

Don't Forget Handling
The most common factor omitted in slotting strategies is material handling - too many companies forget to evaluate downstream handling. Companies often store heavy, dense products next to light, crushable products with comparable product velocity codes. The result? DC workers have to lift and move heavy products multiple times before orders can be shipped.

Workers have to rehandle heavy products to build symmetrical, stable pallets that protect fragile products from being crushed. The solution to this challenge is inspired by, of all things, the Jolly Green Giant.

Case-picking operations performing pallet picks should build a theoretical Jolly Green Giant pallet - a giant pallet with every SKU in the distribution center that does not have to be re-handled before shipping.

Assign SKUs within zones based on this theoretical pallet build. Heavy items go in primary pick locations, lowest to the ground. Though this setup might increase travel time, it offsets that by reducing handling during labeling, quality control, packing, and shipping.

Finding the right balance between location maintenance, material handling, and optimizing cube is a fine line. Integrate slotting as part of your weekly goals and you will be amazed at the productivity gains you can accomplish each month.

If you don't, you may just feel like one of those Rockin boys when he takes a good punch on the chin! "BAM!"