Trends-June 2007

Regardless of their political affiliations or opinions on the Iraq war, logistics and transportation professionals paid close attention to the compromise Iraqi war appropriations supplemental bill signed into law by President Bush in May.

The bill contained two provisions impacting supply chain security: funding for port security measures, and further details on the hotly debated pilot plan to open the border to Mexican truckers.

The bill, known as H.R. 2206, includes $110 million in additional fiscal 2007 funding for the federal Port Security Grant program, hailed by the American Association of Port Authorities (AAPA) as “a giant leap forward” to help U.S. ports secure their facilities against terrorism.

Given the high cost of enhancing facility security at U.S. ports, including implementing the new Transportation Worker Identification Credential program, AAPA advocates a $400-million appropriation in fiscal 2008. The amount is an increase from 2007’s $320 million funding total – an original $210 million plus the $110 million granted in the new bill.

While the ports were seeking additional funding from the war bill, Congress sought additional safeguards for the proposed cross-border trucking pilot plan announced in April by the Department of Transportation (DOT).

The Bush Administration remains committed to implementing the cross-border program. President Bush, however, did allow the new spending bill to require that DOT get approval from its inspector general that the experimental program is in compliance with more than one dozen safety conditions laid out by Congress before it can move forward.

The war bill also includes a provision sponsored by Rep. Duncan Hunter (R-CA) requiring the government to publish its plans to enforce requirements that Mexican drivers be able to communicate in English.

The provision also compels the agency to publish details of U.S. safety audits of Mexican trucking companies authorized to participate in the program.

DHL Wins Other Amazing Race

While most people watch episodes of The Amazing Race on TV, Georgia Tech students devised their own race – they tasked FedEx, UPS, and DHL with delivering packages to Tikrit, Iraq; Harare, Zimbabwe; Yangon, Myanmar; Floranopolis, Brazil; and Apia, Samoa, as part of the annual Great Package Race.

Sixty students from the Supply Chain and Logistics Institute at Georgia Tech, with their professor, Dr. John Bartholdi, sent identical boxes containing Georgia Tech material to these out-of-the-way locations to learn which major express carrier could deliver fastest and cheapest. The carriers had no idea a competition was in progress.

The event is important, says Bartholdi, because it shows ideas the students study in the classroom – such as network design, scheduling, and packing – being used to make real-world decisions.

“The sense of relevance is further heightened because some of the destinations are home to our international students,” says Bartholdi. “We also discuss the logic of where carriers locate their sortation centers, and examine the dominant freight routes.”

Georgia Tech’s Great Package Race started in 2003, when Dr. Bartholdi needed to ship two boxes to Georgia Tech’s sister organization in Singapore.

“When I packed the two boxes I thought it might be interesting to send them via different carriers to compare results,” recalls Bartholdi. “Afterward, a UPS vice president visited my class and explained the company’s global freight network design and local issues in delivering shipments to Singapore.”

This year marks the first time a clear race winner emerged. DHL was the only carrier to complete deliveries to all five locations. It also logged the fastest delivery time for three locations, and the second-fastest time for the other two.

FedEx delivered to three locations, while UPS delivered only to two. UPS also did not recognize the country Samoa, which it still listed as Western Samoa, despite the country’s name change in 1997.

Each carrier’s prices varied greatly. For example, UPS offered the least expensive rate to Tikrit—$67.34—even though the package was returned to sender. FedEx charged slightly more than $100, while DHL was the most expensive, at $125.26. Shipping to Harare via DHL, however, only cost $126.18, while FedEx charged $244.48, and UPS’s tab totalled $336.60.

“The Great Package Race is more of an event than a serious study,” notes Bartholdi. “The main message for students is that sending packages to such distant countries requires a lot more than just airplanes and trucks.”

PierPass Passes 5 Million Milestone

When it debuted in July 2005, the PierPass OffPeak program at the ports of Los Angeles and Long Beach was an experimental remedy aimed at easing peak traffic congestion.

Today, it is an essential part of port operations, and has diverted more than five million truck trips from peak daytime traffic since inception. OffPeak is also credited with removing a weekly average of 60,000 truck trips from the freeways during commuting hours.

The PierPass program uses a congestion-pricing model that provides an incentive for cargo owners to move shipments at night and on weekends; those that move containers during peak daytime hours pay a traffic mitigation fee, which helps fund the cost of the night and weekend shifts.

Government officials and business leaders lauded OffPeak’s five-million truck trips milestone, citing the program as a model for industry-led initiatives to eliminate costly bottlenecks, reduce gridlock on area freeways, and curtail air pollution from idling traffic.

“OffPeak has helped keep the economic engine of the ports running, while reducing the impact on Los Angeles residents,” says Los Angeles Mayor Antonio Villaraigosa.

The two ports recently announced another environmental initiative—the “San Pedro Ports Clean Air Action Plan,” which aims to cut particulate matter pollution from all port-related sources by more than 50 percent within the next five years.

The plan, which launches Jan. 1, 2008, will phase out the use of old, “dirty-emissions” trucks under the following timetable: starting next year, 18 percent of trucks from 1989 or earlier will no longer be permitted to operate in the ports; by Jan. 1, 2009, the ban will extend to trucks older than 1994; by 2010 to trucks older than 1996; and by 2011, to vehicles older than 2004.

The ports, along with the South Coast Air Quality Management District, propose allocating more than $200 million toward this effort.

Meeting Mandates with Technology

Cutting costs has historically been the top priority for supply chain organizations, but most companies today are looking to improve supply chain processes by meeting customer mandates for faster and more accurate fulfillment, according to a new study by Boston-based research firm Aberdeen Group.

Supply chain executives are addressing this need for new approaches and priorities by increasing their spending on supply chain technology in 2007. Five times as many companies plan to increase, rather than decrease, IT spending, shows the report, The Supply Chain Innovator’s Technology Footprint 2007, which surveyed more than 200 companies at the start of the year. The survey’s aim was to explore companies’ technology investment plans en route to supply chain improvement.

What technology do most companies plan to invest in? Inventory management stands out as a top priority – 57 percent of respondents list it as their number-one technology pick. The study suggests “companies that have not yet refreshed or expanded their use of inventory management technology should put it on their to-do list this year.”

Supply chain visibility ranks a close second to inventory management, with 55 percent of participants listing it as the biggest priority for technology investment.

The Aberdeen report finds, among other things:

• Companies looking to create new supply chain innovations are 1.5 times more likely than all others to see globalization as the top driver for supply chain improvements.
• Services-oriented architecture and radio frequency identification technologies in the warehouse are not high priorities in 2007.
• Companies are increasingly looking to on-demand applications to address supply chain visibility.
• Forty-one percent of overall respondents (and 77 percent of large enterprises) plan to spend $500,000 or more on supply chain technology in 2007.

WMS: In Demand and In Flux

If you’ve recently purchased a Warehouse Management System (WMS) for your business, you are in good company, as WMS purchases are on the rise.

The worldwide market for WMS solutions is expected to grow at a compounded annual rate of 4.8 percent over the next five years, according to a new study, Warehouse Management Systems Worldwide Outlook, from Dedham, Mass.-based ARC Advisory Group. The WMS market reached $1.07 billion in 2006 and is expected to top $1.4 million in 2011, predicts the report.

Though the WMS market is mature, it will experience faster growth in the next few years than it has in the recent past, says Steve Banker, service director for supply chain management at ARC.

“The average WMS solution has a lifespan of 11 years. As the years between 1995 (11 years prior to the base year of this study) and 2000 were high-growth years for the WMS market, the market going forward will mirror, on a smaller scale, the previous era’s growth,” he explains.

In addition, WMS solutions are morphing to incorporate new technologies, shows ARC’s research. The increasing use of voice recognition and radio frequency solutions in warehouses is impacting the construction of WMS solutions.

WMS providers have devoted a considerable effort to understanding the warehouse workflows and processes that result from these new multi-modal terminals, says Banker. WMS solutions must now be configurable to support these data collection methods, as well as multi-modal applications.

In the future, WMS architecture may need to treat Automatic IDentification (AutoID) as one layer of the solution so that multi-modal AutoID tasks are supported, he adds.