Monday, September 28, 2009

16th Annual 3PL CEO Survey Released

Recently, key findings from the 2009 3PL Provider CEO Perspective survey were presented at the Council of Supply Chain Management Professionals Annual Global Conference. The survey author, Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, and Joe Gallick, Senior Vice President of Sales for Penske Logistics were responsible for the survey. The findings, sponsored by Penske Logistics, analyze responses from 35 third-party logistics company CEOs across North America, Europe and Asia-Pacific whose companies were responsible for generating approximately $64 billion in revenue in 2008.

"This year's survey results underscore the caution and anticipation felt by 3PL executives as they wait for signs of a global economic recovery," commented Lieb. "Yet, despite bearish growth projections and acknowledgement that consolidation, pricing pressures and operational reductions were, and may continue to be, necessary adjustments, the opportunities for improved collaboration with customers, expansion into emerging markets and the possible addition of new management talent have many excited about the next several years."

Revenue Projections of the 3PL's

The global recession's influence has been profound, prompting very modest revenue growth projections. In fact, on average, 3PL CEOs in Europe project negative growth rates for their companies during the next year.

  • One-year company revenue growth projections were 6.9% for North America (12.6% in 2008), -3.3% for Europe (10.8% in 2008) and 12.9% for Asia-Pacific (21.4% in 2008). The average three-year company growth projections were 11.8% for North America (13.4% in 2008), 8.7% for Europe (10.0% in 2008) and 16.7% for Asia-Pacific (23.1% in 2008)

  • One-year industry revenue growth projections averaged 3.5% for North America (9.0% in 2008), -1.4% for Europe (7.3% in 2008) and 10.7% for Asia-Pacific (11.2% in 2008). The average three-year industry growth projections were 7.9% for North America (9.8% in 2008), 4.9% for Europe (6.5% in 2008) and 11.7% for Asia-Pacific (12.9% in 2008).
  • 16 of the 35 companies surveyed failed to meet their revenue growth projections during 2008, while 33 CEOs reported their companies were at least moderately profitable during 2008, with only one reporting unprofitability.


Shortened Supply Chains and Reverse Globalization

While the scale of the shift is small at this point, many CEOs surveyed expect that the trend toward reverse globalization and the shortening of supply chains will continue during the next several years.


  • CEOs surveyed in North America and Europe reported that, on average, nearly one-quarter of their customers had taken steps during the past year to shorten supply chains; the reported average was 9% in Asia-Pacific.

  • 20 CEOs reported that some of their major customers had shifted manufacturing activities from Asia to North or Central America or Eastern Europe.


Commitment to Sustainability and Human Capital

Despite the global economic downturn, 3PLs have identified environmental sustainability and human capital issues among those worthy of continuing ongoing support.


  • 25 of the companies involved in this year's survey reported launching new sustainability initiatives during the past 12 months, 22 have expanded existing sustainability programs and none reported scaling back "green" programs.

  • While 28 of 35 CEOs reported layoffs during the past year, 27 CEOs noted a reduction in recruiting efforts. There were 26 leaders who reported reduced executive trips to industry conferences. Only six noted a cut in employee training programs.

Business Relationships, M&A and Price Compression


  • CEOs in all three regions noted more adversarial relationships with approximately one-quarter of their customers due to recession pressures; however, at the same time more collaborative relationships were reported with more than one-third of North American customers, 20% of European customers and 13% of customers in the Asia-Pacific region.

  • Only nine companies were involved in significant merger or acquisition activity during 2008; but many believe that industry consolidation will continue. On average, executives in all three regions expect less than 9% of their revenue growth to come from acquisitions during the next three years.

  • 33 CEOs indicated that the economic downturn has intensified price compression in the industry.


For access to the full Executive Summary, click here.


Survey Design

Thirty-five CEOs completed surveys via an Internet-based questionnaire during the summer of 2009. Companies participating in the annual survey included: Cardinal Logistics, DSC Logistics, DHL Exel Supply Chain, Genco Supply Chain Solutions, Kuehne+Nagel Logistics, Landstar, Menlo Logistics, Panalpina, NYK Logistics, Penske Logistics, Pittsburgh Logistics, Ryder Integrated Logistics, Schenker, Schneider Logistics, Transplace, UPS Supply Chain Solutions, UTi Integrated Logistics, Caterpillar Logistics Services, CEVA Logistics and Wincanton.

For more information about Northeastern University click here http://www.cba.neu.edu/.

Source of this article: 16th Annual 3PL CEO Survey Released - Sponsored by Penske Logistics

Monday, September 14, 2009

Economy - What Strategy Should You Employ Today for Your Transportation Costs Tomorrow?

Mixed Signals on Economic Recovery??? Here's What We Found From a Couple of Trusted Sources:

Logistics Management

"In the last two weeks there have been an abundance of signs signifying positive economic activity. Some examples include:

· the Institute of Supply Management’s manufacturing index—the PMI—which covers the overall health of the manufacturing sector, rose four percentage points to 52.9 percent, marking the first time the index has climbed above 50 since the recession began—the 50 percent mark is typically viewed as the dividing line between “growth” and “contraction”;

· the Department of Commerce’s recent report that durable goods orders were up by its largest amount in two years, with a 4.9 percent bump, that has seen the increase up in three of the last four months;

· the Cass Information Systems Freight Index, which measures freight expenditures and payables, was up 1.3 percent in August compared to July."

While the overall economic picture is blurred, one industry analyst told LM there are some things to be optimistic about “In general, things are positive, especially the ISM index which suggests manufacturing is picking back up,” said Eric Starks, president of freight transportation forecasting firm FTR Associates. “We have been looking for stabilization in the economy and have seen things stabilize in the last three months as the economy has hit the bottom.”


Supply Chain Management Review

Trucking, which accounts for 78 percent of transport by revenue and half of all business logistics cost, was particularly hard hit, rising just 1.3 percent compared with 4.4 percent for the other modes (rail, barge, air cargo, oil pipelines and forwarders).

For shippers, this has resulted in bargain transport rates, especially in trucking and ocean transport, according to Rosalyn Wilson, the long-time author of the SoL report.

“Abundant capacity, particularly in trucking and ocean shipping, pushed rates down (last year), often below costs,” Wilson said. “Many companies have not survived the prolonged downturn. Many more will not survive the upcoming months as we continue to ride out the recession.”

As a result of the shakeout—more than 3,000 motor carriers ceased operations last year, taking out approximately 7 percent of truck capacity—supply chains are being redefined and processes changing, Wilson said.

“The industry will emerge more efficient and resilient,” Wilson predicted.

“It is becoming more apparent that we will see an end to the decline by the end of this year but not a quick recovery,” she said.

One indicator of that is the sharp, record rise in inventory-to-sales ratios, which Wilson called an “unwelcome sign” of a slow recovery. Even with historic inventory reduction rates, the inventory-to-sales ratio skyrocketed from a low last June of 1.25 to 1.46 by December. That is the swiftest rise in that benchmark since 1982. And Wilson said it occurred across the entire distribution chain—wholesale, manufacturing, and retail.

That took a toll on transport pricing. After 6 percent rise in 2007, total transport costs were up less than 2 percent last year. Trucking, the largest component of transport, rose just 1.3 percent. Lower fuel surcharges and tougher bargaining by shippers were cited, especially during the soft 2008 fourth quarter, when truck tonnage fell 6 percent. That decline has carried over into this year, Wilson said.



So What Strategy Should the Smart Transportation Manager Take?

Wilson is advising shippers and logisticians to be proactive in preparing for the recovery. She is recommending shippers lock in capacity now with guarantees before space becomes scarce.

“Re-evaluate your relationships with your supply chain partners and strengthen them,” Wilson advised. “Carriers have already begun expressing the sentiment that when capacity gets tight—and it will—they will remember customers who worked with them through the recession.”

Tuesday, September 8, 2009

Will Your Trucking Company Be There For You....

August 2009 - The Month Our Economy Stopped Declining and Started Growing

Our economy has already been gaining momentum, as proven by the index below, and last weeks article The Recession is Over.... Here's more proof on the economy, then we'll get back to what it is going to mean for transportation.

Nationwide, the ISM Manufacturing Index went above 50 for the first time since June 2007, when it was also at 52.9. An index score of 50 indicates that manufacturing is neither declining or advancing.

Here is the trend for the past 12 months:





















The below report is back from May, 2009. This explains the ISM Manufacturing Index and the excitement that was actually being generated back in May.










So Why The Concern About Transportation?? Shouldn't this be GOOD NEWS for all companies???

In a recent interview with Schilli Transportation President and CEO, Thomas R. Schilli, it was explained what has been going on in the trucking industry and what WILL be going on in the industry.

According to Mr. Schilli, who has over 40 years of experience running Schilli Transportation Services, the past 18 months have seen record number of trucking companies filing for bankruptcy and many totally closing down. "Many of those trucks have been exported to Europe and the former Soviet Union and are not just sitting around waiting for that call to come back into action. In other words, our supply of trucks has diminished due to the past economic conditions."

Mr. Schilli went on to explain that while new trucks can be built, all business are facing a problem with business loans. "The only two types of companies that are going to be able to provide capital to purchase more equipment are the publicly held companies (they can acquire equity financing through stocks and other equity means) and companies that have stockpiled cash. The latter is going to be a little short in supply, again due to the economy."

The majority of trucking companies are going to be doing everything that they can to hold on to the assets that they have. The problem with this, of course, is trucks don't last forever. There are going to be more truck break downs and more possible service issues related to truck break downs.

Until our banking industry will take favor upon transportation companies once again, this is going to mean that the number of trucks is not going to be able to keep up with the demand that our economy is starting to produce.






What Does This Mean to Manufacturers and All Other Companies?

Be Prepared for upcoming price increases and difficulty of finding available trucks.

So what can the wise transporation manager do NOW to protect themselves??? Mr. Schilli recommends to all shippers that they may want to think twice about taking the lowest bidder and developing systems around the lowest-priced provider today. "That type of thought is likely to become extremely problematic in the very near future. It would be best for shippers to make deals with transportation companies now to lock in lower rates today and hedge their positions for the future." Mr. Schilli goes on, "Companies will end up negotiating higher rates than the last few months, but they will not only save money in the future, but they will also maintain their capacity".


Smart Transportation Managers should be thinking of their strategies now and making sure to take care of the carriers who they have been dealing with and would like to deal with, before those carriers start going where the trail of higher rates leads them in the months ahead!!