VOLUME 22 • NUMBER 10 • SEPTEMBER 2007VOLUME 22 • NUMBER 10 • SEPTEMBER 2007

The Integration of Storage and MovementEditor’s Note: A June 2007 research study by Ian Hobkirk,“Integrated Transportation Management” published byAberdeen Group, provided the inspiration for this article.“Performance by the Numbers,” by Karl Manrodt and KateVitasek, an article published by DC Velocity, May, 2007, wasreferenced as well. KBA

Throughout the duration of our attention to supplychain management and its earlier incarnations as physicaldistribution and logistics, the critical interaction betweenthose who move cargo and those who store it has been a fo-cus for researchers.

The Historical PerspectiveDuring the 19th and 20th centuries transportation terms

like, transfer, truck & storage, depot or terminal wereused in the names of many warehousing companies. Onetraditional definition of warehousing was "transportationat zero miles per hour."

When American transportation pricing and serviceswere controlled by federal regulation, warehousing was awidely accepted method of controlling total logisticscosts. Low-cost transport modes, such as rail, marine, andtruckload carriage were used to position inventories nearcustomers, and local warehouse operators provided pooldistribution (a.k.a. cross docking), warehousing, cus-tomer pickup, and delivery.

New Challenges in TransportationWhile the business of storage and warehousing has un-

dergone substantial change during recent decades, thechanges in transportation are greater and more profound.The distance factor is a major change. Nearly every distri-bution company imports an increasing percentage ofproducts from Oriental sources that are thousands of milesdistant from the destination. Accordingly, every commer-cial enterprise is involved in a slow, costly, and sometimesunpredictable struggle to manage lead times and controlinventory shipped from overseas manufacturers.

The cost of transportation has escalated with increaseddistance. It is aggravated by record high costs of the petro-leum products that fuel every transport mode.

A critical problem in the human resources area also hasraised the cost of motor freight. Workforce turnover is arecord 130% among long-haul motor carriers, meaningthat the average truck driver stays with one company for

about nine months. Because new workers must be re-cruited and trained, the cost of the turnover is significant,and must be reflected in the rates charged by the carrier.

Older Challenges Still RemainA study initiated by researchers at The Ohio State Uni-

versity a number of years ago, found that the majority oftrucks on the streets of Columbus, Ohio, were lightlyloaded or empty. They observed that the trucks contrib-uted greatly to traffic congestion, and suggested that amultiuser consolidation terminal at the edge of the citycould reduce the number of trucks entering the commu-nity. The research drew attention overseas, especially inthe Soviet Union; however, no one in the USA wanted tointerfere with the private enterprise system of motorfreight delivery. In recent research, it was found that thewaste generated by underutilized vehicles is just as greattoday as it ever has been.

Railroad transportation is not as competitive in eitherservice or cost as it needs to be. The significant conflictthat once existed between motor carriers and the railroadsrarely is experienced today. Railroad companies bear thecost of ownership and maintenance of their “highways,”while competing with motor, water, and air freight compa-nies that enjoy the use of government owned facilities.Railroad management must make huge capital outlays tomaintain their capability to handle the growingintermodal cargo from the Orient. Additionally, they mustadd the personnel needed to handle sharply increased vol-umes. One carrier estimated that recruitment and trainingof a new crew is a nine month process.

New ToolsEven with increases in transportation costs, sup-

ply-chain management professionals have access to toolsthat were not dreamed of in the past. At one time, elec-tronic communication, particularly overseas, was slowand expensive. Today, communication virtually is freeand widely available almost everywhere in the world.

Global positioning systems (GPS) can pinpoint the pre-cise location of vehicles. Visibility systems in warehouseand transportation management systems convenientlydisplay information on the status of every shipment.

Years ago, Ohio State Professor, B. J. LaLonde, indi-cated that in the future, the supply-chain manager wouldbe able to trade information for inventory, using superiorsystems to avoid needless investment. That future is now!

All Charged UpBy G. Weimer, DC Velocity, August 2007, pg. 60.

Explored in this article is the continuing debate be-tween vendors of fast charge battery systems, andthose who sell traditional batteries and battery chang-ing equipment. The latter group argues that fastcharge systems shorten battery life. Because batteriesmust be both charged and cooled, electric trucks usedon three shifts require three batteries per truck, to en-able them to be worked for eight hours, charged foreight hours, and cooled for eight hours. For maximumbattery life, batteries should not be changed until anindicator light signals that it is time for a fresh battery.This may occur at a convenient time, when the vehicleis working far from the charging station. Fast charg-ing allows batteries to be refreshed during lunch andcoffee breaks, and it eliminates time and safety issuesinvolved in handling heavy acid filled batteries. Op-ponents of fast charge systems argue that all batteriesshould receive a full charge each day as well as an“equalize charge” once per week. This suggests thatthe fast charge systems would work well for a twoshift operation, but not for three. Contact informationfor nine vendors of both battery handling and charg-ing systems is provided as an insert.

Software as a ServiceBy Denis O’Sullivan, Focus, April 2007 pg. 30.

Software as a service, (SAAS), is also referred toas on-demand. It is a good fit for small companies inwhich the IT staff does not manage information sys-tems. It also is popular in large companies in whichimplementing new systems through the internal ITdepartment may be difficult. Charges for the systemare based on transactions, and there is little or no capi-tal expenditure. Two of the most popular applicationsare vehicle routing and scheduling, and track andtrace capability.

How to Win Friends and Influence SoftwareBy J. A. Cooke, DC Velocity, August 2007, pg. 38.

Joining a user group is the easiest and mostcost-effective way to have some influence in the mod-ification and future development of your warehous-ing or transportation software. User groups areformed by customers of a particular solution vendor.They are an important communication channel be-tween users and vendors, and can have measurable in-fluence on product development. User groups mayinclude warehouse managers, operations managers,information specialists and even CEO’s. The attrac-tion is the opportunity to learn from fellow users. Formany, their relationship building facilitated by theuser group becomes the most important benefit of all.

Withdrawing From A Third-Party WarehouseBy Steve Sordy, Focus, May 2007, pg. 31.

Mr. Sordy, and a British magazine, had the forti-tude to address a subject that many managers find toougly to discuss. The process involves the followingsix steps:

P Be sure you understand and can explain, ef-fectively, the reasons for the withdrawal.

P Be certain that you have collected all of therelevant facts, especially contract details.

P Expect the unexpected. For example, are youliable for wear and tear to the owner’s build-ing?

P Engage senior management at the logisticssupplier to maintain good relations.

P Create a project plan to cover every detail ofthe move.

P Implement the plan.In a concluding note, the author warns: “Do not

burn your bridges.”

It’s Not Easy Being GreenBy Clifford F. Lynch, DC Velocity, March 2007, pg. 43.

While praising the green initiatives developed byWal-Mart and others, the author described similar ini-tiatives that met with disaster. A consumer productsmanufacturer introduced recycled corrugated, but thepackaging engineers neglected to test stackingstrength. As a result, bulk storage was replaced bymuch more expensive rack storage. When cartonswere replaced by shrink wrapped cardboard trays,many automated warehouse systems were unable toaccommodate the new packaging. Green initiativesmust be accomplished in a logistics friendly manner.

Who – and What – Is Profitable?By R Sabath, D. J. Daugherty, D. D. Mattioda, and H.Chen, Supply Chain Management Review, July/Au-gust 2007, pg. 44.

Many companies do not track profitability by cus-tomers or by products. These research results make astrong case for doing so. The authors reached thesemajor conclusions:

P Customer information is more important thanproduct information.

P Collecting profit contribution informationhas significant diagnostic value.

P Using profit information leads to strongersupply chain relationships.

Tracking profit contribution helps management tofocus efforts and identify the biggest potential re-wards. It enables management to set priorities.

There are two ways to expand any business:Horizontal growth, which involves acquisition ofother companies and movement into new cities ornew markets.Vertical growth, which requires competing withsuppliers, and sometimes with customers.

A warehousing company that emphasizes verticalgrowth might go into the construction business, or the de-velopment of land for new buildings. Transportation man-agement would likely be part of the process. In somecases, the company might become involved with the pack-aging business, in order to control the quality of the pack-ages stored in a warehouse. One successful vertical diver-sification is the staffing service business. Companies witha successful information technology product will try tosell that solution to other warehouse operators.

In contrast, the company that follows the horizontalgrowth model will concentrate on extending the reach ofits warehousing services, either by acquiring other com-panies, or by organic growth into new markets.

Failure to Cope With ChangeThroughout history, we have suffered with the “dino-

saurs” who would not recognize or adapt to change. In1876, the Western Union Company commissioned a studyof a new invention, and concluded that “the telephone hastoo many shortcomings to be seriously considered as ameans of communication.” When sound revolutionizedthe film industry during the late 1920’s, Harry Warner ofWarner Brothers, said: “Who the hell wants to hear movieactors talk?” Ken Olson, founder of Digital Equipment,said: “There is no reason for any individual to have a com-puter in the home.”

Most of the technology we use today was considered anovelty before it evolved into useful tools. Prior to HenryFord’s assembly line and Charles Kettering’s electricstarter, the automobile was a plaything for the wealthy.The early photocopiers were used widely as a means ofduplicating cartoons and jokes. A director of the FederalCommunications Commission dismissed television as a“wasteland.” There were and still are many frivolous usesof the early application of web technology and e-mail.

Vertical OrHorizontal

Growth?

Why Have A TransportationManagement System?

Few warehouse operators today will try to run a ware-house of any size or complexity without a warehousemanagement system (WMS). Because transportationmanagement systems (TMS) are newer, the advantages ofusing one are not as well understood. Listed below aresome of the things that a TMS will do for you:

Search for the best route.Discover the best load pattern.Discover the lowest cost mode.Discover the best carrier within that mode.

Control and reduce annual freight costs.Control and improve delivery performance.

If you do not have a TMS, ask potential supplierswhether or not they can address the points listed above.

Plugging the Freight LeaksMany distribution executives are not aware of the

many ways in which money is wasted with excessivefreight costs. Here are five significant issues:

Failure to control the cost of inbound freight is acommon problem. If the vendor is allowed to ship

“best way,” the buyer may not receive substantialdiscounts that are available for volume shipments.All freight charges should be reviewed. Unfortu-nately, some carriers bill at a higher figure thantheir quote.Don’t neglect to review the transactions with par-cel carriers (such as UPS and FedEx), and don’t as-sume that your company must pay the list price fortheir services.Be sure that your customers are paying an appro-priate extra charge for “emergency shipments.”Review your freight claim experience with each ofyour carriers.

The Advantages ofAppointment Scheduling

A surprising number of warehouse operators fail to or-ganize a scheduled shipping and receiving dock. Avarietyof excuses are offered, including a common claim that thecompany is too small for the carriers to collaborate onschedule. In actuality, many managers do not haveenough time to study information in order to estimate thetime needed to load or unload each vehicle. In the absenceof such estimates, it is impossible to establish an accurateschedule. The obvious advantage of scheduling is thatsurprises are eliminated. Carriers are pleased to cooper-ate, as long as the shipper demonstrates the ability to keepthe appointments because scheduling is the best way toeliminate congestion at the shipping dock.

The Performance of “Best-In-Class”As shown in the figure below, 14% of companies sur-

veyed have reduced transportation expenses relative torevenue during the past two years. Given the substantialescalation of transportation pricing during the same pe-riod, this is an incredible accomplishment by a smallgroup that Aberdeen designates as “best-in-class.”

How did they do it? It is conceivable that a few compa-nies made major product changes that reduced the cost ofmovement. For example, technical advances might haveenabled an electronics firm to replace a piece of comput-ing equipment with a new, significantly smaller model,that is less expensive to transport. Greater visibility mayhave allowed significantly decreased use of premiumtransportation (air freight). Improved collaboration withcarriers, suppliers, and customers usually results in a re-duction of emergency shipments. Increased use of trans-portation management software enables shippers to pur-chase common carrier services wisely. This is more thanmerely a search for the lowest price. In some cases, itleads to the discovery that one carrier needs increased rev-enue in certain lanes, and is willing to make concessionsto build volume.

Improved understanding of total supply-chain costsmay result in the establishment of new consolidation anddistribution centers that will reduce the cost of parcel de-livery and LTL transportation. Others may increase theiruse of cross docking and pool distribution to control trans-portation costs.

Reduction of “Dwell Time”One of the unfortunate realities of the motor freight

business is the number of unproductive hours spent by theaverage driver. This “dwell time” currently is estimated atabout 30 hours per week, and is spent waiting at ware-house loading docks or stopped by traffic choked high-ways. Federal regulations established during 2003 andmodified during 2005 and July of this year, limit the timethat a truck driver can stay in the vehicle without taking arest break. While complaints have been voiced about fed-eral interference, some have addressed the regulations increative ways. One method is increased use of “drop andhook” loading and unloading at factories and warehouses.

With this system, the motor carrier drops a trailer in thecustomer’s yard, and then picks it up at a later time, afterloading or unloading has been completed. With drop andhook, the delay that a truck driver experiences at the cus-tomer’s premises is limited to the relatively short timeneeded to place the trailer in a designated spot and to re-trieve it later. While this strategy is not practical for LTL(less-than-truckload) or parcel carriers, it can reducegreatly the wasteful dwell time for truckload carriers.

The Growing Use Of Yard ManagementThe drop and hook procedure just described results in a

new control challenge for the warehouse operator. Untilrecently, most warehouse operators were concerned onlyabout systems to locate all of the material within the wallsof the distribution center. Today, a growing number ofmanagers must create a yard management system to sup-plement the warehouse management system. When thereare dozens, or even hundreds of trailers parked outdoors,the problem of locating each becomes a significant chal-lenge. Fortunately, software vendors have responded withyard management packages for the warehouse operator.

The Critical Task of Keeping ScoreHow do we measure success in integrating warehous-

ing and transportation? The most comprehensive metricis the percentage of perfect orders. A perfect order is onethat is delivered on time, complete, and without damage.Results of the survey by Manrodt and Vitasek found thatmedian performance was 97 to 99% perfect orders, with“best-in- class” companies scoring as high as 99.9%.

Order cycle time is a critical quality measurement,which is not defined as comprehensively as it should be.The most common definition of order cycle time, is thetime elapsed between receipt of order and its’ shipment.However, the customer is concerned with when the orderis received, not when it was shipped. This means that thedelivering carrier and distribution center managementmust work as a team to achieve continuous improvementin total order cycle time. The results of the Manrodt/Vitasek survey show that order cycle time performance ofbest-in-class companies declined between 2006 and2007. That is a disturbing statistic.

Finally, how well does your company control its distri-bution cost as a percent of sales? There are major varia-tions by industry, but survey results showed that medianperformance was 4.9%, with best-in-class dropping toless than 2.2%. The actual number is less important thanthe trend from year to year.

Putting It All TogetherToday’s supply chain manager faces a daunting combi-

nation of challenges. In the face of relentless senior man-agement pressures to improve quality and control cost,only a few companies have been successful at doing both.While there could be many theories to explain this im-provement in performance, our belief is that more effec-tive teamwork between warehousing and transportationproviders has been the most important factor.

There are two ways to expand any business:Horizontal growth, which involves acquisition ofother companies and movement into new cities ornew markets.Vertical growth, which requires competing withsuppliers, and sometimes with customers.

A warehousing company that emphasizes verticalgrowth might go into the construction business, or the de-velopment of land for new buildings. Transportation man-agement would likely be part of the process. In somecases, the company might become involved with the pack-aging business, in order to control the quality of the pack-ages stored in a warehouse. One successful vertical diver-sification is the staffing service business. Companies witha successful information technology product will try tosell that solution to other warehouse operators.

In contrast, the company that follows the horizontalgrowth model will concentrate on extending the reach ofits warehousing services, either by acquiring other com-panies, or by organic growth into new markets.

Failure to Cope With ChangeThroughout history, we have suffered with the “dino-

saurs” who would not recognize or adapt to change. In1876, the Western Union Company commissioned a studyof a new invention, and concluded that “the telephone hastoo many shortcomings to be seriously considered as ameans of communication.” When sound revolutionizedthe film industry during the late 1920’s, Harry Warner ofWarner Brothers, said: “Who the hell wants to hear movieactors talk?” Ken Olson, founder of Digital Equipment,said: “There is no reason for any individual to have a com-puter in the home.”

Most of the technology we use today was considered anovelty before it evolved into useful tools. Prior to HenryFord’s assembly line and Charles Kettering’s electricstarter, the automobile was a plaything for the wealthy.The early photocopiers were used widely as a means ofduplicating cartoons and jokes. A director of the FederalCommunications Commission dismissed television as a“wasteland.” There were and still are many frivolous usesof the early application of web technology and e-mail.

Vertical OrHorizontal

Growth?

Why Have A TransportationManagement System?

Few warehouse operators today will try to run a ware-house of any size or complexity without a warehousemanagement system (WMS). Because transportationmanagement systems (TMS) are newer, the advantages ofusing one are not as well understood. Listed below aresome of the things that a TMS will do for you:

Search for the best route.Discover the best load pattern.Discover the lowest cost mode.Discover the best carrier within that mode.

Control and reduce annual freight costs.Control and improve delivery performance.

If you do not have a TMS, ask potential supplierswhether or not they can address the points listed above.

Plugging the Freight LeaksMany distribution executives are not aware of the

many ways in which money is wasted with excessivefreight costs. Here are five significant issues:

Failure to control the cost of inbound freight is acommon problem. If the vendor is allowed to ship

“best way,” the buyer may not receive substantialdiscounts that are available for volume shipments.All freight charges should be reviewed. Unfortu-nately, some carriers bill at a higher figure thantheir quote.Don’t neglect to review the transactions with par-cel carriers (such as UPS and FedEx), and don’t as-sume that your company must pay the list price fortheir services.Be sure that your customers are paying an appro-priate extra charge for “emergency shipments.”Review your freight claim experience with each ofyour carriers.

The Advantages ofAppointment Scheduling

A surprising number of warehouse operators fail to or-ganize a scheduled shipping and receiving dock. Avarietyof excuses are offered, including a common claim that thecompany is too small for the carriers to collaborate onschedule. In actuality, many managers do not haveenough time to study information in order to estimate thetime needed to load or unload each vehicle. In the absenceof such estimates, it is impossible to establish an accurateschedule. The obvious advantage of scheduling is thatsurprises are eliminated. Carriers are pleased to cooper-ate, as long as the shipper demonstrates the ability to keepthe appointments because scheduling is the best way toeliminate congestion at the shipping dock.

The Performance of “Best-In-Class”As shown in the figure below, 14% of companies sur-

veyed have reduced transportation expenses relative torevenue during the past two years. Given the substantialescalation of transportation pricing during the same pe-riod, this is an incredible accomplishment by a smallgroup that Aberdeen designates as “best-in-class.”

How did they do it? It is conceivable that a few compa-nies made major product changes that reduced the cost ofmovement. For example, technical advances might haveenabled an electronics firm to replace a piece of comput-ing equipment with a new, significantly smaller model,that is less expensive to transport. Greater visibility mayhave allowed significantly decreased use of premiumtransportation (air freight). Improved collaboration withcarriers, suppliers, and customers usually results in a re-duction of emergency shipments. Increased use of trans-portation management software enables shippers to pur-chase common carrier services wisely. This is more thanmerely a search for the lowest price. In some cases, itleads to the discovery that one carrier needs increased rev-enue in certain lanes, and is willing to make concessionsto build volume.

Improved understanding of total supply-chain costsmay result in the establishment of new consolidation anddistribution centers that will reduce the cost of parcel de-livery and LTL transportation. Others may increase theiruse of cross docking and pool distribution to control trans-portation costs.

Reduction of “Dwell Time”One of the unfortunate realities of the motor freight

business is the number of unproductive hours spent by theaverage driver. This “dwell time” currently is estimated atabout 30 hours per week, and is spent waiting at ware-house loading docks or stopped by traffic choked high-ways. Federal regulations established during 2003 andmodified during 2005 and July of this year, limit the timethat a truck driver can stay in the vehicle without taking arest break. While complaints have been voiced about fed-eral interference, some have addressed the regulations increative ways. One method is increased use of “drop andhook” loading and unloading at factories and warehouses.

With this system, the motor carrier drops a trailer in thecustomer’s yard, and then picks it up at a later time, afterloading or unloading has been completed. With drop andhook, the delay that a truck driver experiences at the cus-tomer’s premises is limited to the relatively short timeneeded to place the trailer in a designated spot and to re-trieve it later. While this strategy is not practical for LTL(less-than-truckload) or parcel carriers, it can reducegreatly the wasteful dwell time for truckload carriers.

The Growing Use Of Yard ManagementThe drop and hook procedure just described results in a

new control challenge for the warehouse operator. Untilrecently, most warehouse operators were concerned onlyabout systems to locate all of the material within the wallsof the distribution center. Today, a growing number ofmanagers must create a yard management system to sup-plement the warehouse management system. When thereare dozens, or even hundreds of trailers parked outdoors,the problem of locating each becomes a significant chal-lenge. Fortunately, software vendors have responded withyard management packages for the warehouse operator.

The Critical Task of Keeping ScoreHow do we measure success in integrating warehous-

ing and transportation? The most comprehensive metricis the percentage of perfect orders. A perfect order is onethat is delivered on time, complete, and without damage.Results of the survey by Manrodt and Vitasek found thatmedian performance was 97 to 99% perfect orders, with“best-in- class” companies scoring as high as 99.9%.

Order cycle time is a critical quality measurement,which is not defined as comprehensively as it should be.The most common definition of order cycle time, is thetime elapsed between receipt of order and its’ shipment.However, the customer is concerned with when the orderis received, not when it was shipped. This means that thedelivering carrier and distribution center managementmust work as a team to achieve continuous improvementin total order cycle time. The results of the Manrodt/Vitasek survey show that order cycle time performance ofbest-in-class companies declined between 2006 and2007. That is a disturbing statistic.

Finally, how well does your company control its distri-bution cost as a percent of sales? There are major varia-tions by industry, but survey results showed that medianperformance was 4.9%, with best-in-class dropping toless than 2.2%. The actual number is less important thanthe trend from year to year.

Putting It All TogetherToday’s supply chain manager faces a daunting combi-

nation of challenges. In the face of relentless senior man-agement pressures to improve quality and control cost,only a few companies have been successful at doing both.While there could be many theories to explain this im-provement in performance, our belief is that more effec-tive teamwork between warehousing and transportationproviders has been the most important factor.

VOLUME 22 • NUMBER 10 • SEPTEMBER 2007VOLUME 22 • NUMBER 10 • SEPTEMBER 2007

The Integration of Storage and MovementEditor’s Note: A June 2007 research study by Ian Hobkirk,“Integrated Transportation Management” published byAberdeen Group, provided the inspiration for this article.“Performance by the Numbers,” by Karl Manrodt and KateVitasek, an article published by DC Velocity, May, 2007, wasreferenced as well. KBA

Throughout the duration of our attention to supplychain management and its earlier incarnations as physicaldistribution and logistics, the critical interaction betweenthose who move cargo and those who store it has been a fo-cus for researchers.

The Historical PerspectiveDuring the 19th and 20th centuries transportation terms

like, transfer, truck & storage, depot or terminal wereused in the names of many warehousing companies. Onetraditional definition of warehousing was "transportationat zero miles per hour."

When American transportation pricing and serviceswere controlled by federal regulation, warehousing was awidely accepted method of controlling total logisticscosts. Low-cost transport modes, such as rail, marine, andtruckload carriage were used to position inventories nearcustomers, and local warehouse operators provided pooldistribution (a.k.a. cross docking), warehousing, cus-tomer pickup, and delivery.

New Challenges in TransportationWhile the business of storage and warehousing has un-

dergone substantial change during recent decades, thechanges in transportation are greater and more profound.The distance factor is a major change. Nearly every distri-bution company imports an increasing percentage ofproducts from Oriental sources that are thousands of milesdistant from the destination. Accordingly, every commer-cial enterprise is involved in a slow, costly, and sometimesunpredictable struggle to manage lead times and controlinventory shipped from overseas manufacturers.

The cost of transportation has escalated with increaseddistance. It is aggravated by record high costs of the petro-leum products that fuel every transport mode.

A critical problem in the human resources area also hasraised the cost of motor freight. Workforce turnover is arecord 130% among long-haul motor carriers, meaningthat the average truck driver stays with one company for

about nine months. Because new workers must be re-cruited and trained, the cost of the turnover is significant,and must be reflected in the rates charged by the carrier.

Older Challenges Still RemainA study initiated by researchers at The Ohio State Uni-

versity a number of years ago, found that the majority oftrucks on the streets of Columbus, Ohio, were lightlyloaded or empty. They observed that the trucks contrib-uted greatly to traffic congestion, and suggested that amultiuser consolidation terminal at the edge of the citycould reduce the number of trucks entering the commu-nity. The research drew attention overseas, especially inthe Soviet Union; however, no one in the USA wanted tointerfere with the private enterprise system of motorfreight delivery. In recent research, it was found that thewaste generated by underutilized vehicles is just as greattoday as it ever has been.

Railroad transportation is not as competitive in eitherservice or cost as it needs to be. The significant conflictthat once existed between motor carriers and the railroadsrarely is experienced today. Railroad companies bear thecost of ownership and maintenance of their “highways,”while competing with motor, water, and air freight compa-nies that enjoy the use of government owned facilities.Railroad management must make huge capital outlays tomaintain their capability to handle the growingintermodal cargo from the Orient. Additionally, they mustadd the personnel needed to handle sharply increased vol-umes. One carrier estimated that recruitment and trainingof a new crew is a nine month process.

New ToolsEven with increases in transportation costs, sup-

ply-chain management professionals have access to toolsthat were not dreamed of in the past. At one time, elec-tronic communication, particularly overseas, was slowand expensive. Today, communication virtually is freeand widely available almost everywhere in the world.

Global positioning systems (GPS) can pinpoint the pre-cise location of vehicles. Visibility systems in warehouseand transportation management systems convenientlydisplay information on the status of every shipment.

Years ago, Ohio State Professor, B. J. LaLonde, indi-cated that in the future, the supply-chain manager wouldbe able to trade information for inventory, using superiorsystems to avoid needless investment. That future is now!

All Charged UpBy G. Weimer, DC Velocity, August 2007, pg. 60.

Explored in this article is the continuing debate be-tween vendors of fast charge battery systems, andthose who sell traditional batteries and battery chang-ing equipment. The latter group argues that fastcharge systems shorten battery life. Because batteriesmust be both charged and cooled, electric trucks usedon three shifts require three batteries per truck, to en-able them to be worked for eight hours, charged foreight hours, and cooled for eight hours. For maximumbattery life, batteries should not be changed until anindicator light signals that it is time for a fresh battery.This may occur at a convenient time, when the vehicleis working far from the charging station. Fast charg-ing allows batteries to be refreshed during lunch andcoffee breaks, and it eliminates time and safety issuesinvolved in handling heavy acid filled batteries. Op-ponents of fast charge systems argue that all batteriesshould receive a full charge each day as well as an“equalize charge” once per week. This suggests thatthe fast charge systems would work well for a twoshift operation, but not for three. Contact informationfor nine vendors of both battery handling and charg-ing systems is provided as an insert.

Software as a ServiceBy Denis O’Sullivan, Focus, April 2007 pg. 30.

Software as a service, (SAAS), is also referred toas on-demand. It is a good fit for small companies inwhich the IT staff does not manage information sys-tems. It also is popular in large companies in whichimplementing new systems through the internal ITdepartment may be difficult. Charges for the systemare based on transactions, and there is little or no capi-tal expenditure. Two of the most popular applicationsare vehicle routing and scheduling, and track andtrace capability.

How to Win Friends and Influence SoftwareBy J. A. Cooke, DC Velocity, August 2007, pg. 38.

Joining a user group is the easiest and mostcost-effective way to have some influence in the mod-ification and future development of your warehous-ing or transportation software. User groups areformed by customers of a particular solution vendor.They are an important communication channel be-tween users and vendors, and can have measurable in-fluence on product development. User groups mayinclude warehouse managers, operations managers,information specialists and even CEO’s. The attrac-tion is the opportunity to learn from fellow users. Formany, their relationship building facilitated by theuser group becomes the most important benefit of all.

Withdrawing From A Third-Party WarehouseBy Steve Sordy, Focus, May 2007, pg. 31.

Mr. Sordy, and a British magazine, had the forti-tude to address a subject that many managers find toougly to discuss. The process involves the followingsix steps:

P Be sure you understand and can explain, ef-fectively, the reasons for the withdrawal.

P Be certain that you have collected all of therelevant facts, especially contract details.

P Expect the unexpected. For example, are youliable for wear and tear to the owner’s build-ing?

P Engage senior management at the logisticssupplier to maintain good relations.

P Create a project plan to cover every detail ofthe move.

P Implement the plan.In a concluding note, the author warns: “Do not

burn your bridges.”

It’s Not Easy Being GreenBy Clifford F. Lynch, DC Velocity, March 2007, pg. 43.

While praising the green initiatives developed byWal-Mart and others, the author described similar ini-tiatives that met with disaster. A consumer productsmanufacturer introduced recycled corrugated, but thepackaging engineers neglected to test stackingstrength. As a result, bulk storage was replaced bymuch more expensive rack storage. When cartonswere replaced by shrink wrapped cardboard trays,many automated warehouse systems were unable toaccommodate the new packaging. Green initiativesmust be accomplished in a logistics friendly manner.

Who – and What – Is Profitable?By R Sabath, D. J. Daugherty, D. D. Mattioda, and H.Chen, Supply Chain Management Review, July/Au-gust 2007, pg. 44.

Many companies do not track profitability by cus-tomers or by products. These research results make astrong case for doing so. The authors reached thesemajor conclusions:

P Customer information is more important thanproduct information.

P Collecting profit contribution informationhas significant diagnostic value.

P Using profit information leads to strongersupply chain relationships.

Tracking profit contribution helps management tofocus efforts and identify the biggest potential re-wards. It enables management to set priorities.

VOLUME 22 • NUMBER 10 • SEPTEMBER 2007VOLUME 22 • NUMBER 10 • SEPTEMBER 2007

The Integration of Storage and MovementEditor’s Note: A June 2007 research study by Ian Hobkirk,“Integrated Transportation Management” published byAberdeen Group, provided the inspiration for this article.“Performance by the Numbers,” by Karl Manrodt and KateVitasek, an article published by DC Velocity, May, 2007, wasreferenced as well. KBA

Throughout the duration of our attention to supplychain management and its earlier incarnations as physicaldistribution and logistics, the critical interaction betweenthose who move cargo and those who store it has been a fo-cus for researchers.

The Historical PerspectiveDuring the 19th and 20th centuries transportation terms

like, transfer, truck & storage, depot or terminal wereused in the names of many warehousing companies. Onetraditional definition of warehousing was "transportationat zero miles per hour."

When American transportation pricing and serviceswere controlled by federal regulation, warehousing was awidely accepted method of controlling total logisticscosts. Low-cost transport modes, such as rail, marine, andtruckload carriage were used to position inventories nearcustomers, and local warehouse operators provided pooldistribution (a.k.a. cross docking), warehousing, cus-tomer pickup, and delivery.

New Challenges in TransportationWhile the business of storage and warehousing has un-

dergone substantial change during recent decades, thechanges in transportation are greater and more profound.The distance factor is a major change. Nearly every distri-bution company imports an increasing percentage ofproducts from Oriental sources that are thousands of milesdistant from the destination. Accordingly, every commer-cial enterprise is involved in a slow, costly, and sometimesunpredictable struggle to manage lead times and controlinventory shipped from overseas manufacturers.

The cost of transportation has escalated with increaseddistance. It is aggravated by record high costs of the petro-leum products that fuel every transport mode.

A critical problem in the human resources area also hasraised the cost of motor freight. Workforce turnover is arecord 130% among long-haul motor carriers, meaningthat the average truck driver stays with one company for

about nine months. Because new workers must be re-cruited and trained, the cost of the turnover is significant,and must be reflected in the rates charged by the carrier.

Older Challenges Still RemainA study initiated by researchers at The Ohio State Uni-

versity a number of years ago, found that the majority oftrucks on the streets of Columbus, Ohio, were lightlyloaded or empty. They observed that the trucks contrib-uted greatly to traffic congestion, and suggested that amultiuser consolidation terminal at the edge of the citycould reduce the number of trucks entering the commu-nity. The research drew attention overseas, especially inthe Soviet Union; however, no one in the USA wanted tointerfere with the private enterprise system of motorfreight delivery. In recent research, it was found that thewaste generated by underutilized vehicles is just as greattoday as it ever has been.

Railroad transportation is not as competitive in eitherservice or cost as it needs to be. The significant conflictthat once existed between motor carriers and the railroadsrarely is experienced today. Railroad companies bear thecost of ownership and maintenance of their “highways,”while competing with motor, water, and air freight compa-nies that enjoy the use of government owned facilities.Railroad management must make huge capital outlays tomaintain their capability to handle the growingintermodal cargo from the Orient. Additionally, they mustadd the personnel needed to handle sharply increased vol-umes. One carrier estimated that recruitment and trainingof a new crew is a nine month process.

New ToolsEven with increases in transportation costs, sup-

ply-chain management professionals have access to toolsthat were not dreamed of in the past. At one time, elec-tronic communication, particularly overseas, was slowand expensive. Today, communication virtually is freeand widely available almost everywhere in the world.

Global positioning systems (GPS) can pinpoint the pre-cise location of vehicles. Visibility systems in warehouseand transportation management systems convenientlydisplay information on the status of every shipment.

Years ago, Ohio State Professor, B. J. LaLonde, indi-cated that in the future, the supply-chain manager wouldbe able to trade information for inventory, using superiorsystems to avoid needless investment. That future is now!

All Charged UpBy G. Weimer, DC Velocity, August 2007, pg. 60.

Explored in this article is the continuing debate be-tween vendors of fast charge battery systems, andthose who sell traditional batteries and battery chang-ing equipment. The latter group argues that fastcharge systems shorten battery life. Because batteriesmust be both charged and cooled, electric trucks usedon three shifts require three batteries per truck, to en-able them to be worked for eight hours, charged foreight hours, and cooled for eight hours. For maximumbattery life, batteries should not be changed until anindicator light signals that it is time for a fresh battery.This may occur at a convenient time, when the vehicleis working far from the charging station. Fast charg-ing allows batteries to be refreshed during lunch andcoffee breaks, and it eliminates time and safety issuesinvolved in handling heavy acid filled batteries. Op-ponents of fast charge systems argue that all batteriesshould receive a full charge each day as well as an“equalize charge” once per week. This suggests thatthe fast charge systems would work well for a twoshift operation, but not for three. Contact informationfor nine vendors of both battery handling and charg-ing systems is provided as an insert.

Software as a ServiceBy Denis O’Sullivan, Focus, April 2007 pg. 30.

Software as a service, (SAAS), is also referred toas on-demand. It is a good fit for small companies inwhich the IT staff does not manage information sys-tems. It also is popular in large companies in whichimplementing new systems through the internal ITdepartment may be difficult. Charges for the systemare based on transactions, and there is little or no capi-tal expenditure. Two of the most popular applicationsare vehicle routing and scheduling, and track andtrace capability.

How to Win Friends and Influence SoftwareBy J. A. Cooke, DC Velocity, August 2007, pg. 38.

Joining a user group is the easiest and mostcost-effective way to have some influence in the mod-ification and future development of your warehous-ing or transportation software. User groups areformed by customers of a particular solution vendor.They are an important communication channel be-tween users and vendors, and can have measurable in-fluence on product development. User groups mayinclude warehouse managers, operations managers,information specialists and even CEO’s. The attrac-tion is the opportunity to learn from fellow users. Formany, their relationship building facilitated by theuser group becomes the most important benefit of all.

Withdrawing From A Third-Party WarehouseBy Steve Sordy, Focus, May 2007, pg. 31.

Mr. Sordy, and a British magazine, had the forti-tude to address a subject that many managers find toougly to discuss. The process involves the followingsix steps:

P Be sure you understand and can explain, ef-fectively, the reasons for the withdrawal.

P Be certain that you have collected all of therelevant facts, especially contract details.

P Expect the unexpected. For example, are youliable for wear and tear to the owner’s build-ing?

P Engage senior management at the logisticssupplier to maintain good relations.

P Create a project plan to cover every detail ofthe move.

P Implement the plan.In a concluding note, the author warns: “Do not

burn your bridges.”

It’s Not Easy Being GreenBy Clifford F. Lynch, DC Velocity, March 2007, pg. 43.

While praising the green initiatives developed byWal-Mart and others, the author described similar ini-tiatives that met with disaster. A consumer productsmanufacturer introduced recycled corrugated, but thepackaging engineers neglected to test stackingstrength. As a result, bulk storage was replaced bymuch more expensive rack storage. When cartonswere replaced by shrink wrapped cardboard trays,many automated warehouse systems were unable toaccommodate the new packaging. Green initiativesmust be accomplished in a logistics friendly manner.

Who – and What – Is Profitable?By R Sabath, D. J. Daugherty, D. D. Mattioda, and H.Chen, Supply Chain Management Review, July/Au-gust 2007, pg. 44.

Many companies do not track profitability by cus-tomers or by products. These research results make astrong case for doing so. The authors reached thesemajor conclusions:

P Customer information is more important thanproduct information.

P Collecting profit contribution informationhas significant diagnostic value.

P Using profit information leads to strongersupply chain relationships.

Tracking profit contribution helps management tofocus efforts and identify the biggest potential re-wards. It enables management to set priorities.