Global Logistics—September 2006

Ocean Shippers Get Global Guarantee

Companies that source products from China—and who’s not on that list these days?—have to balance shipment time with cost when selecting an import transportation mode. Traditionally, the choices were either to use air freight for speed but spend more, or cut costs by using ocean shipping and deal with slow transit times.

Now, two transportation companies—APL Logistics and Con-way Freight—are joining forces to help ease this shipping pain point.

APL and Con-way recently launched OceanGuaranteed, a new service that provides secure, guaranteed port-to-door delivery of less-than-containerload (LCL) shipments from China to the United States.

OceanGuaranteed is an industry first. It was created in response to increasing shipper demand for a premium ocean LCL/domestic LTL service that offers fast transit times and day-definite delivery at a cost-effective price, says Brian Lutt, president, APL Logistics.

"In today’s global marketplace, most shippers source some aspect of their business in China," explains David McClimon, president, Con-way Freight.

"They are managing longer supply chains and more import volumes, yet they still remain under pressure to accelerate product through their domestic distribution networks as rapidly and cost efficiently as possible. The new service directly addresses this critical requirement," he adds.

The service offers guaranteed transit from Hong Kong, Shanghai, and Shenzhen in China, to all continental U.S. destinations served by Con-way Freight. It uses Los Angeles as the U.S. port-of-call for customs clearance and deconsolidation, and provides transit times ranging from 15 to 16 days from China to the West Coast, up to 18 to 19 days for delivery to East Coast destinations.

Shipment prices are calculated on a per-kilo rate, based on delivery from the origin ports in China to 11 delivery zones in the United States. These shipments also receive expedited handling, including late-gate privileges at origin, "last on, first off" loading and unloading, and priority shipboard stowage for rapid discharge at the destination port.

APL Logistics handles all in-country China shipment management services, with ocean carriage provided by APL Logistics’ sister company, APL. Con-way manages receipt of ocean containers and deconsolidation in Los Angeles, and delivers cargo as LTL shipments to U.S. customers.

No Shortage Of Short-Sea Shipping in EU

Three years ago, the European Commission’s (EC) Program for the Promotion of Short-Sea Shipping laid out 14 actions that would help the European Union (EU) improve short-sea shipping efficiency and overcome obstacles to its development. This crucial initiative was aimed at making cargo transportation in Europe efficient and environmentally friendly.

Halfway through the EU and EC’s efforts, the program is "a transport success story with good growth rates," says EC Vice President Jacques Barrot.

Short-sea shipping plays a key role in ensuring sustainable mobility, and contributes to meeting objectives such as alleviating congestion and environmental pressure caused by freight transport, according to the EC’s latest report.

While short-sea shipping has not caught up to over-the-road freight transport yet, it is growing, as the following findings show:

• Between 1995 and 2004, the ton-kilometer performance of short-sea shipping in the 25 EU countries grew by 32 percent, while road performance grew by 35 percent.
• Thirty-nine percent of all ton-kilometers in the EU are moved via short-sea shipping, while road’s share is 44 percent.
• The fastest-growing segment of short-sea shipping is containerized cargo, with average yearly growth rates of 8.8 percent since 2000.

Although the EU has made progress improving its short-sea shipping efficacy, the EC proposes re-targeting some of its original Program for the Promotion of Short-Sea Shipping measures. The proposals include extending the scope of short-sea promotion to promote multimodal solutions in inland transport, and more closely integrating short-sea shipping into the multimodal logistics supply chain.

Targeting Trade Threats

In the immediate aftermath of the Sept. 11 terrorist attacks, operations on the United States’ northern and southern borders were severely impacted, bringing cross-border trade—which totals nearly $1.9 billion each day—to a virtual halt.

Last month, as the five-year anniversary of the attacks approached, the United States and its northern neighbors evaluated preparedness for future disruptions during a joint exercise in Detroit.

Seventy individuals from U.S. Customs and Border Protection, the Canada Border Services Agency, local law enforcement, emergency responders, and trade representatives came together to discuss hypothetical emergency scenarios, and coordinate responses that would help the United States and Canada resume cross-border trade quickly if faced with another major emergency.

During the roundtable meeting, discussion topics included logistics, operational decisions and impacts, communications between and among agencies as well as with the media, and potential time frames for reconstituting trade in the aftermath of another incident.

Cross-border trade slowdowns have a large impact on shippers that continually move goods between the United States and Canada, so their feedback is vital to government agencies in formulating response plans.

"It is encouraging that U.S. and Canadian customs agencies are working together and requesting input from various government and trade participants. Hopefully these types of exercises will continue, as they help all parties be better prepared to take action that can help mitigate the impact of a border incident," says James Phillips, a spokesperson for General Motors who participated in the exercise.

The cross-border security exercise was also a key component of the Security and Prosperity Partnership, a tri-lateral agreement between the United States, Canada, and Mexico signed in 2005 to help develop a common approach to protect North America from external threats while simultaneously facilitating the movement of legitimate trade and people across the borders.

Pan-EU Rail on Track

Transport ministers from France, Belgium, Luxembourg, and Switzerland recently signed a deal to build a high-speed freight railway connection linking the Belgium coastal city of Antwerp with Lyon, France, and Basel, Switzerland.

The consortium is pushing for train operators to adopt pan-European signaling standards and modern train technology known as the European Rail Traffic Management System, in hopes this synchronicity will improve freight transport performance. The system incorporates technology that automates trains’ traveling speed, which consequently improves transit times while also reducing costs and the risk of breakdowns.

The new link is scheduled for development between 2008 and 2018. The first link to use the European Rail Traffic Management System was the Rotterdam-Genoa corridor, launched in March 2006.

China Sourcing: Risks vs. Rewards

Companies making the choice to utilize low-cost sourcing in China are often lured by the inexpensive and abundant labor force. But they are also aware of the potential pitfalls that can occur when sourcing in China.

Shippers list intellectual property protection and supplier strategies as the top two risk areas facing manufacturing and retail executives with operations in China, according to a recent report published by Manufacturing Insights, a Framingham, Mass., supply chain consultancy.

Logistics and transportation, infrastructure, and national as well as local political events are the other top risk areas ranked by respondents to Manufacturing Insights’ annual survey, Low-Cost Manufacturing in China.

"Identifying and ranking these risk areas helps supply chain executives understand current trends for manufacturing lead times, inventory, and transportation costs associated with products originating in China, as well as to anticipate future changes," says Bob Ferrari, program director of supply chain strategies at Manufacturing Insights, and author of the report.

In addition to ranking the top risk areas, survey respondents also identify the top information technology tools impacting operations in China. The majority—70 percent—rank enterprise resource planning software as the most effective IT tool.

Supply chain collaboration portals, advanced demand or supply planning systems, transportation management and control systems, and storage resource management or procurement systems also rank high with survey respondents.

"The increased use and effectiveness of IT and applications is a positive sign for the region. This, coupled with data showing some improvement in lead times, indicates that all in all, operations in China are progressing," adds Ferrari.