SCS concurs "even with threat of recession... Things are looking up for 3PLs"

PHILADELPHIA, Oct. 4, 2011 – Today, the 18th Annual Survey of Third-Party Logistics Providers revealed logistics companies experienced improved economic conditions in 2010, with 88 percent of companies surveyed in North America meeting or exceeding their revenue projections, as compared with only 50 percent in 2009. The survey is underwritten by Penske Logistics, a leading provider of third-party logistics services.

The survey is being presented today at the Council of Supply Chain Management Professionals Annual Global Conference by survey author, Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, and Joe Gallick, Senior Vice President of Sales for Penske Logistics. The findings analyze responses from 36 third-party logistics company CEOs across North America, Europe and Asia-Pacific whose companies were responsible for generating approximately $58 billion in revenue in 2010.

Economic conditions appeared to slightly improve for third-party logistics companies surveyed in 2010 in North America. None of the companies were unprofitable and none of the CEOs believed the regional third-party logistics industry operated at a loss for the year. In Europe, economic conditions continued to be challenging for third-party logistics companies with only 55 percent of companies surveyed meeting or exceeding their revenue growth projections for the year, as opposed to 90 percent of companies surveyed in Asia-Pacific. Growth projections are most optimistic in Asia, with companies expecting to grow 15.8% in the next year, as compared to 10.8% expected in North America and 8.4% in Europe.

“CEOs continue to grapple with industry dynamics such as a stagnating economy, pricing pressures, rising costs and the impact of regulatory changes,” commented Lieb. “These are similar to the trends we’ve been seeing in years past, and we are confident that the industry can adapt.”

“This year’s survey indicates the logistics industry has largely adjusted to the new economic realities and are now investing in growth,” stated Gallick. “Companies are leaner and more adaptive than just a few years ago. Today, logistics companies are better positioned to help serve their customers as catalysts for supply chain transformation and innovation, which ultimately drives their own growth prospects.”

European and APAC Results

Both European and Asia-Pacific CEOs reported a shortage of managerial and operational talent in the industry as one of the major problems in their regions. In Europe, marketplace concerns about stability of the third-party logistics industry were also cited. The Asia-Pacific market is expanding, according to the survey findings, with CEOs seeing a variety of growth opportunities in the region, including increased volumes in China and India. The report also cited more extensive road transport services to support manufacturing in China as it moves inland. The most significant development in the APAC region for third-party logistics services during the past year was the diminishing role of Guangdong and Hong Kong as manufacturing centers, with manufacturing shifting to other low-cost countries and to China’s Western Provinces. Demand for “all-in-one” supply chain services increased in 2010, as the industry in Asia-Pacific becomes more sophisticated.

Major Supply Chain and Logistics Industry Trends and Insights

Revenue Projections Improve

With few exceptions, the CEOs are more bullish about the financial prospects of their companies over the next one and three year periods.

• One-year company revenue growth projections were 10.8% for North America (10.4% in 2010), 8.4% for Europe (7.2% in 2010), and 15.8% for APAC (22.5% in 2010).  The average three-year company growth projections were 10.3% for North America (10.6% in 2010), 9.1% for Europe (8.3% in 2010), and 14.6% for APAC (19.5% in 2010).
• One-year regional 3PL industry revenue growth projections averaged 6.8% for North America (7.3% in 2010), 6.1% for Europe (4.8% in 2010), and 9.0% for APAC (15.4% in 2010).  The average three-year regional 3PL industry growth projections were 8.0% for North America (7.8% in 2010), 6.3% for Europe (5.4% in 2010), and 10.3% for APAC (12.9% in 2010).
• Twenty-eight of the 36 CEOs surveyed reported their companies were profitable during 2010, with three reporting they broke even, and three reporting their companies were unprofitable.
 
Outlook for Logistics Mergers and Acquisition Activity (M&A)

• Only five of the 36 CEOs reported their companies were involved in significant M&A activity in their regions during the past year.
• Most believed the 3PL consolidation movement will continue in their regions.
• CEOs in all regions expect less than 9% of their companies’ average annual revenue growth to come from M&A over the next three years.

Disruptions from Japan Tsunami and Earthquake Cause Rethinking

• 25% of the North American 3PL CEOs reported that some of their customers had experienced a loss of sales in Japan. Thirteen percent of the European CEOs reported similar experiences, as did 50% of the CEOS surveyed in the APAC region.
• 88% of the 3PL CEOs included in the North American and European surveys reported that some of their customers had experienced a disruption of supply. 80% of the CEOS in the APAC region also reported that that was the case.
• 31% of the North American 3PL CEOs reported that some of their customers had experienced supplier failures as a result of the tsunami/earthquake. 50% of the CEOs involved in the European survey and 30% of those involved in the APAC survey also reported that to be the case.

Environmental and Sustainability Investments Continue

Despite the volatility of the global economy, the 3PL industry’s involvement in environmental sustainability issues continued to expand.

• Sixteen of the 36 CEOs reported their companies launched new sustainability initiatives during 2010.
• Nineteen CEOs reported expanding existing sustainability projects.
• The percentage of existing customers asking third-party logistics providers to analyze their supply chains in terms of environmental impact/cost were 8% for North America (15% in 2010), 8% for Europe (7% in 2010), and 7% APAC (9% in 2010).
• “Green” capability is ‘infrequently’ a major factor in attracting and retaining clients, according to 86% of CEOs surveyed.
 
Social Media Plays a Growing Role

The third-party logistics providers are generally optimistic about the value of social media activities moving forward, despite the impact of these activities having been limited to date.

• 69% of companies believe social media will become increasingly important in 3PL industry
• 64% of companies have LinkedIn accounts 
• 47% of companies have Facebook pages 
• 36% of companies have Twitter accounts 
• 28% of companies post videos on YouTube 
• 17% of companies surveyed have blogs
 
Survey Design

Thirty-six CEOs completed surveys via an Internet-based questionnaire during the summer of 2011.  Companies participating in the annual survey included: Cardinal Logistics, DSC Logistics, DHL Exel Supply Chain, Genco Supply Chain Solutions, Kuehne+Nagel Logistics, Menlo Logistics, Penske Logistics, Schenker, Schneider Logistics, Transplace, UPS Supply Chain Solutions, UTi Integrated Logistics, Caterpillar Logistics Services, Agility Logistics, Werner Logistics, Yusen Logistics, MIQ Logistics, CEVA Logistics and Wincanton.

About Penske Logistics
Penske Logistics is a wholly owned subsidiary of Penske Truck Leasing. With operations in North America, South America, Europe and Asia, Penske Logistics is a leader in supply chain management and logistics services to major industrial and consumer companies throughout the world. Penske delivers value through design, planning and execution in transportation, warehousing, and international freight forwarding and carrier management. Visithttp://www.penskelogistics.com to learn more.
 
About Northeastern University’s College of Business Administration  
Northeastern University College of Business Administration, established in 1922, provides its students—undergraduate, graduate and executive—with the education, tools and experience necessary to launch and accelerate successful business careers. The College credits its success to expert faculty, close partnerships with the business community, and its emphasis on rigorous academics combined with experiential learning.  The college also offers graduate and undergraduate concentrations in supply chain management, as well as graduate certificates in supply chain management. The College is highly ranked by several prestigious publications. BusinessWeek ranks the undergraduate program 32th in the U.S., #1 in internships, and #19 in the student survey in its 2010 “Best Undergraduate B-schools.” U.S. News & World Report ranks the College’s Bachelor of Science in International Business program #13 in the country. Princeton Review and Entrepreneur magazine ranked the undergraduate business program 14th most entrepreneurial in the U.S. For more information about Northeastern University's College of Business Administration, visit http://www.cba.neu.edu/


Leslie G. Brand III | Chief Executive Officer|  
Phone: 616.554.8900 Ext: 106 | Cell: 616.836.7074 | Toll Free: 877.554.8900 | scsolutionsinc.com |Skype:lgbrand

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Congress expected to pass free trade deals with South Korea, Colombia, Panama

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Congress is expected to pass a long-pending free trade agreements with South Korea, Colombia and Panama on Monday afternoon.

The agreements, which were negotiated in the Bush administration, have strong support in a Congress eager to boost jobs through exports to foreign markets.

“These trade agreements will create tens of thousands of much-needed jobs here at home and boost our economy by billions of dollars, said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. He called on the House to approve companion legislation reauthorizing the Trade Adjustment Assistance program, which the Senate attached to another trade bill and returned to the House.

House Speaker John Boehner said the House will quickly vote on the three FTAs and TAA. He said Congress had “overcome a crucial hurdle to helping put Americans back to work. While the delay was unacceptably long and likely cost jobs, I am pleased the Obama Administration has finally done its part and sent these important trade pacts to Congress.”

Regards,

Leslie G. Brand III | Chief Executive Officer|  

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Phone: 616.554.8900 Ext: 106 | Cell: 616.836.7074 | Toll Free: 877.554.8900 | scsolutionsinc.com |Skype:lgbrand

Gas tax hikes ruled out, House chairman tells industry groups

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House Transportation and Infrastructure Committee Chairman John Mica told industry groups he is looking for more revenue to boost his planned transport spending measure, but that it cannot include a hike in the federal gasoline tax.Mica, R-Fla., told stakeholder groups on Thursday that he was cleared by House GOP leadership to find an additional revenue beyond what's now coming into the Highway Trust Fund, said a congressional source said. The Transportation Weekly newsletter reported Mica wants to find $15 billion more to pay for a long-term transportation bill, without raising the gas tax.That would be a big change from earlier this year, when Mica unveiled an outline of proposed legislation to spend $230 billion over six years for surface transportation based on anticipated trust fund receipts. The House Appropriations Committee later voted for those spending limits as well.That is well below current levels and backers of more robust transportation spending sharply criticized GOP spending limits for road projects, saying they would wipe out many construction jobs and worsen U.S. infrastructure. Those groups also praised an early Senate vote that would keep funding road and bridge programs at current levels, and renew a popular federal grant program that the House would have let lapse.This week, a high-powered group of freight shipper CEOs told top leaders of the House and Senate that businesses need Congress to make stronger infrastructure investments. The executives said such spending is important to help the economy grow and U.S. firms to export their goods.A congressional source said Mica and John Duncan, R-Tenn., who chairs the highway subcommittee, told groups that House leaders are now “committed to looking for additional revenue” for a long-term bill, which would also reform and consolidate some transport spending programs to get more bang for the buck.

 

Regards, 

Leslie G. Brand III | Chief Executive Officer|  

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Phone: 616.554.8900 Ext: 106 | Cell: 616.836.7074 | Toll Free: 877.554.8900 | scsolutionsinc.com |Skype:lgbrand 

 

 

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US Manufacturing Index Slips Closer to Contraction

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PMI falls to lowest level in two years, but still shows factory growth

The Institute of Supply Management’s U.S. manufacturing index slipped back 0.3 percentage points in August to its lowest point in two years, registering slim growth in the sector despite economists’ forecasts that the measure would turn negative.

The PMI fell back to 50.6 percent, leaving it down nearly 11 points from the 2011 high set in February, ISM said in a report released Thursday that showed “concern and caution” over the direction of the U.S. economy.

But the reading above 50 percent still showed U.S. factory activity growing despite worries of an economic slowdown. The index for new orders also improved 0.4 percentage points, although the reading of 49.6 percent still showed new orders for manufacturers contracting for the second straight month.

By the Numbers: ISM Monthly U.S. Manufacturing Index Vs. ISM U.S. Production Index

The ISM’s measure for production also worsened in August, declining 3.7 percentage points, the lowest reading for that measure since May 2009 and the first contraction in production in 26 months.

Bradley J. Holcomb, chair of the ISM manufacturing business survey committee, said the August results showed uncertainty amid reports of slowing demand in the U.S. and other markets.

“The overall sentiment is one of concern and caution over the domestic and international economic environment, which is affecting customers’ confidence and willingness to place orders, at least in the short term,” Holcomb said.

The ISM’s inventories index advanced three percentage points to 52.3 after declining in July, and customers’ inventories also edged up 1.5 points.

Regards,

Leslie G. Brand III | Chief Executive Officer|  

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Phone: 616.554.8900 Ext: 106 | Cell: 616.836.7074 | Toll Free: 877.554.8900 | scsolutionsinc.com |Skype:lgbrand

Shipping costs will keep rising in 2012

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Trucking rates will climb 6% and possibly higher, following a 6.3% jump this year. Higher costs are being driven largely by the dearth of highly qualified truck drivers. Rail freight rates, up 5% or so, as firms keep moving cargo from trucks to rail. Air cargo … 3% higher than this year, assuming that jet fuel remains stable. Airfares, ditto. Look for the combination of base fares and ancillary fees for everything from seats with more leg room to blankets to climb as much as 6%. Figure on fewer and more crowded flights, too, in light of coming capacity cutbacks.

 

Regards, 

Leslie G. Brand III | Chief Executive Officer|  

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Phone: 616.554.8900 Ext: 106 | Cell: 616.836.7074 | Toll Free: 877.554.8900 | scsolutionsinc.com |Skype:lgbrand 

 

 

Big Shippers Respond to Maersk's Call for Change

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GT Nexus Shipper Council aims to use technology to improve reliability. The council said it is committed to coming up with specific ideas that can be implemented quickly to the benefits of both shippers and carriers. Some of the ideas on the table include:

     Managing allocations and improving forecasting on a secure neutral platform.

     Streamlining documentation and substitute electronic bills of lading for paper to act as "one version of the truth.”

     Using technology to improve business to business processes between shipper and carrier.

     Collaborating "in the cloud" by using the GT Nexus virtual community to its full potential.

“Reliability, predictability and simplicity creates value,” “We believe that collaboration fused with neutral, industry wide technology adoption will help achieve the vision.

The council said its members are contacting carrier executives and hosting meetings to develop specific plans. The group will then determine what it can do to collectively address some of the shipper side changes that the carriers need to operate better.

Regards,

Leslie G. Brand III | Chief Executive Officer|  

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Phone: 616.554.8900 Ext: 106 | Cell: 616.836.7074 | Toll Free: 877.554.8900 | scsolutionsinc.com |Skype:lgbrand

World's first smart virtual store opens in Korea, caters to Smartphone users

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Supply Chains become more interactive… Homeplus, the nation’s second largest discount chain, announced yesterday that it will open what it calls a “fourth generation retail store,” Homeplus Smart Virtual Store, at Seolleung subway station in southern Seoul today.

It says it’s the first of its kind in the world.

At a press conference yesterday before the official launch, Homeplus CEO Lee Seung-han said discount store chains must respond to rapidly changing consumer habits and behavior, and a new kind of virtual store will cater to skyrocketing Smartphone users in Korea

 

 

Regards, 

Leslie G. Brand III | Chief Executive Officer|  

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Phone: 616.554.8900 Ext: 106 | Cell: 616.836.7074 | Toll Free: 877.554.8900 | scsolutionsinc.com |Skype:lgbrand 

 

 

You Might Have A Bad Warehouse…If The Cycle Count Doesn’t Add Up

By Kate Vitasek 

  This week’s Bad Warehouse comes to us from Gary Roghers, Logistics Manager for DuraTech Industries. A few years back Gary transitioned to a new position, managing warehouse and shipping operations.

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“It was the time of year for our annual physical count. This meant that we had customer service reps, office assistants, purchasing agents, shipping personnel and even janitors counting parts for an entire weekend. Everyone worked really hard and we completed the count and did the adjustments by the end of the day on Sunday.

“The problem was that our inventory was a bigger mess after the count then before we did it. The reason was that we had people working in an area that they either didn’t understand or felt that this was just a good way to pick up some extra overtime hours.” The accuracy of the finished goods inventory was around 85 percent, and the goal was about 95 percent.

“We had to fix this problem and fix it soon,” he said. He met with his shipping and warehouse personnel to discuss ways to: 1.) Fix the mess and 2.) Prevent it from recurring.

Eventually, they decided that to do a recount with the process owners—“the people who have to live with the inventory every day and who have to make those dreaded phone calls when the counts on an item are off. This would solve the first problem.

“Then we met again to determine a path that would allow us to keep the inventory on throughout the year instead of having it on for a little while in January.” They decided to do cycle counting on a daily basis, and roll through the entire warehouse every quarter.

Under the new process, Gary says, “We have hovered right around 95 percent for the past five years.”

He adds that “without a barcode scanning system in place and customers ordering in less than full package quantities we have a huge job of counting and the team pulls it off every quarter. My hat is off to this great group of people that not only came up with the plan to fix our problem but implemented it almost to perfection.”

Gary and his team hit on the best solutions to cope with the situation. They also followed WERC best practice guidelines by installing a system to count inventory on a cyclic schedule rather than once a year.

The WERC guide says that most effective cycle counting systems “require the counting of a certain number of items every workday with each item counted at a prescribed frequency.”  The main purpose of cycle counting is to "identify items with on-hand quantity errors, thus triggering research, identification, and elimination of the cause.”

Gary wound up handling a messy problem by solving it “by the book.”

I love your feedback - and love your contributions to share those bad warehouse stories to help educate the profession on what NOT to do, and maybe what to do if you’re not doing it.


Leslie G. Brand III | Chief Executive Officer|  
Phone: 616.554.8900 Ext: 106 | Cell: 616.836.7074 | Toll Free: 877.554.8900 | scsolutionsinc.com |Skype:lgbrand

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