Trends-April 2006

Though the hubbub has died down and the media have decamped from East Coast ports, the defunct Dubai Ports World deal is still reverberating throughout the shipping industry. Most significantly, the deal has served as an impetus for Congress to more closely examine the broader issue of port security and port operations.

Capitol Hill leapt into action last month with the proposed Security and Accountability For Every (SAFE) Port Act. Introduced by Rep. Dan Lungren (R-CA), chairman of the Subcommittee on Economic Security, Infrastructure Protection, and Cybersecurity, and Rep. Jane Harman (D-CA), ranking member of the House Intelligence Committee, the bill aims to help prevent threats from reaching the United States, track and protect in-transit containers, and increase security at U.S. ports.

Among other changes, the bill will:

• Ensure 100 percent of containers are scanned for radiation.
• Provide risk-based funding through a dedicated Port Security Grant Program to harden U.S. ports against terrorist attacks, and enhance capabilities to respond to attacks and resume operations.
• Require the Department of Homeland Security (DHS) to conduct robust security assessments for foreign ports interested in participating in the Container Security Initiative.
• Strengthen the Customs-Trade Partnership Against Terrorism program, by setting minimum standards for participation and dividing program membership into tiered categories, based on the level of each country’s security cooperation.
• Improve the Automated Targeting System – designed to identify high-risk containers before they reach American soil – by determining additional commercial data elements necessary for more robust targeting.
• Revive Operation Safe Commerce, which aims to improve utilization of private sector initiatives, boost research and development activities, and enhance coordination within DHS.

Trouble for Shippers?

If passed, the bill’s beefed-up regulations could spell trouble for shippers involved in global trade.

“Because there is little excess capacity at our ports, any disruption or decrease in efficiencies will have an impact on shippers with import/export activity. Potentially, this is a steep price for well-intentioned, but seriously flawed, legislation,” says Michael A. Regan, CEO, TranzAct Technologies, a supply chain solutions provider based in Elmhurst, Ill.

To prepare for the bill’s possible consequences, “shippers should engage in scenario planning exercises that consider much longer transit times for import/export shipments,” suggests Regan.

In addition to possible ramifications at home, fallout from the Dubai Ports World deal could hurt U.S. companies seeking business in the Gulf Arab states, according to a recent poll conducted by Aeroceanetwork, a Martinez, Calif.-based network of logistics and international freight forwarding professionals.

Aeroceanetwork recently queried more than 450 shipping and logistics professionals in Bahrain, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, and Yemen, and found that more than 50 percent of respondents believe the United States’ commercial image will suffer mid- to long-term damage in the region as a result of the Dubai deal.

Nearly 63 percent of respondents hold “unfavorable” to “very unfavorable” opinions of Congress’s involvement in the issue.

Though respondents did not believe U.S. companies operating in the Gulf Arab region would feel immediate business effects, they do see long-range ramifications, according to Gary Dale Cearley, executive director of Aeroceanetwork.

“In the long run, respondents believe Arab-based shipping and logistics companies will think twice before making any investments in the United States,” he says.

Secrets to Service Logistics Success

As technologies and products increasingly become commoditized due to global competition, companies are turning to the service side of their business to stand out from the crowd. Those that can’t compete on cost may win over or retain a customer by offering aftermarket services to sweeten the deal.

But the prevalence of outsourced manufacturing has complicated service parts logistics.

“Whether seeking to reduce costs with new suppliers, partner with third parties to support operational efficiency, or simply expand into new markets, outsourcing touches every company. Businesses can be sure their suppliers are also outsourcing, creating a complex web of interdependencies,” says Zack Bergreen, founder and CEO of service lifecycle management software provider Astea International, Horsham, Pa.

Does all this outsourcing mean companies are compromising on quality in service parts logistics? How can businesses provide best-in-class repair, maintenance, and upgrade services when products are manufactured in far-flung locations, with components from suppliers around the globe?

“First, you have to ensure a complete view of this increasingly complex supply chain. Then, you need a single point of control for critical customer and product information, and a way to deliver that to a broad network of field technicians,” Bergreen explains.

To reap the benefits of an effective service parts logistics strategy in the face of increased outsourcing, businesses need to focus on customer service, says Bergreen, who offers these four tips for success:

1. Embrace and enable the mobile workforce. Whether they are on the road or at a desk, key contributors such as technicians may not be in your office; in fact, they may not even work directly for your company. Give these mobile workers up-to-the-minute customer data to do their jobs well. They are your face to the customer.

2. Prepare for outsourcing’s expanding footprint. China and India will offer new services, and will be joined by developing countries, especially in Latin America. These newcomers will be well-positioned to offer lower costs, which could lead to more price pressures. Improving the customer experience will be the best defense. Take steps now to use technologies to ensure optimal service and highly efficient processes.

3. Think beyond “lowest possible cost.” Most profits have already been wrung from overseas resources. Linking the vast chain of key suppliers who handle operations is the next performance driver.

4. Shift to a long-term view. This next wave of service innovation will turn technicians into consultants, and make collaboration across companies a reality. Planning for this major transition takes time; beginning now will position your company to lead the industry as the market takes off within the next two to three years.

60 Years of Service

Not many people in the logistics industry—or any industry, for that matter—stay employed with a company for 60 years. UPS employee Marty Peters is an exception. The 83-year-old Peters recently passed that service milestone to become the longest-tenured of UPS’s 407,200 current global employees.

The Michigan resident, who began working for UPS in March 1946, currently works full-time at a Detroit UPS center as both a processing clerk and a “shifter,” moving trailers among the loading docks. In his six-decade career with UPS, Peters has held a variety of jobs, and remarkably, has taken fewer than five sick days, according to his boss.

Like his company, he has no plans to slow down, saying he is not ready for retirement just yet.