Wednesday, February 28, 2007

100% SCANdalous!

Fear and Loathing in a Port Near You!

You have got to be kidding me...there is no way this legislation should be approved. Get on the phone and start talking to your Senators!

After the private sector successfully killed legislative efforts last year to require technology-based exams of all inbound ocean containers, the ghost of 100-percent inspections has returned to frighten importers and maritime interests once again.

The Senate began debate Tuesday afternoon on legislation to implement the unfulfilled homeland security recommendations of the September 11 Commission, and an industry source with close ties to the Homeland Security Committee confirmed that Sen. Charles Schumer plans to introduce an amendment today to require that every incoming sea container undergo an automated inspection at an overseas port.

Senate leaders stripped any reference to maritime security from their version of H.R. 1 that the House of Representatives swiftly passed in January because the Department of Homeland Security is already moving to implement last year’s port security mandate for a pilot scan-all program at a handful of ports. The Senate bill, S. 4, also includes aviation, rail and highway security sections incorporating legislation proposed by Sen. Daniel Inouye, D-Hawaii, chairman of the Commerce, Science and Transportation Committee.

But Schumer is expected, along with fellow New York and New Jersey Democrats Hillary Clinton, Robert Menendez and Frank Lautenberg, to offer an amendment that closely tracks the H.R. 1 requirement for radiation detection and cargo imaging, and tamper-notifying electronic security seals for every container when the technology becomes reliable, according to several Washington-based industry representatives.

Nervous observers said the vote could go either way.

Meanwhile, other senators are preparing second-degree amendments to soften any Schumer provision, the sources said. One potential draft amendment would extend by two years the deadline in H.R. 1 to scan all containers at large ports within three years and at smaller ports within five years. The bill would allow two-year follow-on extensions if the DHS certifies that scanning technology is not available for purchase or installation, or if technology or processes do not meet the standards set in the 2006 SAFE Port Act.

In a Feb. 23 letter, Republican Sens. Susan Collins of Maine and Norm Coleman of Minnesota, warned their colleagues that scanning all containers within five years at 700 or more foreign ports is not feasible.

“It is very unlikely that these deadlines can be met with current technology and port infrastructure … Given the significant impact the requirement would have on our economy, it would not be responsible to impose arbitrary deadlines for deployment of 100 percent scanning,” the members of the Senate Homeland Security and Governmental Affairs Committee wrote.

Schumer’s office did not respond to phone and e-mail requests for information about his plans.

The U.S. Chamber of Commerce was rushing late Wednesday to draft a letter urging senators to oppose comprehensive container inspections.

The issue has unified the business community, which has been engaged in a concentrated lobbying campaign to defeat a scan-all mandate because of concerns that it would slow down the flow of trade and potentially lead other countries to make similar demands on the U.S. government to examine its exports.

The Retail Leaders Industry Association, National Industrial Transportation League and the National Customs Brokers and Forwarders Association of America are among several groups fighting legislative attempts this session to impose requirements for wholesale X-ray style screening and sealing of containers. The legislative provision last year to conduct comprehensive inspections on a trial basis was a negotiated compromise that helped defeat 100-percent inspection amendments during the previous session.

Industry groups are incensed that lawmakers are moving to impose scan-all requirements when the wet cement of the SAFE Port Act has yet to dry. It’s premature for Congress to consider a container scanning rule covering all trade lanes until the results are in later this year from DHS’s Secure Freight Initiative pilot project that will run containers through detection equipment at several foreign ports, they say.

A number of governments have also weighed in against the inspection requirement in foreign ports, viewing it as a unilateral attempt to impose requirements on their countries.

The Consultative Shipping Group (CSG) said in a recent letter to Sen. Joseph Lieberman, chairman of the Homeland Security and Governmental Affairs Committee, that mandatory scanning of U.S.-bound containers in foreign ports is not feasible.
The CSG represents the shipping ministers of Belgium, Denmark, Finland, France, Germany, Greece, Italy, Japan, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom. The European Commission also supported the letter.

“No customs administration has the resources to scrutinize the scans of the many millions of containers that pass through the world’s ports annually. Indeed, at present, more than 90 percent of the images of those containers that are scanned are used for forensic purposes only, not as a real-time means to prevent illicit activity,” CSG Chairman Brian Wadsworth wrote.

Wholesale imaging regimes “have the potential to undermine a risk-based approach by misallocating resources,” the CSG said, and urged Congress to assess the Secure Freight pilot initiative before requiring more extensive measures.

“Positive results would, of course, be welcome and might constitute the basis for implementing the scheme on a reciprocal basis to exports from other parts of the world,” Wadsworth said.

In a separate letter to DHS Secretary Michael Chertoff last month, European Commissioner for Customs Lazlo Kovacs said that if Congress passed the inspection proposal “it could well give the impression that the United States is not willing to work side by side with the international community to tackle the terrorist threat to the international supply chain. This impression would inevitably have negative consequences for the substantial ongoing cooperation between the U.S. and the EU.

“If the EU and the U.S., the two largest trading blocs in the world, were to introduce measures of the type now proposed, our abilities to trade fairly would be severely limited and we would be threatening world growth, investment and employment.”

Saturday, February 24, 2007

Some Negotiation Tips...Yeah, its that time of year!

Well, its getting to that time of year when carrier contracts will be negotiated...and the rate structure is just one issue that should be reviewed. Here are some tips for your upcoming negotiations:

Pickup performance. How can your delivery be made on time if your pickup isn't on time? Late pickups cost you money, perhaps at overtime rates. Find out your carrier's on-time pickup percentage and how it calculates that measurement. Carriers should also be able to provide this measurement on a customer-specific basis.

On-time delivery is calculated in a similar way as pickup performance. This statistic should be readily available on customer reports --by customer and/or terminal.

Invoicing accuracy. This important metric is often overlooked, but can save your company time and money. Carriers that invest in an imaging system that allows them to use information directly off a customer's bill of lading can ensure accuracy while improving invoicing efficiency. If this isn't one of the measurements you expect to receive from your carrier, it should be.

Interactive web site. Examining your carrier's web site can help you determine the availability of customer service when you need it. Is the web site interactive in a number of ways to provide you with the information you need? The site should allow you to enter pickup requests and download imaged documents and customized reports. It should offer a variety of tracking and tracing capabilities, rate quotes, transit times, and terminal information.

Good communication. Determining how much customers are involved in a carrier's decision-making process indicates the level of interest a carrier has in delivering quality service. Initiating a good communication program with customers is essential.

Responsiveness. You should be able to talk with experts in each of your carrier's departments when you need to. Is the line of communication open and results-oriented? Maintaining a strong communication link goes hand-in-hand with developing a strong, effective partnership.

Centralized customer service. A quick and readily available information resource is valuable to you and your customers. This resource should provide you with an answer to any question you might have about transporting or tracing your shipments.

Empathy and Proactive Account Management. A carrier should know when there are service failures and why. If your customer receives 98 percent of deliveries on time, what about the other two percent? Every service failure should be followed up on, not only to find out what is wrong, but also to correct the problem so that it isn't recurring. Taking this action will make the carrier a better company, and in turn, provide you with better performance. Ask your carrier how it analyzes service defects.

Continuous Improvement Mentality and Training. The kind of training available to your carrier's employees, how often they are trained, and the degree to which they are trained should be part of the company's strategy in providing superior service to customers. Asking questions about training will give you an indication of the company's emphasis on quality performance. Is there a dock workers'training program in place that emphasizes freight handling? Are drivers trained? Is hazardous material training available for all employees? What about general safety training measures? Additionally, the carrier should have accountability procedures in place on each dock to help reduce the number of claims.

Claims Structure and Response time. Getting a shipment to its destination on time doesn't matter much if it doesn't get there intact. How quickly are claims settled? What is the percentage of claims-free service? What is the claims ratio of the terminal that will service your customers? Your carrier should make all these performance statistics available for individual customers and terminals.

Invoice accuracy. This important metric is often overlooked, but can save your company time and money. Carriers that invest in an imaging system that allows them to use information directly off a customer's bill of lading can ensure accuracy while improving invoicing efficiency. If this isn't one of the measurements you expect to receive from your carrier, it should be.

These are just a few things that should be reviewed on a consistent basis...good luck this year! You guys are going to need it!

Thursday, February 22, 2007

DPWN Net Income Down, but Express Starts To Impress

DHL parent’s profit down in 2006

German mail, express and logistics giant Deutsche Post World Net, owners of DHL, reported a group net income of 1.9 billion euros ($2.5 billion) in 2006, down 14.3 percent compared to 2.2 billion euros in the previous year.

“One reason for this decrease was that the group reduced its stake in Postbank to 50 percent plus one share during the past year,” Deutsche Post said in a statement.

Operating profit at Deutsche Post’s enlarged logistics unit, comprising DHL Exel Supply Chain and DHL Global Forwarding, more than doubled in 2006 to 762 million euros ($999.3 million) from 346 million euros in 2005.

The express division posted an operating profit of 325 million euros ($426.2 million), compared to a loss of 23 million euros a year before.

Group operating income increased 2.9 percent to 3.9 billion euros ($5.1 billion) while annual group revenue soared 35.8 percent to 60.5 billion euros ($79.4 billion).

The company’s management will present the full accounts for 2006 on March 20, when a guidance for 2007 will be made.

Friday, February 16, 2007

A Fiduciary Catch-22? Or, DP World Goes on a "Sheikh Down Cruise!"

DP World says port authority could sink AIG deal

Dubai Ports World’s purchase last year of U.S. marine terminal businesses created a huge controversy because of allegations that an Arab company’s operation of the terminals might make the nation more vulnerable to terrorism. Congress stepped in and forced DP World to divest the U.S. holdings acquired from British ports operator P&O.

Now Dubai Ports World’s plan to sell those same businesses to an arm of the U.S. insurance company AIG is creating another brouhaha.

This time the dispute seems to be more about money than security, as well as AIG’s lack of experience in the port business.

Thursday, DP World and AIG complained in a letter to the Port Authority of New York and New Jersey that the agency has not yet granted “consent” to the deal, which includes the right to operate the port authority’s Port Newark Container Terminal (PNCT) in New Jersey.

DP World and AIG also released copies of their letters to media outlets such as the Associated Press.

The letter from Mohammed Sharaf, chief executive officer of DP World, and Christopher Lee, managing director of AIG Global Investment Group, said: “the port authority has indicated that it will not give this consent unless the parties pay a fee of up to $84 million.

“The lease does not provide for any fee for this consent,” the letter continued. “Indeed, we are not aware of any such consent fee for ports anywhere else in the U.S. or globally. The fee being requested by the port authority is far in excess of any reasonable administrative fee.

“If the port authority continues with its unreasonable request, the sale will fail.”

In an interview with the Financial Times, Sharaf said, “On the one hand you’re telling us to sell. On the other you’re making it difficult to sell. It’s very disappointing.”

Richard M. Larrabee, director of the port authority’s Commerce Department, responded with a letter of his own Thursday afternoon. He said DP World and AIG abruptly walked away from negotiations and asked them “to return to the bargaining table, rather than extracting benefits through the press.”

The port authority sees the dispute as a landlord-tenant matter.

“Dubai Ports undertook to sell its PNCT interest with full knowledge that the PNCT lease expressly provides the PA (port authority) with an unconditional consent right in the event of a change of control,” Larrabee wrote. “Dubai Ports elected to proceed with the sales process without in any way discussing with the PA what requirements would need to be satisfied to obtain the PA’s consent.

“This consent right is intended to ensure both the suitability of any terminal operator, as well as to ensure that change of ownership does not occur continually to simply pull the value out of the public investments made without benefiting the long-term interests of the port,” he added.

Larrabee said the agency asked for due diligence information from DP World and AIG in December, and renewed those requests in January and this month.

Only in the last 48 hours at the port authority’s insistence, have DP World and AIG “begun to share any of the information that the PA requires in order to exercise its fiduciary responsibility,” Larrabee said.

Instead of satisfying “due diligence requests and continuing good faith discussions,” Larrabee said DP World and AIG have “chosen instead to voice their position in the public arena.

“The PA has a fiduciary responsibility to ensure that it receives all the information necessary to determine that this transfer does not cause any detriment to the security of this port or to the bi-state region. Among other things, the PA has a fiduciary responsibility to ensure that the proposed change in PNCT’s beneficial ownership, from a shipping operator to a financial investment company, has no adverse impact on future capital investments made in the terminal or on container throughput,” he said.

In addition, Larrabee said that based on public information “Dubai Ports will generate at least $450 million of proceeds on the sale of PNCT, based on a total investment of approximately $140 million. This represents an annualized rate of return of more than 40 percent.”

He noted, “this extraordinary windfall was greatly supported by capital expenditures by the PA into the terminal. The PA’s expenditures of public funds were made to increase capacity of the terminal and thereby directly enhanced the value that Dubai Ports will receive upon a sale of PNCT.

“The PA's request that its capital expenditures be recovered out of Dubai Ports' extraordinary gains is intended to ensure the continuing strength and viability of regional port facilities,” he added. “Recovery of expenditures would be reinvested in the port facilities to ensure the continued competitiveness of the New York and New Jersey port system.”

Meanwhile, the politicians at the center of the opposition to DP World’s takeover last year of P&O, quickly jumped into the fray, criticizing the port authority and asked it to abandon its request for $84 million as a condition for giving approval to the lease transfer.

“I wouldn't call it a shakedown in the traditional sense, but (they are acting) in an unseemly way,” Sen. Charles Schumer, D-N.Y., told the Financial Times.

Representatives from DP World and AIG have resumed negotiations this morning at the port authority's office, an agency spokesman said.

At a press conference Thursday, Sen. Robert Menendez, D-N.J., threatened political payback against the port authority.

“I've carried a lot of water for the port authority. I have no intention of carrying any water for the port authority if they cannot consummate this deal for the national security of the people of our region and our nation,” the AP quoted him as saying.

A formal statement issued by Menendez’s office late in the day seemed more moderate, however, saying simply that concerns about foreign ownership of port assets expressed a year ago are still valid today.

“All parties involved in these negotiations should remember that this is not just a business transaction and isn’t just about a quick payday. This is, most importantly, a matter of national security and about protecting the American people,” Menendez added.

Anybody think that this might be a leaked script from the last season of the Soprano's...think again! Just when you thought the DP World saga could not get any worse...

Saturday, February 10, 2007

A.P. Moller-Maersk Loses Negotiation Tool!

A.P. Moller-Maersk sells rubber hose company

The A.P. Moller-Maersk Group today sold Codan Gummi A/S and its subsidiaries to Italy’s Maflow Group for an undisclosed amount. Codan Gummi manufactures and sells high-technological rubber hoses, mainly to the car industry. The company employs about 900 staff, including 225 in Denmark.

What motivational tool will the Maersk executives resort to using now...since they can't wield the "old rubber hose" in back room negotiations anymore! Don't say it...its a cheap shot...I know.

Monday, February 05, 2007

Supply Chain Disruptions - Survey Results

Supply chain disruptions cause major headaches for shippers, carriers, and customers, often resulting in lost productivity and profits. The effects of supply chain disruptions also reverberate beyond the initial event, as companies scramble to fix problems and get back to business.

More than two-thirds of companies that experience supply chain disruptions say it takes more than one week to recover from the disruption, finds a new Accenture study that surveyed 151 logistics executives in U.S. firms with revenues of more than $1 billion.

Seventy-three percent of the executives surveyed report experiencing supply chain disruptions in the past five years. Of those, more than one-third (36 percent) say it took more than one month to recover, and 32 percent needed between 1 week and 1 month to recover.

Additionally, the vast majority of respondents (94 percent) say disruptions -- which are most often caused by problems associated with supply chain partners, raw materials, and natural disasters -- impact profitability and the ability to meet customer expectations.

When asked to rate the impact of disruptions on profitability and customer service, 50 percent and 56 percent, respectively, say disruptions have a "moderate or significant" impact.

Respondents, however, are upbeat about the future risk of supply chain disruptions. Nearly two-thirds (68 percent) say their supply chains are secure from potential disruptions, while 48 percent expect their level of supply chain risk to increase in the next three years.

Their investment plans, though, imply a lower degree of confidence: Nearly two-thirds plan to increase spending on supply chain risk mitigation, using logistics technology, forecasting/planning, and increased logistics capacity.

The study also gauged executives' expectations about upcoming supply chain disruption risks in specific areas.

Respondents replied as follows when asked which specific factors will have an increased level of risk associated with them over the next three years:

* 50 percent expect risks associated with supply of raw materials or parts to increase.
* 36 percent expect risks associated with port operations and customs delays to increase.
* 36 percent expect risks associated with service failures due to longer supply lines to increase.
* 35 percent expect risks associated with geopolitical instability to increase.

Any thoughts from your perspective? If so, let me know with a comment...

Thursday, February 01, 2007

Intermodalism Is "FUNDamental" at Maersk

Caught this article on the American Shipper know, it kind of makes me chuckle. Is the trade imbalance causing this "re engineering" effort...or is it the cost of all the big ships Maersk is buying? Either way, customer service will suffer and shippers and importers are going to pay more, for less.
Let the "attrition game" begin for the big carriers and their very vulnerable customers...
Maersk restructuring inland services, citing trade imbalance

A plan by Maersk to change how it handles inland cargo in North America could have far-reaching consequences for the container shipping business.

Maersk said it is “fundamentally reengineering” its entire North American network, ending routine intermodal service to some inland rail ramps and concentrating cargo over fewer routes.

Maersk said the changes are being "caused by the trade imbalance and rising rail and trucking costs in North America. These costs are not on a cyclic path, they are on a relentless upward trajectory," the company said.

The changes are meant to reduce costs and “provide sustainable round trip compensation for container transportation costs.”

Attendees at the annual dinner of the New York-New Jersey Foreign Freight Forwarders and Brokers Association Wednesday night agreed it was a bold move by the world’s largest container carrier. They were unsure whether it would be imitated by other companies, but said some competing lines would likely seek out Maersk customers in the areas where it is ending intermodal service.

Logistics companies think there might be opportunities to work with Maersk in helping them retain those accounts by transloading cargo near the ocean ports and arranging inland moves.

Maersk has already announced plans to increase rates to selected destinations, and has announced plans to optimize Pacific trades capacity by phasing out three vessel strings. It also said it is pulling out of the Port of Halifax because of low container volumes and restructured service to the Middle East and Indian subcontinent.

Now Maersk said it is “streamlining the North American inland transportation network by focusing inland rail traffic on significantly fewer routes.”

American Shipper has been contacted by Maersk customers seeking additional information about the planned changes, and others have supplied descriptions or documents describing the plans, one of which said inland delivery points may be eliminated “where cargo density does not ensure round trip cost recovery.”

Maersk said customers will benefit from “faster and more reliable service delivery based on less complex routes that are better managed and administrated.”

Sources say they have been told many of the changes to intermodal routing will go into effect May 1, when the new contract year for much Far East cargo begins.

“The business environment for container shipping in the U.S. and Canada has changed in a fundamental way,” Maersk said in a written statement. “The current shipping industry service model in which acceptance and pricing of end-to-end rates is driven overwhelmingly by the ‘market perception’ of port-to-port ocean leg vessel capacity supply and demand does not make sense any more.

“The reality today is that the growing U.S. trade imbalance significantly reduces export cargo contribution to round trip costs on land and at sea. Additionally, the ‘bottlenecks’ and primary transportation cost drivers in North America have shifted from the ocean leg to the inland leg of the transport,” Maersk continued.
"Shipping back more ‘air’ and getting less for export cargo puts pressure on the import revenues to cover rising roundtrip costs,” it said.

“At end of the day Maersk has a very complex, cost-ineffective intermodal system,” said one source familiar with the planned changes. “They have found there is a lot of money to be saved.”

According to documents describing the planned changes, Maersk will stop using 66 rail ramps in North America and remove service from 18 inland destinations.

They are the U.S. cities of Denver; Council Bluffs, Iowa; Ft. Riley and Kansas City, Kan.; Salt Lake City, Utah; Minneapolis-St. Paul; St, Louis and Kansas City, Mo.; Buffalo and Syracuse, N.Y.; Omaha, Neb.; Arcadia, Wis.; and Auburn, Maine. In Canada they include Calgary and Edmonton, Alberta; Winnipeg, Manitoba; Saskatoon, Saskatchewan; and Moncton, New Brunswick.

Immediate confirmation of this list could not be obtained by Maersk; a spokeswoman noted the plans have been undergoing revision as they have been developed.

The company will also reduce the number of rail routes they use and link ports to specific service areas. Maersk said the changes being planned would reduce 250,000 rail entries to 50,000.

One forwarder said that in the past, Maersk and most other carriers would “accommodate virtually every shipper’s routing request.”

A shipper, for example, moving a container to Chicago might ask that his box be routed through New York, Baltimore or Norfolk. He might prefer a certain port because, for example, Customs officials in that port might be particularly knowledgeable about a commodity or easy to work with.

Maersk said now each port will be matched to a specific “service zone” in North America that will be efficiently served by the simpler network of high-density rail cargo.

As part of the changes, Maersk may add additional calls at some ports and reduce calls in others, but a spokesman said they would not be eliminated entirely in any city other than Halifax.

Maersk said that for inland destinations with high cargo volumes, there might be two or more ports of entry, while areas with less cargo would be served by a single port.

Speaking on background, some forwarders and non-vessel-operating common carriers believe that other carriers will follow Maersk’s lead. They also say that some carriers are likely to target shippers located in inland areas where Maersk is ending service.

They also believe that Maersk will continue to offer service to those locations, especially to prized customers, albeit at higher prices.
"albeit at higher prices" HA! Just wait...