LSCMS Blog

Technology makes the difference for the logistics sector, which demands efficiency and needs an edge to overcome the manpower crunch.

The technology necessary to provide this edge is not cheap, and requires time and money to implement.

One firm, which decided to take the initiative to be outstanding from the competition, is Mr Koh’s Addicon. Addicon serves the garment industry and medical device companies, and wanted to be able to do “big volumes without mistakes” for better margins.

Five years ago, Addicon splashed $300,000 to enter a new technological age of radio frequency identification tags (RFIDs), which look like simple rubber tags, and are attached to the wooden pallets on which boxes of goods are loaded.

The tags contain data that details the contents of boxes, strings of product and batch numbers, destination and origin information. This information is available 24/7, and is detected by Addicon’s wired up warehouse at Old Toh Tuck Road.

It was a big change from the use of barcodes, where a worker had to scan each box in a tedious effort to account for its location.

[Read More]

Kuehne and Nagel have introduced a wireless chip that stays active during flight, allowing monitoring of shipment temperatures – a capability particularly attractive to the pharmaceutical industry. This is thanks to a technology that does not disturb flight systems, thereby permitting it to be used during flights. (more…)

In a country already plagued with high costs, trucking operators will pay almost 7 cent more for diesel from July 1, 2014 under the Federal Government’s carbon tax package.

Unveiling the reform recently, Prime Minister Julia Gillard announced that the trucking industry would be exempt for two years when the tax begins on July 1, 2012.

The scheme will begin at $23 per tonne of carbon, rising to $24.15 the following year and $25.40 in July 2014 before moving to a market-based emissions trading scheme in 2015.

The $25.40 tax will increase diesel prices by 6.85 cents through a reduction in the fuel tax credit rate, which will continue to decline as the cost of carbon increases.

Once implemented, trucking potentially faces a double whammy on diesel prices from July 2014 because the fuel tax credit is reduced at the beginning of each financial year to account for government expenditure on the road network.

These costs could be further compounded by higher wages as CPI will move upwards as cost of food and other items will increase. Overall sad news for the competiveness of Australia’s trucking industry.

Swiss forwarding giant Panalpina has admitted that the sector has earned its reputation for anti-competitive behaviour, but argues that the image is outdated, according to London’s Financial Times.

Panalpina, the 4th largest forwarder in the world after DHL, K&N and Schenker, together with 13 others were recently fined EUR169 million (US$225 million) by the European Commission for participation in cartels in international air freight forwarding services.

Panalpina was fined EUR46.5 million, while Kuehne & Nagel, also based in Switzerland, was told to pay EUR53.7 million. Deutsche Bahn and subsidiary Schenker were fined 34.9 million. The various companies operated one of the international cartels based on meetings at an unpretentious Italian restaurant near London and used code words like “fresh marrow” and “asparagus” to disguise illegal surcharges.

In an interview, Panalpina’s chief executive, Monika Ribar, admitted that her company and its peers had a record of cartels and other anti-competitive practices. “It is true our industry has gained a poor record, based on problems in the past. But companies have learned to deal much more seriously with the situation in recent years.”

Mrs Ribar argued change had been triggered by much tougher laws in Europe and the US, and a greater emphasis on ethics among freight companies.

She pointed out that the latest EU fines reflected past problems that had taken years to investigate fully. “The EU Commission has taken five years to get somewhere. The whole story happened between 2000 and 2005. Our company has changed dramatically in the meantime.”

Panalpina, has had various brushes with regulators. In addition to the latest European crackdown, the group has previously paid almost $82 million in a deferred prosecution agreement under the US Foreign Corrupt Practices Act, after probes into its Nigerian activities prompted it to pull out of the country.

Panalpina has also lost business from government departments and big companies whose policies forbid them from trading with partners sanctioned for anti-competitive or corrupt practices.

“Now as a chief executive in freight you deal more and more with lawyers than with your core business”, said Mrs Ribar. Among the changes she has instituted in the company include elevating compliance, with the appointment of a chief compliance officer reporting directly to the CEO, creating much bigger local compliance teams and increasing focus on corporate ethics.

“Companies have learned to deal much more sensibly with the situation,” Mrs Ribar said. “At Panalpina, we haven’t left a single stone unturned in re-examining the way we do business.

Although rumours have been circulating over the future of US-based global forwarder BDP International, the company has moved quickly to deny it is up for sale. A news story had earlier appeared on Reuters quoting a source close to the company as saying it was looking for a buyer.

However, the Philadelphia-headquartered company has issued a rebuttal, saying that BDP’s ownership, the Bolte family, believes in the company’s future and is exploring opportunities with private investors to raise capital. The statement went on to say that it was seeking additional funds that would enable it to build on its technology and expand its global presence. BDP has revenues in the region of $1.6bn.

Management commented that, “The infusion of capital through outside investment is a normal course of activity for privately owned companies. In essence, our owners are working to make BDP a stronger and even more effective force in the international logistics sector for our customers. BDP will continue to be owned and operated by the Bolte family and incumbent management team.”

Over the past couple of years, BDP has followed a strategy of expansion, developing a presence in key emerging markets as well as in Europe. It positions itself as a specialist in the chemical industry, and on the back of the sector’s development in markets in Asia and the Middle East, it has established a series of joint ventures and partnerships; including in India, Bahrain and Vietnam. Over the last 6 – 12 months BDP has seen quite a high number of senior management changes in it’s Asia Pacific operations.

The company has preferred an asset-light, low risk approach to global growth, seeking to build partnerships with established local companies, rather than to develop its own operations. Despite this, BDP has not totally eschewed acquisition, buying companies in Germany, France, Belgium, Spain and the UK in the past decade.

Mergers and acquisitions activity in the transport and logistics industry is recovering following the Eurozone crisis in 2011. According to Thomson Financial, deals in the first quarter of 2012 were at a higher level than at any point in 2011. With balances high and a more certain economic environment predicted, further consolidation in the express and logistics industry is likely.

Amazon.com, Inc. has announced that it has reached an agreement to acquire Kiva Systems, a developer of mobile-robotic solutions that automate eCommerce order fulfillment and warehouse operations.

“Amazon has long used automation in its fulfillment centers, and Kiva’s technology is another way to improve productivity by bringing the products directly to employees to pick, pack and stow,” said Dave Clark, vice president of global customer fulfillment for Amazon.com. “Kiva shares our passion for invention, and we look forward to supporting their continued growth.”

“For the past 10 years, the Kiva team has been focused on creating innovative material handling technologies,” said Mick Mountz, CEO and founder of Kiva Systems in a statement. “I’m delighted that Amazon is supporting our growth so that we can provide even more valuable solutions in the coming years.”

Following the acquisition, Kiva Systems’ headquarters will remain in North Reading, Mass.

Under the terms of the agreement, which has been approved by Kiva’s stockholders, Amazon will acquire all of the outstanding shares of Kiva for approximately $775 million in cash, as adjusted for the assumption of options and other items. Subject to various closing conditions, the acquisition is expected to close in the second quarter

UPS has agreed to pay US$6.77 billion in cash to acquire TNT Express about one month after TNT Express shareholders rejected UPS’ earlier offer of $6.4 billion.
The offer would create a per-share price of slightly less than $12.50. But the deal is subject to approval from European anti-trust regulators, reported Rosewell, Georgia’s Air Cargo World.

“The combination of UPS and TNT Express will create a global leader in the logistics industry, with annual revenues of more than EUR45 billion [US$60 billion] and will deliver significant benefits for the shareowners, customers, employees and other stakeholders of both companies,” said UPS.

The deal has been approved by the supervisory and executive boards of TNT Express and PostNL, with the latter agreeing to tender its 29.8 per cent stake to UPS.

The deal is expected to help UPS gain a bigger share of business outside the US as 36 per cent of total group revenues will be generated outside the US, up from UPS’ current 26 per cent.

UPS said it will finance its offer with $3 billion in cash from its balance sheet and the remainder will come from new debt arrangements.

UPS expects its acquisition to boost profits in the first year and realise annual pretax cost savings of between $525 million and $725 million by the end of the fourth year after the deal is closed.

The combined company will control about 17.3 per cent of the European express market, placing it just behind Germany’s DHL Express.

Since February we have seen a number of carriers embarking on RRP’s (Rate Restoration Programmes) and GRI’s (General Rate Increases). The feedback from shippers have understandably been negative but the response from carriers have been that current rates, given increased bunker and operating costs is untenable to long term operations.

What will happen next is hard to say. The indication is that we can expect to pay more for Asia Pacific origin cargo from March along these lines

• Asia – India – $150 – $300 per container
• Asia – Australia – $300 – $600 per container
• Asia – Middle East – $50o per container
• Intra-Asia – $50 – $100 per container

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The National Productivity and Continuing Education Council (NPCEC) has endorsed a $42 million (US$33 million), five-year productivity roadmap to lift the long term productivity of the logistics and transportation industry.

The logistics and transportation industry is an important economic sector, contributing eight percent of Singapore’s GDP in 2011 and employing almost 205,000 workers, and as such companies in the logistics and transportation industry can look forward to greater government support for productivity-driven growth.

The National Productivity and Continuing Education Council (NPCEC) has endorsed a $42 million (US$33 million), five-year productivity roadmap to lift the long term productivity of the logistics and transportation industry. As logistics is a key enabler to other industries, these efforts will also boost our productivity in both our manufacturing and services sectors.

Drawn up by the Singapore Economic Development Board (EDB) and SPRING Singapore in consultation with companies, partner agencies and industry associations, the roadmap focuses on two key areas and would increase the value-added (VA) per worker in select segments of the logistics and transportation industry by about 30 percent to $130,000 by 2015.The two key areas are:
(i) Enhancing Supply Chain Management Expertise
(ii) Enhancing Innovation and Efficiency at Enterprise and Industry Levels

You can read more about this at the LSCMS endorsed magazine: LIA.