October 2006 | News | Trends

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To scan 100 percent of containers entering or leaving the United States or not to scan 100 percent? That was the question facing the Senate last month.

After much debate and several amendments attempting to require 100-percent container scanning, the Senate in September approved final passage of the Port Security Improvement Act of 2006. It also added provisions to the bill that authorize $1.2 billion for rail security and $3.4 billion in grants for mass transit security.

Every proposed amendment to include 100-percent container scanning was defeated, including the last effort by Sen. Charles Schumer (D-NY) that proposed a time limit of four years, after which all containers would be subject to scans.

Key to the debate is the difference between the terms "scanning"—inspecting a container with a device such as a radiation detection portal—and "screening," which uses intelligence, cargo manifests, point of origin information, and programs such as the Customs-Trade Partnership Against Terrorism (C-TPAT) to determine if a container poses a threat, explains the National Industrial Transportation League.

The scanning/screening amendment that did pass muster with both Democrats and Republicans was offered by Sen. Norman Coleman (R-MN), and closely mirrors the system used by the Port of Hong Kong.

The amendment requires the screening of all containers as currently performed today, and allows the Department of Homeland Security Secretary to determine when it is "feasible and will not disrupt commerce" to scan all cargo before it arrives at a U.S. port.

The Port Security Improvement Act is a companion bill to The Security and Accountability for Every Port Act (SAFE), which was signed into law by President Bush this month.

The SAFE bill will, among other things:

  • Expand the Container Security Initiative, which calls for originating ports to notify U.S. officials about inbound cargo.
  • Mandate installation of radiation detectors at the 22 largest U.S. ports by the end of next year.
  • Increase the number of random searches of incoming cargo containers.
  • Establish a new office of Cargo Security Policy, which will work with foreign port and security officials to keep bi-directional security information flowing.
  • Implement plans to quickly resume commerce should terrorists strike a U.S. port.

In additional port news, Homeland Security Secretary Michael Chertoff announced an about-face from last year by approving nearly $26 million to fortify New York-area ports against terrorist attacks in 2007.

"It is a great sign for the future that the Department of Homeland Security is realizing New York faces the greatest threat," says U.S. Rep. Peter King (R-NY), chairman of the House Homeland Security Committee.

"This is where the money should go," he adds.

Not Loving Lean

Though lean manufacturing has enjoyed substantial popularity in the automotive and high-tech industries, pharmaceutical companies haven't been as quick to embrace the lean philosophy.

Because of pharmaceutical industry's complex manufacturing processes, lean manufacturing hasn't experienced the same success rate as it has with other industries, according to a recent survey of more than 1,500 pharmaceutical manufacturers conducted by software provider Invistics, Norcross, Ga.

Though more than half of those surveyed have implemented lean, Six Sigma, or Operational Excellence initiatives, less than half reaped satisfactory results, the study finds.

"Many companies in industries that traditionally haven't applied lean and Six Sigma are now trying to benefit from these techniques and they are learning it is not as straightforward as they expected it to be," says Invistics CEO Scott Geller.

These findings dovetail with other studies examining lean manufacturing in the pharmaceutical industry.

"The process industry lags in adopting lean practices across the board primarily because the lean techniques popularized by the Toyota Production System can be difficult to implement in the shared equipment, high product mix, and highly volatile demand scenarios they face," writes AMR Research analyst Colin Masson in Demand-Driven Manufacturing: The (Potential) Rise of Lean.

As with most logistics and manufacturing challenges, however, technologies are emerging that help pharmaceutical manufacturers perfect lean implementations.

These software solutions helped Bristol-Myers Squibb, for example slash cycle times, increase inventory turns, and improve employee productivity in one of its plants that employs lean principles, reports the study.

Cruising to Class

This fall, "back to school" may take on a whole new meaning for truck drivers around the nation, thanks to InCab University, a new online, college-accredited curriculum developed specifically for truckers.

A joint program from TransMarkets Technologies and Chattanooga State Technical Community College, InCab University allows truck drivers to complete a college education right from their rigs.

Drivers can listen to lectures on the road and submit assignments at rest stops and loading docks using cell phones and Wi-Fi. In addition, InCab's year-round open enrollment for class registration lets drivers set their own educational pace while balancing driving responsibilities.

The first crop of drivers started in September; the program has 500 registered students so far.

InCab offers associate's degree programs in arts and science, as well as certificate programs in industry-related topics such as transportation management and homeland security. It also offers certificate programs in non-transportation-related topics such as e-commerce and wellness.

Air Cargo Traffic to Soar

Buckle your seat belts. The air cargo industry is forecasting an upward tilt in volume for the foreseeable future. World air cargo growth is expected to expand at an average annual rate of 6.1 percent during the next two decades, with a three-fold increase in worldwide air freight, according to The Boeing Company's World Air Cargo Forecast 2006/2007.

"Air cargo markets linked to Asia will continue to lead other markets through 2025, led by the highest growth in intra-Asia and domestic China traffic," says Nicole Piasecki, vice president, business strategy and marketing, Boeing Commercial Airplanes.

"Increased international trade; increased liberalization of air services; and improving technologies such as increases in lower hold capacity and fuel-efficient freighters, will drive international air cargo traffic growth. Cargo tends to lead liberalization, which is an economic growth driver," she adds.

Boeing anticipates the growth of Asian air cargo markets to exceed expectations forecast two years ago, with the domestic Chinese and intra-Asian markets expanding 10.8 percent and 8.6 percent per year, respectively.

Highlights from the report include :

* The Asia-North America and Europe-Asia markets will average 7.1 percent and 6.9 percent growth, respectively. More mature markets, such as North America and intra-Europe, will grow more slowly than the world average, as will Latin American and Middle Eastern routes. Europe-Southwest Asia will experience slightly higher than average growth, at 6.2 percent.

* Spot jet fuel prices increased 42 percent in 2005 and have continued to increase in 2006. In spite of these increases, traffic is continuing to grow, experiencing a 3.1-percent increase for the first six months of 2006, compared with the same period in 2005.

* Boeing predicts the world freighter fleet will increase to 3,563 airplanes from 1,789 during the 20-year forecast period, with the greatest growth in wide-body freighters such as the Boeing 747, 777, and 767. This category ultimately will represent 64 percent of the fleet, compared with 50 percent today, eventually constituting more than 90 percent of total freighter capacity.

* Of the 2,983 freighters predicted to join the fleet, 1,209 would be replacements for retired aircraft and the remaining 1,774 added as a result of growth. More than 75 percent—2,217 airplanes—will come from passenger/combi-to-freighter modifications, while 766 will be new production freighters.

TNT: Goodbye Logistics

International express delivery and logistics provider TNT N.V. recently sold its logistics division to affiliates of Apollo Management, a private equity firm with offices in New York, London, and Los Angeles. The sale is part of a new strategy TNT announced last year to focus on its core competency of managing delivery networks.

"Leveraging our expertise, infrastructure, customer base, and Apollo's commitment, we are poised for a competitive and profitable future," says Dave Kulik, who will resign from the TNT Board of Management to become CEO of the new company.

The intended sale—worth an estimated 1.4 billion euro ($US 1.8 billion) is expected to close before year's end, subject to the approval of TNT's shareholders and European Union regulatory bodies.

Mixed Reviews for C-TPAT

Does the Customs-Trade Partnership Against Terrorism (C-TPAT) adequately facilitate trade growth while simultaneously strengthening supply chain security? Or do its costs outweigh its benefits?

Global shippers weighed in on these and other pertinent security questions with mixed reactions in a recent survey conducted by the University of Texas Lyndon B. Johnson School of Public Affairs for the U.S. Congress' Congressional Research Service.

The fundamental purpose behind C-TPAT is good, and, with additional work, it could strike a balance between strengthening trade growth and improving supply chain security, say the 44 respondents to the survey, Port and Supply Chain Security Initiatives in the United States and Abroad, released earlier this month by the university and the National Industrial Transportation League.

But respondents find the Bureau of Customs and Border Protection, which administers C-TPAT, to be "slow and highly bureaucratic." In addition, they feel Congress is ill-equipped to effectively monitor or regulate any import-related processes as it lacks the necessary understanding of international supply chains.

Though most respondents favor an industry-wide security initiative, they cite the need to mandate some elements of C-TPAT in order for the program to realize its stated benefits.

Respondents also criticize the lack of resources provided to fund C-TPAT, the lack of flexibility in accommodating the diverse mix of products and goods that companies ship, and the need for increased knowledge and skill on the part of C-TPAT enforcers and validators.

Railroad Service: Back on Track?

The railroads have been working on...the railroads. Service on the nation's railroads is showing marked improvement over last year's levels, according to a recent shipper survey conducted by financial services company Bear Stearns.

Rail service levels improved on both a sequential and year-over-year basis, the report indicates, further validating Bear Stearns' own analysis of Class I railroad metrics, which shows improvements in both dwell time and velocity.

Shippers were optimistic about rail services for the peak-shipping season, with 72 percent expecting service levels to be stable or improved over the same period last year.

"Unlike in past years when West Coast port congestion slowed rail service during peak demand season, we believe the railroads and the entire supply chain have done a better job of planning for peak season," the report notes.

These improvements come at a time when railroads are moving more freight than ever before, notes Edward R. Hamberger, president and CEO, Association of American Railroads. Total volume is up 2.7 percent so far this year, while intermodal—the industry's most service-sensitive business segment—jumped 6.4 percent from last year when it set previous records.

These improvements have not come cheap, however—the railroads spent a record $8.3 billion in capital improvements this year to increase capacity and improve service, Hamberger notes. "We have also changed operating practices and entered into joint agreements that improve the flow of traffic across the rail network," he adds.

For shippers increasingly strapped for capacity and cash, the potential of an efficient U.S. railroad network bodes well for future rail and intermodal initiatives.

Merger Update

Expanding technology capabilities to better serve companies seeking global solutions is the theme behind two recent high-profile merger deals in the supply chain industry.

Schaumburg, Ill.-based Motorola announced in September its merger with Symbol, an enterprise mobility solutions provider based in Holtsville, N.Y., to help strengthen its breadth of product solutions and provide seamless mobility to its global users.

"Everything is going digital, and everything digital is going mobile," explains Motorola Chairman and CEO Ed Zander. "Motorola and Symbol share the same vision of a digital, mobile world for enterprises."

Upon completion of the merger, Symbol will become a wholly owned subsidiary of Motorola and will be the cornerstone of Motorola's Networks and Enterprise business.

Also last month, QAD Inc., an enterprise software solutions provider headquartered in Carpinteria, Calif., agreed to acquire its long-time partner, Dublin, Ireland-based TMS provider Precision Software. Precision will operate as an independent division of QAD, and will continue to market its products to users outside QAD's traditional targeted manufacturing verticals.

The two companies are joining forces to bring manufacturers and other shippers more robust global visibility solutions.

"By delivering an enhanced transportation management system that integrates seamlessly with QAD Enterprise Applications and other ERP solutions, we're bringing customers one step closer to the 'perfect lean market' we envision in global manufacturing," says QAD President Pamela M. Lopker.

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