We all know the result.  Long lines at the airport, shoes on the conveyor, confiscated shampoo, and body scans of menacing grandmothers.  Hollywood couldn’t stage a more convincing impression of safety if they tried.  Registered voters are duly impressed.  They think “Brownie’s doing a helluva job.”  But how safe are we?

OK, let’s just say we’ve effectively accounted for potentially dangerous passengers at airports.   How does that level of security compare with the measures applied to the rest of our transportation system?  What is being done to monitor commercial shipments over land, water, sea and across our borders every day?   Are these shipments (many of them loaded onto the very same planes as our startled grandmothers) subject to the same level of scrutiny as human cargo?

Screening Shipments Is a Daunting Challenge

Let’s look at the facts:

• Lots of airline passengers: In 2009 there were 709 million passenger “enplanements” through 19,930 US airports.
• But even more shipments: In 2004: UPS transported 3.6 billion shipments, FedEx transported 1.2 billion shipments, and US Postal Service 206 billion parcels and mail pieces over land and air originating from over a million businesses in the US.  And in 2007, parcel shipments only accounted for 0.27% of total transportation tonnage. (Click here) 
• Containers entering US ports: 26 million sealed containers entered US ports in 2007.  Most of them were metal and could not be scanned.  (Sadly, many go back to China empty.)

Obviously, these numbers are staggering.  The challenge of preventing terrorists from using parcels, cargo containers and commercial carriers to deliver weapons of mass destruction is daunting.  And as we all know, the US Government doesn’t do daunting (or political courage for that matter) very well, especially if it means impeding domestic business and global trade.  Obama has set a goal of doubling exports within 5 years and creating 2 million US jobs.  Think Amity Mayor Vaughn vs. Police Chief Brody in Jaws.

Freight transportation security is inadequate

“The Intelligence Reform and Terrorism Prevention Act (2004) required the development of the National Strategy for Transportation Security. This strategy is a classified document, but it is known that this document provides the framework for the federal government, working with state, local, and tribal governments and private industry, to secure the national transportation system and to prepare to respond to terrorist threats or attacks to transportation infrastructure.”  

OK, so there’s a double secret strategy, but what is actually being done?  Homeland Security helped to consolidate agencies responsible for our protection, but enforcement responsibility and accountability is still fragmented.  Depending on the commodity classification, a shipment may be subject to various agencies including Departments of Commerce, State, Defense, US Census, Transportation, etc.  Shippers are responsible for classifying their own goods, in effect deciding who will provide the oversight.

The 9/11 Commission Act of 2007 mandated 50% screening of cargo that is transported by a passenger carrier by February 2009 and 100% screening of cargo that is transported by a passenger carrier by August 2010.  Transportation Security Administration (TSA) is required to establish a system to ensure 100% of cargo transported on passenger aircraft is screened at a level of security commensurate to that of passenger baggage.  This requires screening at the piece level.  But this is more about protecting airline passengers, not cities, or else all carrier cargo would be subject to the same level of screening.

Export shipping compliance enforcement is spotty.  Trillions of dollars in global trade, but only $2.7 million in fines were levied by the Bureau of Industry and Security in 2008.  BIS is the agency responsible for enforcing export shipping compliance.  

US Customs offers a voluntary certification program to help ensure international shipment security (Customs-Trade Partnership Against Terrorism).  In exchange, C-TPAT-certified shipper freight is expedited through US Customs.   But if you’re a terrorist, what’s the hurry?  

Supply chain participants need to get serious about homeland security

To those of us in the transportation management system business who have helped thousands of companies automate load planning, carrier selection, and compliance procedures, it seems that government oversight is weak at best.  “Reasonable care” standards are vague.  Ignorance about regulatory compliance abound and complacency prevails. 

For example, there is a regulatory requirement for shippers to screen customer names against numerous restricted party lists posted by various governmental agencies.  Only a few of the thousands of shipping systems I am aware of have this capability.  Why?  Maybe these checks are being done earlier in the fulfillment process, but I don’t think so.  The industry consensus is that the demand is not there because it’s all too complicated and expensive to implement. 

Look at it from this perspective: you can bet the IRS has shippers, consignees, and carriers focused on tax law compliance.  The wheels of government are greased when it comes to tax collection, but when it comes to homeland security protection Big Brother looks more like Little Brother to your average shipper.

A new approach is required – 10 homeland security ideas 

1. Apply export shipping compliance standards to domestic shipping:  export compliance is all about monitoring the movement of goods to ensure they don’t fall into the wrong hands.  Sorry, but 9/11 was perpetrated by foreigners operating domestically.
2. Electronically monitor line item detail:  Require shippers to electronically submit line item detail of all shipment contents to a Homeland Security screening process.  US Customs requires this for exports exceeding $2500 in value. Retailers like Walmart require advanced shipping notices from their suppliers for inbound shipments.  Department of Transportation requires detailed documentation for hazardous material.  The technology is there and it is cheaper every day with the proliferation of Internet connectivity standards.
3. Marketing Data: with a central repository of line item detail, incentivize compliant businesses with access to more and better marketing information about who is buying what, where, and how, beyond what the US Census is able to provide.
4. Cargo scans:  scan all air freight, not just goods loaded onto passenger planes.
5. Enforcement:  so long as it is cheaper not to comply with regulatory mandates than to comply, complacency will prevail.  Businesses will ignore regulations with impunity without a higher risk of consequences.  Criminal and civil penalties, incarceration, and loss of shipping privileges simply have a way of getting the mind right.
6. Homeland Security Certification:  expand voluntary certification programs like C-TPAT to ensure shippers and consignees incorporate best practice standards into their logistics and transportation processes.  Create incentives including tax breaks and reduced audit requirements.
7. Carriers accountability:  many shippers today aren’t concerned about export compliance because they believe they are outsourcing liability to carriers and freight forwarders.  In reality, their false sense of security is misplaced because liability rests squarely on the shipper of record.  Carriers generate profits from using our transportation infrastructure.  It’s time they step up and take some responsibility for monitoring goods in their possession.  Mandate compliance spot checks.
8. Consignee accountability:  buyers should be as accountable for compliance as suppliers, in the same way buyers would be liable for procuring stolen goods.  This would ensure that every link in the supply chain has a role in ensuring the safety of the infrastructure.   
9. Executive Accountability:  With its focus on executive culpability, Sarbanes Oxley has worked wonders to improve truth-in-financial-reporting to protect investors from the Enrons of the world.  Today, the very same law could be applied more broadly to guard investors and other citizens against flagrant disregard of regulatory risks.   It just isn’t.
10. Political Accountability:  impede the flow of goods from countries that do not incorporate Homeland Security protection standards.

The above measures are intrusive, expensive, and would require a further expansion of government.   Most have no chance of implementation in the current economic climate or with the cast of characters now in Washington (can you even imagine the lobbyist chops licking and bleating if carriers were actually held accountable for what they transport). 

But ours is not a nation of sleepers.  When the next 9/11 event occurs (and it definitely will), the calls for action to more effectively protect the homeland will be swift and strong.  Our industry leaders need to be thinking now about how to implement these measures and in a way that will protect our liberties.

Here are some easy ways you can save as much as 40% on your inbound freight expenses:

• Develop a program to have your vendors that ship to you, or directly to your customers, “forcing” them to use your carrier account numbers.
• Provide a “rate shopping” tool for your purchasing and sourcing departments so when they are placing orders they can choose the best carrier and service level and make it part of the Purchase Order you issue.
• Post an inbound routing guide on your companies website. These routing guides can be as simple as a one page table, or as complicated as many pages. Some large retailers even have interactive on line routing guides.
• Work with your carrier reps, letting then know about your planned increase revenue for them, ask them to give you an increased incentive if your volume increases.

I do 20-40 meetings a month with companies that want to reduce freight, and over the last several months their questions have focused almost exclusively on inbound. 

Good luck on this, and if you need any help with it, please contact me or another professional who you are comfortable with.

Ship Better Save Money

Transportation providers are typically a bellwether of the economy, due to the role they play in moving goods across our nation. News yesterday from YRC (Yellow Roadway Corporation) casts doubt that a full recovery is really underway.

YRC shares fell 29%, due to a debt for equity swap that increases the number of outstanding shares by more than 2 billion.  In exchange, investors will provide YRC with $70 million in new liquidity.  Once the swap is complete, bondholders holding more than $470 million in YRC debt will control 94% of the company.

The hope is that these moves will keep the company solvent as it continues to seek further financing.  We can only hope.

Economic recovery?  Maybe if you ask the our President – just don’t ask YRC!

Scene:  Executive conference room.  CEO and management team huddled around a table evaluating a Transportation Management System proposal presented by VP of Operations: “… so in conclusion, by investing $2.5m in an enterprise TMS system, we will reduce our overall transportation spend by $6m over the next 5 years.  Savings will go straight to the bottom line and we’ll meet the threats by global competitors more effectively”.   Golf claps by the management team.  Except for the CFO and VP of IT who exchange nervous looks like Patriots fans during the 4^th quarter of a Colts game.

CFO:  “Aren’t we still waiting for the return on investment from the ERP project, now 6 months delayed?  Have you factored in the risks associated with changes to our procurement model?  What happens if we go through with the acquisition we have planned for next year?  How will the TMS system adapt?”

VP of IT:  “You guys keep adding systems like I have secret integration sauce stashed in my data center.  After last year’s staff reduction, I have fewer people and they are burning out and barely able to manage the hodge-podge of 35 mission critical systems we’ve accumulated over the years. Now you want to add another!?  Get real.”

The VP of IT didn’t actually say anything, but he thought it.   Instead, he knew the project could be tragically scuttled during the technical due diligence phase.   System incompatibility, security issues or something like that. He’d think of something if the CFO couldn’t.  Otherwise: hello monster.com.

Composite TMS Applications Reduce Total Cost of Ownership and Risks

The above scenario plays out in corporate environments on a Groundhog Daily basis.   Plopping evermore complex layers of technology on top of old technology and expecting it to all sorta-kinda work is unsustainable as an IT strategy (or as an IT management career path).  Everybody knows it, but the same everybodies are being chased by global competition every day.  A new approach is required.

Composite Application technology meets the challenge head on.  Leading industry consultancy Gartner Group defines a composite application as “a software assembly that implements a set of independent but related functions – each meant to be perceived by users as indivisible – and where the component parts are heterogeneous in their information architecture”.   As we would say in Boston: “Those boys from Gahtnah are wicked smaht”.  

Another way to think about:  Do I really need to buy and install a mapping, email, search engine, or sales automation, or should I just ping mapquest, Google, and Salesforce.com?  What if users could access all of those sources of information but within a business context?  Imagine: Sally in sales brings up a customer in salesforce.com, up pops the street view of the headquarters, the latest financial news articles, a summary of billings from the legacy accounting system, and all associated emails to the contact.   What if she could do that without the IT manager having to develop everything from scratch? Now you understand Composite Application technology.

Now imagine you need to more effectively manage transportation costs.  Why not grab data from your order management system, let a managed routing web service figure out the best carriers services to use, ping the carrier for compliant labels and bills of lading, let a trade management web service validate export regulatory requirements,  let a carrier network service provider update your supply chain partners with in-transit status, and access carrier invoices from an auditing service for settlement.  Now you understand Composite TMS Applications.

Reduce Transportation Costs and Improve Supply Chain Collaboration

Composite Application technology and methods are possible because the Internet has forced participants to standardize how information is transmitted and exchanged.  No more systems integration duct tape with proprietary formats.   Web services make it possible to access and consume information when you need it without getting locked in to any specific information source. 

This means that Composite TMS Application platforms are vendor neutral.  You can integrate, rather than buy or develop, capabilities offered by other companies (whether SaaS applications or portals) whose expertise you can “rent” or in some cases get for free.  When your needs change, plug in a different service.  New and more powerful logistics web services are launched every day.  Why not tap into the ones that are useful to your business, as you need them, and unplug them when you don’t?  

Think: are you locked into a proprietary carrier system?  Don’t be (for reasons I now hope are obvious).  Instead ask them to feed you web services that you can use within a Composite TMS Application that includes your business rules, order data, and role-specific contexts  that suits your objectives, not theirs.

In addition, Composite TMS Applications extend the value of your legacy IT investments.  The days of trying to build everything from the ground up or acquire from a single vendor are over.   There is too much valuable information to manage, and that should be a blessing and not a curse.

Best of all, because Composite TMS Application platforms are built on a service oriented architecture, they can be delivered to your trading partners and customers via the Internet in role-specific contexts.  Got a browser?  Connect, collaborate, and communicate, without the costs and risks associated with traditional TMS applications.

Or go visit monster.com.

I don’t know how you felt but when UPS released their earnings yesterday I was shocked.  I literally had to take a Xanax to calm my nerves. Every one of my customers believes it is getting the best deal but guess what? None of them really know for sure! Read on.

How Was Your Profit?

During Q4, 2009 UPS stated how important the across the board 4.9% increase that went into effect on January 2, 2010 was to its company’s profitability. Your rates went up, some as high as 8%. How was your profit? Well my friends if you are not angry about this, then I can’t help.  Why not just offer to pay them 20% more?  But, if you want to fight back, here are five simple steps that will lower your transportation costs…immediately:

Benchmark:  Check with a professional to be absolutely certain the assurances you receive from your carrier rep. are accurate and you in fact have the lowest rates available to you. 

Compare Shipping Rates: When carriers compete, you win.  In real estate valuation is often measured by location, location, location!  I say, compare, compare, compare!  What Brown, Purple, Black and Blue can do for you is based on your ability to negotiate.  You have options! Get an expert if you need help.

Carrier Routes: Make sure every package you send uses the least costly service provided by your preferred carrier.

Hygiene: (Yeah shipping hygiene!): Make sure every carton is addressed perfectly and is placed in the smallest possible carton with the least amount of packing material. BTW, there are foolproof ways to check all your addresses, zip codes and carrier zones.

Freight Bill Audits: Examine your invoice for post-shipment charges and question them when you find them.  Last October at the Parcel Show in Chicago over 50% of the attendees were desperate for ways to control these costs. Why? They needed absolute assurance that their customers were being charged back properly.  They still need it. There are lots of ways to help.

From the Transportation Spend Assassin, I hope this helps your company Ship Better and Save Money℠!

Jim LeRose

What does this have to with UPS, you ask?

UPS, a great company, is caught between the rock of needing to lower its expenses (to the tune of letting almost 2,000 middle managers go even though its Q4 profits for 2009 are apparently higher than expected — note the key word “profits”, not losses); and the rock of lowering its reputation for excellent service at a time when new competitors, most of them not yet household names, abound and new technologies are changing the face of shipping… just as they are upsetting/adding value to everything else we do.

Why? Because Wall St. will kill UPS if it doesn’t. Well, “kill” may be overkill here but “damage” is not.

Whaddyah mean?

In a rising stock market that’s rewarding increasing earnings, many of which are based on lowering costs rather than increasing revenues, Wall St. will feast on the bones of UPS if it doesn’t step up and play the short term game. It will drive their stock price down and that has a real dampening effect on any company no matter how big or dominant it is in its space.

What does all this mean to you?

If you’re a corporate shipper, evaluate your options. Take a good, long look at the newer technologies, the kinds that save you money, from lower, aggregated rates to proof of on time delivery; from the newer OnDemand models that lower or cut out completely your initial Cap X outlays to seeking better rates with LTL, regional carriers… and more.

You will still use UPS throughout this whole ordeal. They’ll ride this out and may even emerge stronger — short term thinking notwithstanding. But as for you, avoid short term thinking. Take the more rational Wall St. view, the longer term approach for your business, while watching out for any and all of your suppliers, business partners or vendors that are laying off a lot of their expenses (that’s what they call it) while cutting back or out huge amounts of service you’ve come to depend on. Whatever they choose to call it, that should be what you’re looking out for. No one else will do it for you.

Joe Mulready is Executive Chairman of the Agile Network, LLC

Shipping Demand Slows Months Before Market Meltdown

Spring 2008. Irrational exuberance still prevails. Dow Jones down but still hovering around 13,000. I talked to a friend of mine at a major parcel carrier. I asked him how the economy looked from a carrier’s perspective:

“Bad.”
“Bad as in time to reconsider tax shelters?”
“No. Bad as in time to reconsider bomb shelters. Looks like no back to school rush, no Christmas rush, no shipping. Economic activity at a standstill. The abyss. Cannibalism. Bad.”
“You really gotta stop following the Cubs and cheer up.”

At a corporate level, FedEx and UPS began to signal weakening freight demand during the Fall of 2007, right at the height of the market. Turns out the carriers could see with their own eyes at their hubs and terminals what would not become apparent to economists for months: businesses were not shipping as much.   The economy was slowing down.  Only unprecedented Federal intervention brought the economy back from the precipice.

DEC Stops Shipping

Those of us in the shipping system business have seen the same dynamic at work at a micro-economic level. I can recall implementing UPS manifest software at DEC warehouses that sprung up around the metro Boston area in the mid-1980’s. At the time, DEC was still the darling of Wall Street, even as they continued to dismiss the idea that PCs could replace mini-computers as serious business machines.

One day we implemented some custom reports for the Traffic Manager and I noticed for the first time that their monthly shipping volumes were declining at the same time the media continued to paint a rosy picture of DEC’s prospects. Shipping didn’t lie. The canary soon assumed room temperature. Compaq swallowed DEC, HP swallowed Compaq. Massachusetts miracle ended. Bush beat Dukakis.

Shipping Outlook 2010

What is the economic outlook for 2010? Mixed, but cautiously optimistic. FedEx CFO Alan Graf Chief sees “some uncertainty regarding the sustainability of current demand trends after our peak shipping season.”, but international, air and group shipments all increased between 3-6%.  Coming from carrier known for conservative financial forecasts, he might as well have sung “Happy Days Are Here Again”.

UPS gave a more optimistic outlook in early January 2010.  UPS CEO Kurt Kuehn announced better than expected Q4 results, anticipating “a gradual economic recovery with improvement more evident as 2010 progresses.”   Cue balloons.

So pay attention to UPS and FedEx volumes in early 2010. They’ll tell us a lot about how we can expect the economy to perform throughout the rest of the year.

Why is poor project management so frequent in the IT implementation world? Because too often project managers forget that their sole function is to bring the project to “go live” on time and on budget. As such they are the drivers of the implementation and it is their job to ensure that all parties to the process perform as expected.

If failure is recognized at such a high rate, where do these project managers fall down? There are several points at which this may happen. They are listed here:

1. Failure to insist upon a detailed, comprehensive project plan that everyone agrees upon– call it a blueprint;
2. Failure to craft along with the entire implementation plan a realistic project schedule and to set up guidelines to manage to it – also part of the plan;
3. Inadequate testing of the project, at various, specified stages, in a reconstructed buyer’s environment by the seller/implementer and, equally as important, by the buyer in its  own environment on a full test platform before implementation and go live;
4. Failure to document all change orders, even the smallest ones (including pricing and schedule changes); and,
5. Failure to drive all parties, all the time, to fulfill all their obligations, especially the plan and timelines.

Any or all of these deficiencies listed above constitute a recipe for upset, even disaster, which usually means a frustrated and unhappy customer, a distressed sales and implementation team, an inability on the part of the sales team to get paid, damage to reputations on all sides, the lack of a referenceable customer and the threat of lawsuits back and forth on both sides.

So, if planning, scheduling, testing etc are so important and everyone agrees with that, the next question is: who should be a project manager? More specifically, what skills and what training should a PM have? Said another way, how much technical ability, training and experience with the product(s) and what in the way of management skills should he have?

The answer: some and lots; some technical aptitude and product specific knowledge and lots and lots of management ability. That is, very good skills at working with people and moving projects along in expeditious fashion. The problem is that far too often project managers are techies who sort of morph into their new roles because of their product knowledge and not because they have good planning and management skills.

This is a mistake. The PM must assume that there are techies on both teams whom he can rely on while at the same time he has enough knowledge on the various subjects before him that he can’t be easily steamrolled by them. And if he senses that he is being played for a sucker, he must be able to know where and when to go for expertise to validate his suspicions.

It’s the other part of the equation, the management side, where he must have a high degree of knowledge and skills because that’s where the consequences are most severe if the project and he fail.

Consider an example from the commercial construction industry, which, I believe, is relevant. Whether the project is a home remodeling assignment, a development of multi-million dollar show houses or a new, 50 storey commercial office building, the issues are the same. Time and money matters drive the deal. Often, almost always in bigger projects, there is construction financing with an interest meter ticking feverishly away and the pressures on the contractor and the subcontractors are relentless to get the job done. Bad planning, delays on the part of delivery of materials or a subcontractor’s lack of availability when he’s supposed to be or whimsical, poorly documented change orders cause delays and inflated costs.

What skills must the PM on such a project bring to his job? Construction knowledge, to be sure; the order in which certain events must happen, absolutely; a recognition that framing the outside of the building must happen before winter, of course. But most of all he must make sure that the project was minutely and accurately planned and agreed to and that execution remains on schedule. Otherwise someone has to pay for the overage, which can run from tens of thousands of dollars to hundreds of thousands or more, and that someone has to be identified and documented every step of the way. That’s the project manager’s primary job and in such situations he is often not the most popular person on the project when he starts exercising his authority. And he can’t accept excuses in a world where everyone about him is inventing them at the speed of light.

What’s so different about a typical IT installation? Oftentimes the size of the job — both financial and the time involved — seems to blind seller and customer alike to the pitfalls of inadequate planning and project management. While the dollars may be smaller than in a $50 million commercial skyscraper, the significance to all the parties may be equally important.

Bad planning and poor execution on a $250K project may be as painful to a couple of small businesses as $3 million or more is to a large contractor or subcontractor in real estate development. As they say in that industry (and others), “Nothing changes but the zeroes; certainly not the pain.”  In the long run, a talented and dedicated PM pays for himself and saves both parties to each transaction lots of time and heartburn.

AgileElite supports the following Purolator rates:

• Air
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