Transportation Management News — August, 2007
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China Turns Inward--to Develop Its Interior, But Transit Is Problematic
The economic development trend in the Chinese hinterland is highly dependent on building transportation and logistics infrastructure in these areas. Building transportation infrastructure is one of the centerpieces of China's 11th five-year plan (2006-2010), and for good reason.
According to the London-based Drewry Shipping Consultants, China spends about 18.5 percent of its GDP on logistics as compared to about 10 percent in the U.S. and Europe.
"Inland transport costs to the coast from provinces like Sichuan, for export to overseas markets, are often higher than the maritime transport cost from China to foreign destination ports, while inventory management, trucking and rail transport are currently inefficient," says Philip Damas, Drewry's research director who has presented his findings in a report called Opportunities in China's Container Transport and Logistics Sectors: Fixing the Weak Links of China's Economy.
According to Damas, these issues are critical not only for China's economic planners, but also for importers and manufacturers who need to source goods from the interior provinces where poor transport connections remain a major impediment.
"In some cases, it is a chicken-and-egg situation," says Damas. "Manufacturers are unwilling to move to interior provinces while transport providers lack the scale to lower inland costs. Infrastructure investment is the answer."
The government is expected to spend $20bn on building and upgrading the country's railway system alone, which should dramatically improve the ability to move containers in and out of inland regions from coastal port cities. There is a high priority to make these rail improvements quickly because freight rail capabilities seriously trail the growth of containers moving through the ports, which increased by 22 percent in 2006.
"In fact, only about one percent of containers loaded or discharged at the sea ports of China are carried inland by rail," says Damas. "This number is a much smaller percentage than in the U.S. and Europe."
For the long term, government investment in road improvements will be huge, but these will take time. Over the next 30 years the government is projected to spend $256.4bn on highways. The largest piece of this investment will expand the country's expressway network to 85,000 kilometers--longer than the U.S. interstate highway system--to connect all cities with a population greater than 200,000.

Acquisition Enhances Con-way Clout in Multiple Areas of Transportation
Con-way Inc. has agreed to take over Contract Freighters Inc. (CFI), a privately held North American truckload carrier based in Joplin, Mo., in a transaction valued at $750m.
Founded in 1951, CFI operates over 2,600 tractors and more than 7,000 trailers. The acquisition positions Con-way very favorably in the freight transportation industry, creating a leading less-than-truckload, truckload and supply chain management enterprise with a broad portfolio of high-value solutions, says Douglas W. Stotlar, Con-way's president and CEO.
The acquisition will join CFI with Con-way's existing Con-way Truckload division, creating a business unit with more than $500m in annual revenues for truckload freight. Together with the complementary capabilities of LTL carrier Con-way Freight, and global supply chain services provider Menlo Logistics, says Stotlar, the Con-way organization will deliver an expanded transportation and logistics platform to North America-based shippers as well as global businesses, from "first-mile" sourcing in Asia or Europe, to "last-mile" delivery in North America.
CFI is Con-way Freight's largest provider of contract services for long-haul transcontinental truckload transportation. The acquisition will enable Con-way to retain margins from this contract business. In addition, Con-way Freight is CFI's largest customer, and the company foresees opportunities to further optimize freight operations for both the LTL and truckload networks through this acquisition.
With operations in Mexico for nearly 20 years, CFI is among the largest participants in the market for cross-border truckload freight. Combining CFI's network, experience and expertise with Con-way Freight's Mexico network and Menlo's in-country and border-based logistics operations significantly improves the combined company's presence and capabilities in Mexico.
Menlo manages approximately $600m in domestic truckload transportation services on behalf of its customers, some of which already is handled by CFI. The acquisition will present opportunities for CFI and Menlo to collaborate, where practical, on freight flows to further optimize operations for its customers, introduce new services, and drive efficiencies in the Con-way network.

Transportation Largest Component of Record Expenses for Logistics
A key benchmark report released recently shows logistics costs in the U.S. rose dramatically again during 2006. Fueled primarily by rising energy costs, interest rates, and inventory-carrying costs, the Council of Supply Chain Management Professionals' 18th Annual State of Logistics Report shows logistics costs increased $130bn over 2005 to $1.305tr for 2006.
"In 2006, U.S. business logistics costs accounted for 9.9 percent of our gross domestic product," says Rick Blasgen, president and CEO of CSCMP. "It's the third year in a row that logistics costs have accounted for an increasing share of GDP."
Transportation costs, spurred by rising fuel costs, rose 9.4 percent in 2006 and represent the largest component of logistics costs. Inventory-carrying costs increased even faster: 13.5 percent. "Inventory costs have risen dramatically because of rising interest rates and because there is more inventory in the system," says Rosalyn Wilson, a transportation consultant and author of the CSCMP research report. "While large retailers are keeping lean stocks on hand, they are foisting inventory back on their suppliers, requiring them to stock and re-supply stores more frequently."
The full report, available exclusively from CSCMP, contains the complete portrait of industry statistics, their impact, recommendations, and an insightful future perspective on the logistics and supply chain professions. It also includes recommendations that are critical to aging infrastructure needs.

French Electrical Parts Maker Uses TM Solution from Catalyst International

Catalyst International, a global supplier of supply chain execution software, says the Legrand Group is to extend its Catalyst solution to include transportation planning and management, multi-channel distribution and synchronized network fulfillment.
Headquartered in France, the Legrand Group manufactures electrical parts and operates in 60 countries. Legrand supplies products to distributors and resellers throughout the world from its French distribution centers in Verneuil and La Valoine.
Legrand deployed the Catalyst Warehouse Management solution in 2002. The new project should enable Legrand to reduce its transport costs, manage multiple brands and channels, enhance order fulfillment management, synchronize manufacturing with its finished goods inventory warehousing and optimize its network with cross-docking and appointment scheduling.
"Catalyst's product focus has evolved to include transport management and we are delighted to be working with a longstanding and trusted partner to optimize our global supply chain network to continue offering top-class service to our customers," says Henry Bruneau, director of Legrand's logistics group.

TM Component in Accellos Suite May Interest Small, Mid-Sized Firms
Accellos Inc., a developer of a number of supply chain execution solutions, says it is launching an integrated suite that could be of interest to transportation managers, particularly those with small to mid-sized companies.
The suite, called Accellos One, will combine the company's transportation management, warehouse, logistics, mobile and business intelligence applications. Built upon Microsoft's Sharepoint Server 2007, Accellos One is designed to leverage the latest in web services technology to deliver affordable and easy-to-use supply chain solutions.
The developer says the transportation management component is a series of solutions designed to assist carriers, brokers and shippers in maximizing the effectiveness of their transportation planning, execution and reporting.

Packaging Solutions Provider Opts for Shippers Commonwealth TMS
Graphic Packaging Corporation, a multibillion-dollar provider of paperboard packaging solutions for a wide variety of name brand products, has selected Shippers Commonwealth, or ShipComm, as its transportation management system provider.
The new TMS is being deployed on a phased basis for covering all of Graphic Packaging Corporation's U.S. paper mills, combined with centralized transportation management of all U.S. carton (converting) plants. Graphic Packaging is headquartered in Marietta, Ga.
The ShipComm TMS replaces incumbent legacy systems and earlier third-party logistics programs.
"After a thorough evaluation process, we selected Shippers Commonwealth as our TMS provider based upon their proven program and track record of success in large-scale manufacturing transportation improvement programs, including in our industry," says Robert L. "Bo" Pierce, corporate director of transportation and logistics for Graphic Packaging.

Europe to Dump Centralized Distribution Hub Model in Favor of Regional Centers?
Capgemini has concluded that the centralized distribution center model no longer works in Europe. With the expansion of business into central and eastern Europe, fuel and congestion issues have made the centralized distribution hub obsolete, says the consultancy. Regional distribution centers are emerging, it says, and will continue to be the road to distribution success for some time.
For more information on the consultancy's take on European distribution networks, contact

High-Tech Shippers See Airfreight as Secure Mode of Transportation

When Qatar Airways finishes refitting its freight terminal at the Doha airport, cargo General Manager John Batten is hoping to have the facility certified by the Transported Asset Protection Association. That follows the group's recent certification of AirBridge Cargo, making the Russian freight airline the latest operator to get the seal of approval from the shipper-led organization.
"It truly is a professional organization, much needed in our business," says AirBridge president and CEO Stan Wraight. "It brings together all the elements of the logistics chain into an open and frank discussion, and also serves as a benchmark for what airlines and all the industry serving air cargo processes should achieve."
Interest from such companies shows how well established TAPA's name is becoming in air cargo, and illustrates how awareness of its security procedures is spreading around the globe. Already well established in the United States, Europe and Asia, the group has recently formed two new chapters, TAPA South Africa and a TAPA Brazil.
Thorsten Neumann, chairman of TAPA Europe Middle East and Africa, says a Dubai chapter is being formed under the leadership of Emirates Airlines, and includes the involvement of the Dubai airport police.
It's a dramatic expansion for an organization that started as the Technology Asset Protection Association in the U.S. in 1997 with handful of concerned manufacturers of high-technology goods. Theft of goods in transit was spreading right alongside the internet-fed explosion in high-tech shipping and the companies believed common standards would help address the problem. Realizing there was a global problem, TAPA EMEA and TAPA Asia quickly followed.
Source: Air Cargo World,

LeanLogistics Says 'Path' Program Identifies ROI on TMS in Advance
Path to Value, a new program from LeanLogistics is designed to help companies generate the ROI of implementing a transportation management solution. Path to Value determines a company's current state (deciding where it is best-in-class and where improvements can be made), then provides a "strategically incremental" continuous improvement program and certain result. LeanLogistics says the return on investment--both the program savings and cost--is identified in advance.
Path to Value has four components: benchmarking, which employs best-in-class companies and their process results as a metric; transportation industry best practices; LeanLogistics's On-Demand TMS; and a managed services delivery model.

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