Contributing Author: Les Brand, CEO of Supply Chain Solutions Inc.

The trucking industry can expect some capacity restraints by year end, along with some driver shortages, according to the recent State of Logistics Report, released by the Council of Supply Chain Management Professionals.

In the Penske Logistics-sponsored report, author Rosalyn Wilson says the trucking industry will be short about 400,000 drivers by next year. Wilson says many drivers came into the industry from other sectors during the economic downturn, particularly construction. Now, they’ll likely head back into their previous occupations. In addition, about one in six drivers is age 55 or older and are coming up on retirement. Other factors contributing to a shortage include CSA 2010, reduction in driver pay during the recession, and a declining share of young new entrants, the report said.

“The lack of drivers will also slow the return of trucks to the marketplace,” Wilson said.

Trucking has been the hardest hit sector in transportation, with a 20.3 percent drop in 2009. Truck tonnage was down 8.7 percent in 2009 on a volume basis, so abundant capacity was competing for fewer and fewer loads.

“Industry average lengths of haul are continuing their long term downward turn, while long-haul truck ton-miles have also fallen off,” Wilson said. “These shifts are the result of higher usage of intermodal and more regionalization of distribution centers in response to higher fuel costs.”

With not enough volumes to fill trucks, many trucking companies restructured their business by reducing their fleet size. In 2009, about 2,000 trucking companies went bankrupt, taking even more trucks off the roads. The report says another 2,000 companies will likely be forced out of business in 2010 because of higher operating costs and low demand for freight, according to research by Donald Broughton of Avondale Partners.

The good news is, freight volumes are starting to increase, with truck tonnage up over 6.5 percent in the last seven months, the report said.

“Truck shipments are picking up in most market segments and there are already reports of equipment shortages. Rates still have not taken off.”

The report also pointed to trends in the overall U.S. business logistics system, which saw costs drop 18.2 percent in 2009, the largest decrease ever. As a percent of GDP, logistics costs were at 7.7 percent. Transportation costs fell 20.3 percent from 2008, while trucking costs declined 20.3 percent.

Contributing Author – Lee Garza, VP of Icap & Solutions Development, Supply Chain Solutions

The recent article highlighted in CSCMP’s Quarterly newsletter (‘Network Redesign Emerges As Top Priority In Tough Times‘) highlights a number of important points when thinking about managing your logistics costs.  Analyzing your network is a holistic approach that is necessary to ensure that in an effort to reduce costs in one area, you don’t inadvertently increase costs in another.

While network analysis is often thought of from a strategic perspective, it can also reveal tactical opportunities that can be capitalized upon in the near term without disruptive changes like opening/closing/relocating facilities.  For example, an overall analysis of your network including suppliers, producers, warehouse, and customers can reveal opportunities such as:
•    realigning service territories
•    identifying geographic densities among suppliers and/or customers that present opportunities for load consolidation
•    analyzing the total impact of lower-cost transportation methods like rail/intermodal

And the advantage of these types of changes is that they can deliver benefits for the long-term.  Unlike short-term opportunities such as simply re-negotiating below-market freight rates when carriers are struggling to find loads.  Because eventually those rates will increase when the carriers regain a position of strength.

Since they were first introduced, the Incoterms rules have been revised about once a decade to keep up with the rapid expansion of world trade and globalization.

Since the last revision in 2000, much has changed in global trade. Cargo security is now at the forefront of the transportation agenda for many countries. In addition, the United States’ Uniform Commercial Code was revised in 2004, resulting in a deletion of US shipment and delivery terms. The latest version of the Incoterms rules will reflect these changes and others.

The publication will be released in mid-September, with an enforcement date of January 1, 2011.

The table of contents are:

ICC Publication No. 715E, 2010 Edition

Table of Contents:

* FOREWORD
* INTRODUCTION
* TABLE OF CONTENTS
FOREWORD
INTRODUCTION
RULES FOR ANY MODE OR MODES OF TRANSPORT
EXW ex works
FCA free carrier
CPT carriage paid to
CIP carriage and insurance paid to
DAT delivered at terminal
DAP delivered at place
DDP delivered duty paid
RULES FOR SEA AND INLAND WATERWAY TRANSPORT
FAS free alongside ship
FOB free on board
CFR cost and freight
CIF cost insurance and freight

For more information on Incoterms 2010, visit the International Chamber of Commerce

Exporters and companies interested in expanding to new export markets have some news to put a little bounce in their step. With the recent announcement by the Chinese government that it will float its currency, effectively raising the value of its money and making exports more affordable to its vast markets of consumers, and the launch of a new joint effort between the United States Postal Service and the US Commerce Department to boost exports among small to mid-sized businesses, exports have become a hot topic. For more information see the links below.

China’s Currency Shake-Up – Via Supply Chain Solutions

http://www.scs-logistics.net/index.php?option=com_content&view=article&id=221:floating-yuan&catid=89:july-enews&Itemid=584

Postal Service, Commerce Department Launch Joint Exporting Program – Via DC Velocity

http://www.dcvelocity.com/articles/20100713usps_commerce_dept_initiative/

GRAND RAPIDS – The cost of shipping raw materials to a manufacturing plant can add up substantially if those materials are being delivered in semi-trucks that are half empty. But when full truckload deliveries are rare, an out-of-the-box solution must be found. For some area office furniture manufacturers, Grand Rapids- based Supply Chain Solutions Inc. (SCS) had the answer – collaboration.

This is a very important announcement sent to all C-TPAT members by the U.S. Customs and Border Protection Agency.  Supply Chain Solutions takes its commitment to the principles of C-TPAT certification with the utmost seriousness. We have taken this announcement under advisement and will continue to hold ourselves, our partners, and our carriers to the highest of standards.  Thank you.

C-TPAT Members:

As we maintain our vigilance against extremist attacks originating from locations far from our borders, we must also recognize that many threats we face are much closer.

Over the course of the past few months law enforcement on both sides of the US/Mexico border have made several large narcotics seizures involving commercial shipments linked to C-TPAT members. The seizures have occurred across the entire southwest border and involved both dry goods as well as fresh produce. In most cases the narcotics were commingled with the commercial merchandise. Of particular note is that in many instances C-TPAT members were utilizing the services of non-C-TPAT service providers.

CBP reminds members that they are expected to use C-TPAT partners to the extent possible and to conduct extensive screening of their non-C-TPAT business partners. Members must have written and verifiable processes in place to ensure this screening takes place on a consistent basis. Given the current threat from Mexico, non-C-TPAT business partners must be afforded higher levels of scrutiny. C-TPAT members are expected to verify the security measures being utilized.

Comprehensive reviews of recent events have clearly identified two primary causative factors having enabled supply chain security breaches;

1. Companies had established security procedures in place yet failed to follow them.
2. Lack of corporate oversight ultimately resulting in significant levels of subversion of established supply chain security procedures via internal conspiracies.

It is imperative that C-TPAT partners perform internal risk assessments to identify inherent threats to supply chain corridors and augment established security procedures accordingly. We have taken this opportunity to identify other causative factors which you may wish to consider as you evaluate the risk factors unique to your supply chain and further, the steps that you can take to mitigate these risks. Areas of consideration include:

Ensuring there is adequate oversight and accountability of the cargo loading and sealing process.

Employing the use of cameras and/or other suitable monitoring devices or processes at the cargo loading areas.

Ensuring that all conveyance hardware and fastening devices are inspected for overall security and deterrence of unauthorized access. Where deficiencies are present, steps must be taken to mitigate the risk and/or harden all fastening/access devices.

Consider the use of more stringent security devices to secure trailer doors.

Audit and verification of employee screening processes, to include periodic reviews.

Consider rotating personnel assigned to operationally sensitive positions, such as dispatcher.

Review the established processes for oversight of the transportation component. Areas of potential weaknesses and vulnerability should be assessed. Specific attention and focus should be provided towards addressing potential delays and/or opportunities for security breach.

Members should work with service providers to develop written and verifiable procedures to track conveyances from the point of origin to the final destination.

Establishment of route times from the manufacturing site to various points in the transportation flow will help monitor and ensure that drivers are arriving at designated locations within established time parameters.

Members should work with service providers to develop written and verifiable procedures to address those instances that a driver does not check in within established time parameters. Drivers should not be allowed to make unauthorized stops.

While the focus of this security bulletin is directed toward operations along the South West Border of the United States, all C-TPAT members are highly encouraged to take this opportunity to review their established security processes. Continued supply chain security is dependent upon your continued vigilance.

You are encouraged to contact your assigned Supply Chain Security Specialist to discuss ways in which your company can help CBP address this issue or if you have specific concerns that need to be addressed.

In closing, the program relays its continued appreciation of your diligent and continued efforts in securing the international supply chain.

Bradd M. Skinner

Director

C-TPAT/ Industry Partnership Programs

U.S. Customs and Border Protection

At Supply Chain Solutions, we know that your supply chain can be your greatest competitive advantage. There has never been a better time to re-assess and re-align your supply chain strategy to find savings potential.

Supply Chain Solutions (SCS) is a proven partner in the assessment, design and implementation of solutions that will further your strategic business goals for long term gains while emphasizing speed to value today.

We have created a Supply Chain Assessment kit to better illustrate how an assessment can put your company ahead and to illustrate our collaborative process.

Your success is our success. To learn how SCS can help your organization unlock supply chain potential, call 877-554-8906 and ask to speak in Les Brand