Global Logistics — May, 2007
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Recent Developments in Logistics Services

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From the Top: Price-Cutting Isn't the Only Way That Forwarders Can Beat the Competition
Logistics managers have recently experienced their annual high anxiety moments as carriers completed the general rate increase reviews this spring. Profit margins in the logistics services business are thin enough so when an NVOCC/forwarder absorbs a carrier cost increase to retain customers they may be jeopardizing their long-term health. Getting the best rate from a carrier often depends on factors beyond the control of an NVOCC. But there is another way for companies to stay competitive that does remain under the control of the forwarder/NVO, according to Marcia Dorer, Director of Business Services with Silver Bullet Technologies. "Extraordinary customer service" she says, is a critical challenge to logistic operators today. They must be much more proactive keeping their clients up to date. The ability to provide "quicker, more accurate information allows tighter management of supply chain events and therefore risk. Few companies can achieve that goal with existing systems, however. Those who try must maintain an army of customer-service representatives (CSRs), to manually ferret out critical information on shipments and relay it to customers immediately. For most forwarders, that conventional approach is being rendered obsolete by disruptive technology changes being applied to business processes."At a good forwarder, a CSR spends on average two to four hours a day preparing those detailed reports," Dorer says. "The reports are essential otherwise, they will lose the customer." While the information needs to be current, its retrieval and presentation is often accomplished with archaic processes. And, the internet is no magic substitute for that demanding level of service. Larger shippers who engage several forwarders in their supply chains will not settle for a spruced-up website with basic status information. Their businesses demand regular, accurate, customized reports--possibly twice a day--that detail all of their freight activity in an easy-to-read format. Ideally, the information will be color-coded to highlight important events in different contexts across the same data. Further, real-time alerts allow forwarders to get problems in front of shippers as they occur, so that corrective action can be taken as soon as possible. Smaller shippers might be content with access to websites that offer status information, Dorer says; "but this is really not customer service, it is self-service." In these cases, new business software systems written to leverage the evolving global communications infrastructure are offering a new and efficient way for NVO's, forwarders and other logistics service providers to meet the demands of shippers for accurate, instant updates. In the long run, she adds, forwarders and NVO's may exercise better control over margins once customers discover that the new level of service made possible by state-of-the-art systems is indispensable. Eventually, of course, that capability may be matched by competitors and leading providers will have to reach for an even higher level of quality. But that situation is preferable to the price wars that threaten the existence of all but the most powerful logistics providers.


3PL Revenues in 2006 Topped $110bn for the First Time, Armstrong & Associates Reports
Gross revenues of third-party logistics providers in the U.S. surpassed $110bn for the first time last year, according to a new report from Armstrong & Associates. The firm pegs U.S. 3PL gross revenues at $113.6bn in 2006, an increase of 9.5 percent over the prior year. Net revenues were $53.1bn. An economic slowdown in the fourth quarter caused a slight reduction in net income margins, to 5.4 percent of net revenue. Some of the biggest net-revenue increases came in the international transportation management (ITM) sector, which saw an improvement rate of 17.7 percent. Companies that showed net-income margins of 10 percent or better, compared to net revenue, included Kuehne & Nagel, Expeditors, DHL Global and APL Logistics. Growth in ITM was primarily driven by continued economic expansion in China and other Asia-Pacific markets, Armstrong said. Domestic transportation management (DTM), including freight brokerage, experienced a 12-percent gain in net revenues. Big performers, with revenue growth of 20 percent or more, included BAX, BNSF, C.H. Robinson, Meridian IQ and NFI. Armstrong & Associates estimates the global 3PL market at $391bn in revenues. The European segment accounts for some $139bn, the firm said.

Commercial Jet Maker Taps Menlo Worldwide for Parts Distribution in Singapore
Empresa Brasileira de Aeronautica S.A. (Embraer), the Brazilian-based manufacturer of smaller commercial, executive and military jets, has selected Menlo Worldwide to operate a regional logistics hub for service-parts distribution in the Asia-Pacific market. The deal calls for Menlo to set up a dedicated facility at its existing Singapore Regional Logistics Hub, to handle the warehousing and distribution of service parts related to Embraer's regional and executive jet aircraft. Menlo will maintain a complete inventory of parts for the manufacturer's ERJ 145 and 170/190 line of planes. Activities to be performed at the site include import customs clearance, local transportation of inbound shipments, quality inspection, repair, returns management and order fulfillment. The last includes picking, packing and three levels of dispatch service, depending on the urgency of the order. Menlo will also select and manage freight forwarders approved by Embraer. The company specializes in commercial jets of up to 120 seats. Its inventory at the Menlo facility will consist of more than 20,000 SKUs of service parts, components and supplies.


Dallas Logistics Hub Kicks Off Major Development Project With Grand Opening Ceremonies
The Dallas Logistics Hub, a new development project aimed at companies serving the southwestern U.S., recently marked its grand opening with more than 1,000 government, community and business leaders. Located at the Lancaster, TX Municipal Airport, the facility claims to be the largest new logistics park under development in North America. It covers more than 6,000 acres, which will accommodate 60m square feet of space for distribution, manufacturing, office and retail use. The San Diego, Calif.-based Allen Group, developer of the Dallas Logistics Hub, will kick off construction with two new buildings of 640,000 and 210,000 square feet. Work is set to begin in June and finish up by the end of this year. The facility's master plan includes warehouse and distribution facilities, light manufacturing, retail support services, business-class hotels, restaurants, and housing.

Panther Expedited Services Acquires Forwarder and Logistics Provider Integres Global
Panther Expected Services, Inc., a provider of critical-shipment delivery services, has acquired Integres Global Logistics, a freight forwarding and logistics company. The deal combines Panther's ground-based expedited fleet with Integres's time-critical air and ground network in North America. It allows Panther to offer real-time freight quoting, booking and shipment tracking information, from pickup to delivery, for all critical freight. Panther claims to be the largest independent, non-asset-based provider of expedited transportation services in North America. It covers the continental U.S., Canada and Mexico. It is owned by Fenway Partners, a middle-market private equity firm with extensive holdings in the transportation and logistics sector. Integres's optimized analytics product, known as FastLane Technology, serves shippers in need of value-added, time-definite services.

Calendar: Upcoming Events of Interest to Logistics Providers
9th Annual European Supply Chain & Logistics Summit
Dusseldorf, Germany
May 21-22, 2007

D/C Conference & Expo
Chicago, IL
May 22-24, 2007

Interlog Summer
San Francisco, Calif.
June 11-14, 2007

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