Certifiable Results

Certifiable Results<br />

SmartWay Partner. ISO. C-TPAT. Cargo Network Service. Cargo 2000. FAST. Logistics service providers attain a multitude of certifications, but what does it mean for shippers? Find out how providers qualify, and what you can gain from working with certified partners.

Certified. The word suggests a deep commitment to a set of logistics goals: quality, safety, environmental responsibility, security. Many shippers routinely include certifications on their requests for information from potential third-party logistics providers (3PLs). But what does being certified really mean?

Certification can be shorthand for conveying a provider’s qualifications, but it doesn’t take the place of fully vetting a potential partner’s practices and capabilities. It’s essential that shippers understand what it takes to earn certifications, and assess how well they align with their own goals and objectives.

“Whether or not providers hold a certification doesn’t tell the whole story,” says Patrik Thollesson, regional director operations/BE, the Americas, for Geodis Wilson, a global third-party logistics provider with U.S. headquarters in Iselin, N.J. “It’s important how they work with it— do they satisfy only the minimum requirements, or push the boundaries?”

3PLs are eligible to apply for a range of certifications depending on their services— importing, moving goods through ports, or procuring transportation. The more assets and services they offer, the more certifications 3PLs may be eligible for.

Licenses and permits are often required to hold and move perishable, restricted, or hazardous goods, and any shipments that cross an international border. Certifications fall into a different category: voluntary. Service providers that want to set themselves apart pursue certification to signify a higher level of capability and commitment.

Must-Have, or nice-to-have?

Early applicants for certification often gain competitive advantage. The Environmental Protection Agency’s SmartWay Transport, for example, is a relatively new designation for 3PLs, compared with ISO 9001, which has been available since 1987. Over time, some certifications become the price of admission in certain industries or markets.

New or old, though, certification requirements tend to grow more stringent over time, to stay ahead of security threats or reflect innovation. Once-certified doesn’t mean forever-certified; many 3PLs devote considerable resources to staying compliant.

Why Certification Matters

Certifications are important to shippers because they impose rigor on the 3PL’s processes.

“Overall performance manifests what certification does,” says Patrick O’Malley, co-chief operating officer, Landstar System, a Jacksonville, Fla., non-asset-based 3PL. In other words, the process of qualifying causes a 3PL to examine and fine-tune internal processes, often resulting in lower costs and more efficient practices that help ensure that cargo moves safely and quickly.

“For small service providers operating one or two offices, it’s easy to maintain quality and consistency,” adds Grant Opperman, president of D.W. Morgan, a Pleasanton, Calif.-based 3PL. “But when they begin to expand in different areas, they run the risk of not delivering on promises to shippers.”

Certification efforts such as ISO 9001 help create repeatable and extensible processes that ensure consistency. Savings are another benefit of the certification effort. Operations efficiency and cost-cutting initiatives, such as minimizing fuel consumption as part of SmartWay, net lower costs for the 3PL— and, in turn, the shipper.

Many 3PLs employ at least one staffer devoted solely to maintaining certifications. Compliance can also mean process change and capital costs, such as committing to LEED-certified environmentally responsible distribution facilities.

“Persuing certifications requires a certain amount of administration, investment, training, and education, but the money and resources are well spent,” says Thollesson.

3PLs must carefully consider the value certification will bring before committing those resources. C-TPAT is meaningless for those not bringing goods across the border, and non-asset 3PLs don’t even qualify. And for a 3PL whose value proposition is all about speed or moving a low-price commodity through a particular lane, efficiency and low cost might outweigh a security compliance credential.

Even when 3PLs deem a certification worth pursuing, adopting new, prescribed business processes often requires yielding some of their own.

“When 3PLs sign up for certification, they sign up for the administrative and bureaucratic overhead that goes with it,” says Opperman. “They trade some flexibility and freedom, and even some of their margin, to comply with a third party’s established processes and help their risk assessment profile.”

Achieving certification doesn’t mean a company can then coast; maintaining certification takes effort.

“Any certification program done for marketing or self-promotion purposes is one that will provide little benefit and will likely waste time and resources,” says Julian Grush, client/quality manager for Wheels Clipper, a 3PL in Mississauga, Ontario.

Look Past the Logos

A long lineup of 3PL certification logos is an impressive sight, and 3PLs devote considerable resources to attaining those credentials. But there is a difference between passing a test and acing it. Shippers seeking to select the right 3PL partner must first determine their own requirements and expectations, then look behind potential 3PL partners’ certifications to probe the business processes and attitudes that make that organization tick.

Understanding what each certification signifies will help you determine whether you require a certified service provider. Here’s a guide to common certifications, the steps service providers must take to earn them, and how their efforts benefit you.

Customs-Trade Partnership Against Terrorism (C-TPAT)

What it is:

A voluntary government-business initiative to create a more secure and expedient supply chain by ensuring compliance with supply chain security measures.

How 3pls earn it:

Businesses complete an application on U.S. Customs and Border Protection’s (CBP) Web site. The application solicits corporate information, a supply chain security profile, and an acknowledgement of an agreement to voluntarily participate. Companies must conduct a comprehensive self-assessment of their supply chain security procedures using the C-TPAT security criteria or guidelines jointly developed by CBP and the trade community for the company’s specific enrollment category.

Benefits to the 3PL:

  • C-TPAT importers are four to six times less likely to incur a security or compliance examination, according to CBP.
  • Certified partners receive front-of-the-line privileges for containers that are selected for an examination.
  • Procedures for assessing and managing supply chain logistics are strengthened as a result of joining C-TPAT, according to a 2010 survey of C-TPAT members.

Benefits to Shippers:

  • Shipments move more quickly through ports.
  • Goods are more secure.
  • Shippers are assured that subcontractors are also certified.
  • Goods are less likely to be delayed or damaged as a result of Customs inspections.

Added Insight:

  • 42 percent of surveyed C-TPAT members believe the benefits of participation outweigh the costs, with those holding certification the longest most likely to see benefits.
  • Seven percent of surveyed C-TPAT members report dropping out of the program. Some critics say increasingly stringent requirements mean fewer shipments qualify, and smaller companies have a tough time complying. Less scrutiny could also make C-TPAT-certified assets a target for smugglers.
  • C-TPAT does not exclude shipments from non-Customs inspections, such as USDA.
  • There are 32 certified 3PLs in the program, which has been open to 3PLs since January 2009.

Cargo Network Service (CNS) and CARGO 2000

What it is:

The International Air Transportation Association’s (IATA) Cargo Network Service (CNS) certifies freight forwarders meeting its performance, reliability, and security criteria. Cargo 2000 is an industry group within IATA that implements measurable processes, backed by quality standards, to improve air cargo efficiency.

How 3PLs earn it:

For CNS, individual staffers must pass a training course; companies must meet business, financial, and insurance requirements. Cargo 2000 membership is open to all airlines, freight forwarders, and others able to meet the system implementation requirements and schedules.

Benefits to the 3PL:

  • Membership in either program decreases the time required for manual track-and-trace and managing exceptions, which helps reduce claims.
  • Standardized processes improve participants’ operations.
  • Participants’ processes are moved toward paperless shipping management.

“CNS and Cargo 2000 absolutely offer cost savings,” says Geodis Wilson’s Thollesson. “They also provide an objective way to assess performance.”

Benefits to Shippers:

Air cargo shipments move more expediently.

Added Insight:

Cargo 2000 has more than halved the number of individual processes in the air cargo supply chain to just 19.

Free And Secure Trade (FAST)

What it is:

A commercial clearance program for known low-risk shipments entering the United States from Canada and Mexico, enabling expedited processing at 55 of the 105 land border crossings.

How 3PLs earn it:

Every link in the supply chain must be certified under C-TPAT for participation in FAST. Technically, individual drivers are eligible for certification; currently 87,000 drivers are FAST-certified.

Benefits to the 3PL:

  • Provides access to dedicated lanes at border crossings.
  • Reduces the number of inspections.
  • Allows front-of-the-line processing for Customs inspections.

“Participating in C-TPAT and FAST was a critical factor when we introduced services between Texas and Guadalajara, Mexico,” says D.W. Morgan’s Opperman. “A contract manufacturer told us it was a tremendous risk and a tremendous opportunity.” C-TPAT and FAST credentials assure shippers that the 3PL is equipped to succeed in challenging conditions.

Benefits to Shippers:

  • Shipments move more quickly through ports.
  • Goods are more secure.
  • Subcontractors are also certified.

Added Insight:

Most FAST processing occurs at border crossings in Michigan, New York, and Washington, as well as several points from California to Texas.

Leadership in Energy & Environmental Design (LEED)

What it is:

The LEED green building certification program encourages and accelerates global adoption of sustainable green building and development practices through a suite of rating systems.

How 3PLs earn it:

By constructing compliant distribution facilities.

Benefits to the 3PL:

  • A California study of LEED construction found less than two percent of construction costs yields lifecycle savings of more than 10 times the initial investment. For example, $100,000 spent to incorporate green building features into a $5-million project results in savings of at least $1 million over 20 years.
  • Delivers cost savings on energy, waste disposal, water, operations, and maintenance.
  • Increases worker productivity.
  • Provides support and data for 3PL and shipper sustainability goals.

“A LEED building is more cost-effective over the facility’s lifecycle because it reduces natural resource consumption. And using sustainable building materials and natural light reduces the environmental impact,” says Tony Oliverio, senior director, operations strategy at San Mateo, Calif.-based 3PL Menlo Worldwide Logistics. “LEED buildings can also contribute to longer term lower costs in the supply chain— a savings that is passed on to shippers.”

Benefits to Shippers:

  • Lower costs may be passed along.
  • Sustainability goals are supported.

Added Insight:

LEED uses a 100-point rating scale, with Certified, Silver, Gold, and Platinum tiers.

SmartWay Transport Logistics Partner

What it is:

One of three designations available through SmartWay, the Logistics program encourages 3PLs to promote the program and use SmartWay carriers.

How 3PLs earn it:

3PLs earn a score annually based on the number of SmartWay carriers they use, multiplied by the freight volume placed with those carriers. Top performers— about 20 percent— can use the SmartWay logo and are so designated on the SmartWay Web site. Currently, 450 3PLs and logistics companies participate.

“As SmartWay has evolved, partners have become more efficient, and we periodically have to raise the bar,” says Cheryl Bynum, program manager for SmartWay Transport.

Benefits to the 3PL:

  • Adds value to shippers through more efficient transport; from 2004 to 2008, SmartWay carriers saved 1.5 billion gallons of fuel, worth $3.6 billion, and 14.7 metric tons of CO2.
  • Enables 3PLs to report data for shipper sustainability programs.
  • Encourages adopting best practices to attain compliance, such as adding a weighted carrier SmartWay score as a factor in carrier selection.
  • Provides opportunities to share ideas among SmartWay 3PLs.

“3PLs managing transportation control a key component of the sustainability roadmap,” says C. Thomas Barnes, president, Ann Arbor, Mich.-based truckload brokerage company Con-way Multimodal.

Benefits to Shippers:

  • Supports sustainability efforts.
  • Provides more transparency into freight carriers, because 3PLs must track this data for compliance.

Added Insight:

Shippers, truck and rail carriers, and truck stops can also join SmartWay.

International Organization For Standardization (ISO) 9001 and 14001

What it is:

ISO 9001 is the internationally recognized standard for the quality management of businesses. The standard applies to the processes used to create and control products and services, and prescribes systematic control of those activities to ensure that business needs and customer expectations are met.

ISO 14001 applies to the environmental management of businesses. It prescribes controls for activities that impact the environment, such as natural resources use, waste handling and treatment, and energy consumption.

 How 3PLs earn it:

ISO 9001 and ISO 14001 certification is carried out by third-party testing and accreditation parties.

Benefits to the 3PL:

ISO 9001 helps 3PLs comply with other certification programs due to its rigorous documentation of processes and continuous improvement requirements.

“ISO 9001 demonstrates our entire team’s commitment to continuous improvement,” says William R. Cortez, president and CEO of CorTrans Logistics, a 3PL in Norcross, Ga. “ISO 9001 is a key ingredient to achieving our organization’s goals.”

 Benefits to Shippers:

As a result of documented, consistent processes across the 3PL’s operations, shippers attain better visibility and higher service levels. Some industries, such as high-tech, commonly require 3PL ISO 9001 certification. “All our processes are ISO-prepared,” says Menlo’s Oliverio. The 3PL obtains certification for a particular facility upon customer request. “It ensures we are providing the level of service that we’ve committed to. 3PLs that take an ISO-type approach are much more efficient in how they conduct business, and achieve higher productivity.”

Added Insight:

ISO 9000 is a family of standards that represents an international consensus on good quality-management practices.

Alphabet Soup: Additional 3PL Certifications

Many industry associations and organizations offer specialized certifications that can benefit 3PLs. Here’s a sampling.

GS1 Certified Data Quality Solution Partner

The accuracy of dimensional data for packages is critical to help retailers anticipate space requirements throughout the supply chain and synchronize their master data. Problems most often occur when subsequent changes to product and packaging are not updated in databases. GS1 US, a not-for-profit organization that administers the Universal Product Code, offers a Certified Data Quality Solution Partner program to those with the right equipment and demonstrated knowledge of GS1 GDSN Package Measurement Standards. The program allows certified partners to make these measurements on behalf of supplier customers for the many large retailers requiring certified measurements.

“As a GS1 partner, we’re a one-stop shop,” says Mike Ghassali, COO for Genco Damage Research, a unit of 3PL Genco ATC, Pittsburgh, Pa. “It’s a value-add.”

ISO 28000

The ISO 28000 series of standards on supply chain security management systems addresses potential security issues at all stages of the supply process, targeting threats such as terrorism, fraud, and piracy.

Transported Asset Protection Association (TAPA)

TAPA certifies facilities meeting its Freight Security Requirements standards for storing and handling high-value, theft-targeted cargo. A related set of standards covers Trucking Security Requirements for these goods.

Transportation Intermediaries Association (TIA)

TIA’s Performance Certified Program is a best-practices program with guaranteed levels of freight payment, mandating bond, insurance, and credit score requirements and compliance with a code of ethics.