With due apologies to Charles Dickens, our fearless Supply Chain forecasters are predicting that 2008 will go down in the books as both the best and worst of years.

The operative word in all aspects of the Supply Chain—transportation, logistics, IT, trade finance—is ‘Change.’ On the upside this bodes well for improvements in efficiency, control and return on assets; on the downside is the merciless competition that is driving these change imperatives, leaving little margin for error.

And of course all of this within the context of a U.S. (and global?) economy expected to be sluggish at best.

With so much in play, World Trade Magazine cast its net broadly this year for forecasters. We sought opinions from operators and analysts across the spectrum, asking them to stake out how they saw the landscape shaking out.

Here are the headlines: faster responsiveness amongst supply chain collaborators, more consolidation within 3PLs to afford global capability, price wars and route expansion as air freight providers compete for cargo, and evolution of Web-based platforms to enable real-time supply chain visibility.

Last year we looked ahead to 2007 as “the year of living dangerously.” Two thousand eight will see more of the same as the global supply chain that had previously fed into the United States becomes more of a two-way channel with increasingly more amounts of out-bound. 

We are thus entering a major transitional moment.  The balance of power may be shifting towards shippers as transport providers compete for lesser levels of freight but at the same time those shippers are demanding collaborative logistic partners with ample resources to maximize supply chain productivity.

The complexity of managing supply chains is only going to grow more challenging.

—Neil Shister, Editorial Director

Top 10 Predictions for 2008: Better, Faster Supply Chain Decision Making Will Be The Next Big Thing, by Simon Ellis

Manufacturing Insights, an IDC company, is a vertical research company focusing on Manufacturing and Supply Chain, and providing strategic business technology and application advice. IDC is the foremost global market intelligence and advisory firm with more than 900 analysts spanning over 90 countries. Within Manufacturing Insights, the Supply Chain Strategies advisory service offers fact-based research and analysis to help manufacturers and retailers make informed decisions on the deployment of global supply chain strategies and supporting technology applications.

The world continues to change, with growing pressures on manufacturers’ supply chain organizations for greater efficiency and sustainability. At the same time, supply chain complexity, driven by diversifying retail and consumer demands in the form of new products and services, requires unparalleled flexibility and agility.

Based on extensive surveys of top manufacturers around the globe, there is a strong desire for better, faster decision-making in this increasingly complex business environment. In the supply chain, the focus is therefore on tools and business processes that can facilitate this better, faster decision-making (supply chain execution, visibility/inventory optimization, RFID, lean/six sigma, risk management) whilst maintaining an acceptable cost base (low-cost country sourcing, sustainability, ‘supply chain as partner,’ strategic outsourcing).

At the conclusion of every year, Manufacturing Insights develops a series of Top 10 Predictions documents for the upcoming year. These predictions are those trends or developments within the marketplace that we believe to be the most urgent and influential for the coming year, and the areas that will generate new activity and spending. 

At Manufacturing Insights we will follow these predictions throughout 2008, both in our complimentary newsletter Theory & Practice and in our custom research.

1. Your suppliers' problems become your own, especially when they are related to sustainability.

The new metric for the 2008 supply chain will be sustainability, reprioritizing criteria for suppliers to include environmental factors and regulatory compliance. The pervasiveness of sustainability discussions and its elevation to C-level executives means customers are demanding visibility into their own operations and those of their suppliers and suppliers’ suppliers. It will no longer be enough to look for sustainability in your own operations, but in your suppliers operations as well. Sustainability will become more than just ‘Green-IT’ and environmental packaging, it will extend to things like social corporate responsibility, postponement, and better use of logistics/transportation.

2. New supply chain investments have to be simpler and faster to integrate, and must deliver value sooner.

The drive for business process advancements in the supply chain puts more pressure on supply chain applications to be more easily integrated into existing IT investments. The continuing shift away from best-of-breed supply chain IT strategies (at least to the extent that they are directly integrated), and towards a common platform with pre-integrated modules (as opposed to integration post-deal), implies that the longer-term survival of smaller/best-of-breed vendors will depend upon best practice-based partnerships as critical means for serving customers.

3. Business value comes first, RFID technology second.

RFID technology decisions take a back seat to delivering business value. RFID has finally shed its hype: buyers are impatient with the technology and will only move forward if they can expect vendors to deliver complete applications the first time around, including ROI. Part of achieving that will be more integrated solutions that bundle hardware, software, and an understanding of manufacturers’ business challenges that can be addressed with RFID.

4. Quality reigns supreme in a back-to-basics focus.

A renewed focus on back-to-basics raises the profile of lean and six sigma quality controls within the supply chain. The supply chain faces a fading infrastructure and loss of talent, yet the challenge to fundamentally balance cost and productivity with customer service is intensifying. Quality control practices, used successfully within manufacturing, will become an increasingly necessary component of the supply chain. Companies will use it for industry specific focus, such as tackling the persistent issues of on-shelf availability/out-of-stocks in CP. 

5. Outsourcing reaches deeper into the business, as companies redefine core competencies to a smaller set of strategic priorities.

Outsourcing continues to ramp up and reaches deeper in the supply chain into areas that were once considered core competencies. At the same time, budget pressures on the IT organization are driving companies to redefine core competencies to a smaller set of priorities, and strengthen those skills internally and rely on outsourcing to do more with less. This ‘strategic outsourcing’ will continue to result in companies becoming increasingly reliant on the extended supply network and struggle with control of an exponentially more complex supply network.

6. Risk management is the key to becoming global.

Risk management becomes a priority as companies struggle to move beyond multi-regional operations to truly global supply networks. It will allow companies to better balance the tradeoffs inherent in things like low-cost country sourcing and extended supply networks.

7. Practical application of fulfillment-driven techniques wins out over the lofty demand-driven dreams to deliver SC efficiency.

Supply chain planning elevates demand-shaping techniques and moves more to a fulfillment-driven rather than demand-driven approach. It involves the challenge of moving from a ‘capacity optimization’ to a ‘buffer inventory optimization’ approach. Visibility can reduce unnecessary elements of inventory but the ‘pulsed’ nature of supply chains requires buffer inventories. A true demand-driven approach requires significant supply capabilities (i.e. more rapid cycling of SKUs/manufacturing flexibility and capacity) which, at least in the short- to medium-term, businesses have been reluctant to do.

8. Finally, companies recognize that the supply chain is THE essential ingredient for global competition.

In the context of supply chain cost pressures (sourcing, transportation) and globalization, expect more consistent participation of the supply chain in broader business decisions, as well as a renewed focus on supply chain execution systems (SCE). There is a reduced tolerance for supply chain ‘waste’ and clear evidence that supply chain involvement in NPDI (new product development and introduction), for example, can both speed up the process and reduce rework. Further, continued pressure on supply chain costs will motivate businesses to look more closely at better execution—TMS, network optimization, event management. More accessible options from vendors like SAP will make integration easier.

9. Start your RFID projects at home.

More sensible RFID implementations will see a continued reemergence of ‘four walls’ applications  (asset tracking, ingredient monitoring) as collaborative visibility benefits remain elusive. Successful RFID pilot applications have moved beyond CPG and include many examples of both IT and non-IT asset/spare parts tracking. Momentum in Consumer Products is clearly slowing, although progress in other industry verticals will reduce technology costs and allow for a reevaluation in CP. A greater focus on ROI, and the chronic shortage of qualified RFID system integrators further incentivises companies to ‘start where you know.’

10. Manufacturing cost still matters, but companies are increasingly looking at total supply network cost when evaluating sourcing options.

Low cost country sourcing isn’t just about China, it’s also about India, Vietnam, South America … and sometimes it just doesn’t make sense. Companies need to look at all options, including low-cost country outsourcing, near-sourcing, or even moving operations to locations of growing customer segments (‘follow the global consumer’). Skyrocketing energy costs, and the implications for transportation/logistics costs may change the dynamic for many categories. wt

Sidebar: Quality Control Practices are a Growing Component of the Supply Chain

Many progressive companies are now realizing that the quality control practices (lean, six sigma, TPM) that have been so successful within manufacturing can be applied elsewhere in the supply chain. This is particularly true in places where people and business processes are complex and require extensive, hands-on follow up. Logistics, or the business processes that make up ‘Deliver/Replenishment,’ is a good candidate for the expansion of these kinds of process controls as many of the work is still characterized by people having direct personal or environmental interaction, where the success of the relationship is dependent upon someone completing a task or set of tasks.

A specific example of this is the thorny problem of on-shelf availability in consumer packaged goods. Out-of-stocks have largely stabilized at about 10%, and efforts to reduce the problem have either not been effective or have just offset growing complexity (SKU proliferation, channel differentiation, smaller/more frequent order patterns). While technology solutions such as RFID offer promising solutions, cost and inter-operability remain barriers to adoption. The implementation of quality control practices, however, have no such technological barriers and in limited tests have shown promise.

Great Predictions 2008: Buckle Up and Hunker Down, by Andrea MacDonald

It was a challenging year for the logistics sector with continued consolidations, increasing fuel and transportation costs, intermodal issues and a softening in the economy overall. So what does it all mean for 2008? We asked a sampling of executives from across the supply chain—logistics providers, shipping lines, supply chain finance providers and ports—to give us their predictions.

Jerry Levy, Vice President, Marketing, Agility

It has been a year of change. There has been a big change in demand that has allowed assets and infrastructure to catch up at the ports. Trade will continue to become more balanced, and business levels will be healthier for non-asset companies. Agility will continue to gain critical mass in developing countries such as Sri Lanka, Vietnam, India and Pakistan through 2008.

A change is definitely coming. We will see the U.S. export engine expand due to the lower U.S. dollar. Capacity, the exchange rate and the efficiency of U.S. businesses create the perfect storm for the U.S. balance of trade to improve. This is the time for businesses to look at their export supply chains.

The world economy looks to be sound with demand for U.S. products there, but in most developing nations the internal logistics and transportation infrastructure is way behind.

—Jerry Levy, Vice President, Marketing, Agility

Roy Slagle, Senior Vice President of Sales & Marketing, ABF

As with most of the industry, we have experienced year over year tonnage declines. However, we have effectively managed through this challenging environment and look forward to 2008. We see prospects of profitable growth with RPM, our regional line-haul network that provides next-day and second-day service throughout the eastern two-thirds of the U.S. However, congestion and domestic infrastructure on the roads and at the ports will continue to be a major challenge for the supply chain.

—Roy Slagle, Senior Vice President of Sales & Marketing, ABF

John Bowe, President of the Americas, APL and APL Logistics

Rising costs continued to force carriers to reassess the way they operate, but 2007 has also seen the beginnings of a turnaround in the business cycle; market conditions have improved, rates have stabilized and containerized trade growth globally is healthy. 

Our big objective for 2008 is to help shippers and carriers better understand the forces that shape their businesses. How can carriers generate profit to plow back into their transportation and logistics infrastructure? How can shippers control their supply chain costs to make overseas sourcing strategies work? We need an understanding of these fundamentals if we’re going to build mutually beneficial relationships.

Shippers will turn increasingly to transportation and logistics partners who can help them overcome the challenges of supply chain cost and congestion. This means working with providers who control their own assets, have size and strength across the continuum of logistics services, and have a record of innovation and reliability in delivering time-definite service in a challenging operating environment. 

—John Bowe, President of the Americas, APL and APL Logistics

Joey Carnes, CEO, Bax Global Inc.

Two thousand seven was a very good business year because we were able to grow our market share at a very healthy pace. This was accomplished due to larger companies continuing their practice of outsourcing substantial portions of their 3PL activity with a fewer number of providers. Sustained growth is always our biggest goal and our biggest challenge. However, what has allowed us to meet this goal is our continued focus on improving our service offerings to the vertical markets we serve. We will continue to leverage our size and scale.

The biggest change that will have the most significant impact on the supply chain is cost effective tracking and tracing capabilities. RFID is gaining momentum and once it is made more affordable on an established unified platform, it will make a major impact on the management of the supply chain.

Joey Carnes, CEO, Bax Global Inc.

Jim Butts, Vice President, C.H. Robinson

The weakening dollar has fueled export interest. However, it may also cause shippers to reconsider the lengthening of supply chains, as the dollar buys relatively less in labor and transportation. Supply chain and food safety will continue to warrant attention and demand resources, as will import/export security issues. When the housing market rebounds, and construction picks up, we may be revisiting the driver shortage issue. Congestion issues in major cities and the green movement will continue to challenge the transportation and logistics industry for comprehensive solutions. The biggest change we see, however, is in the use and proliferation of business information to increase supply chain effectiveness, drive towards lower total costs, facilitate decision making and increase the likelihood of achieving competitive advantage.

Jim Butts, Vice President, C.H. Robinson

Howard Finkel, Executive Vice President, COSCO Container Lines Americas Inc.

We had ships full the whole year but supply and demand were imbalanced. The tremendous cost increases due to land transportation and fuel were not covered by an equivalent increase in the rates charged to shippers. We are the only transportation sector where customers do not pay an emergency fuel charge to cover increases. Our efforts in 2008 will focus on recouping some of these cost increases. When we enter into negotiations with customers (for U.S. controlled cargo coming from Asia) we will be trying to find some common ground for revenue recovery.

A big change will be the opening of the new port in Prince Rupert, Canada, which is the closest port to Asia by two days. We are the only shipping line currently at the facility, which is going to be one of the best ports for cargo to the Midwest.

Howard Finkel, Executive Vice President, COSCO Container Lines Americas Inc.

Ram Menen, Divisional Senior Vice President, Cargo, Emirates Sky Cargo

It has been a year of challenges—over-capacity on truck routes, high costs due to high oil prices, and the weak dollar. The second half of 2007 is performing better than the first half however, with demand for airfreight on the rise, and some of the cargo that was lost to ocean freight returning to the air. Two thousand eight will see a continued focus on our expansion plans, targeting global connectivity for our customers and business partners. 

The downward slide of the dollar is likely to lead to a paradigm shift worldwide. Besides its obvious geo-political challenges, the single biggest change will be in procurement patterns within the globalization of production. Markets such as India will emerge as industrial powerhouses, with manufacturing outsourcing for high-tech hardware overtaking business process outsourcing. 

Technology and RFID initiatives will continue to evolve; the charge for cargo liberalization will gain momentum; and security and environmental issues will continue to dominate. The science of inventory management as a means to achieving better cost-economies in the supply chain will be a major focus.

Ram Menen, Divisional Senior Vice President, Cargo, Emirates Sky Cargo

Greg Kefer, Director, Corporate Marketing, GT Nexus

Importers and exporters know they need technology to help them manage their long, complex global supply chains and have discovered that their traditional, installed supply chain software systems are not designed to scale “beyond their four walls.” Instead, they are looking for an on-demand platform that is accessible via the Web. As a result, we are aggressively expanding into Europe, Asia and South America and are continuously extending the capability mix of the GT Nexus portal.

One of the exciting trends we are seeing involves the financial supply chain. For years, the logistics departments have been building out platforms to track and manage the physical flows of inventory. Now, companies are discovering that the same information can be used by the financial side of organizations to drive improvements in the way goods sourced from overseas are financed. This enables companies to use a single platform to drive efficiencies and savings in the way they order goods, move goods and pay for goods.

Greg Kefer, Director, Corporate Marketing, GT Nexus

Bob Bianco, President, Menlo Worldwide

We expect to see continued evolution of where and how companies selectively and strategically employ outsourcing initiatives to improve logistics and supply chain performance. Recently, two industry studies predicted the logistics spend that companies worldwide will devote to outsourcing will continue to grow in the range of 10–15 percent each year. The challenge for 3PLs is simple. We must focus on creating value and helping our customers reduce the overall cost of operating longer, more complex and dynamic supply chains. With our focus on using process to drive value and the global application of lean principles and practices in every facility we have, we have the unique ability to help our customers remove waste, realize efficiencies and do it consistently.

Bob Bianco, President, Menlo Worldwide

Mike Wilson, Director of Trade Development, Port Freeport

We plan to bring our new $1 billion LNG facility on line in the first quarter of 2008. In addition to the LNG project, we will be stabilizing another 20-30 acres of the 8,000 acres we own on deep water for project cargo and new liner business. At the current pace, by the end of 2008 we could move from the thirteenth port in the nation in total foreign tonnage, to one of the top 10. 

We just started construction of our new container facility, Velasco terminal. It will be approximately 800,000 TEUs in size and will have a major impact on the Gulf Coast once it is completed. In market terms, we expect the dollar to begin to recover in 2008, and imports to begin to increase as a result.

Mike Wilson, Director of Trade Development, Port Freeport

John Creighton, Commissioner, Port of Seattle

Two thousand seven was relatively flat, and has been so for the past two years. But worldwide, the trend is up and we expect to see growth. China is still booming; in order to be prepared we are converting a cruise ship terminal into a freight terminal.

Our biggest objective for 2008 is to get ahead of the curve on environmental stewardship. Maritime emissions are roughly 30 percent of regional emissions. In the draft of the Northwest Ports Clean Air Strategy—currently under review by the ports of Seattle, Tacoma, and Vancouver, BC—we propose a 70 percent reduction in emissions from ocean-going vessels by 2010. That’s an aggressive goal that we can achieve through collaboration with the ports’ partners. Our biggest challenge is to manage a thriving port within a gentrifying community. It’s a challenge for many ports. Terminals are often right downtown and near major bedroom communities. We want to ensure we remain ahead of the curve on environmental stewardship, while still maintaining an efficient freight corridor in the community.

John Creighton, Commissioner, Port of Seattle

Rick Langer, General Manager, PowerTrack/US Bank

This year, we saw an awareness on the part of the customer that the financial supply chain can offer a competitive advantage the same way the physical supply chain can

In order to continue our growth, 2008 will see us manage our acquisition while we continue to expand our global footprint by leveraging the presence in Europe we gained through the acquisition and expanding into Asia Pacific. We will also continue to derive greater tool sets for our customers.

The biggest change we see happening is the awakening within customers that the physical supply chain connects to the financial supply chain. Customers are becoming more aware of the benefits that can come from turning their attention to the financial supply chain, and financial institutions are more focused on developing tools.

Rick Langer, General Manager, PowerTrack/US Bank

Elizabeth Atkins, Senior Vice President & Head of Supply Chain Finance, Wells Fargo HSBC Trade Bank

The supply chain finance business is beginning its transition from a unique and highly specialized niche to a mainstream product offering. We are seeing our most highly conservative large corporates down to smaller middle-market importers implement financial supply chain solutions. In 2008, we will continue to provide middle-market customers access to integrated treasury management and supply chain finance tools that have traditionally only been available to large corporations.  

There is a wealth of non-integrated information available today from financial institutions, 3PLs and other technology providers on the physical and financial supply chain. The next big step will be to integrate this information in a way that companies can take action to more efficiently manage working capital through all phases of their physical and financial supply chains. 

Elizabeth Atkins, Senior Vice President & Head of Supply Chain Finance, Wells Fargo HSBC Trade Bank

Clifford K. Otto, President, Saddle Creek Corp.

We have three main objectives for 2008: expansion, in terms of facilities as well as geographically throughout the U.S.; a focus on technology that will result in increased productivity and operational improvements; and a continued customer service focus as we explore how we can bring greater value to our customers. 

Changes we see coming include industry demand for greater depth of services and for greater visibility of goods throughout the supply chain. Consolidations will continue to be a concern as many of the larger players have focused their efforts on building a global infrastructure. Both cost and availability of fuel concerns are likely to continue causing companies to re-evaluate strategies that have produced long global supply chains. We could see some repositioning of manufacturing and distribution activity closer to North American markets.

Clifford K. Otto, President, Saddle Creek Corp.

Jackie Kaiko, Global Trade Middle Market Sales Executive, JPMorgan Chase

This year, we’ve seen an acceleration of mega-retailers moving their vendors from Letters of Credit (LC) to Open Account (OA) and engaging banks to handle their OA processing. What must happen to make this trend domino down to smaller companies also looking to automate key functions, achieve process proficiencies and gain cost savings?

For trade bankers and their clients, the questions may be: Can I buy OA processing in a cost effective way? What will the impact be on my suppliers’ liquidity and ability to meet their obligations if their LCs are taken away? Can I require my suppliers to direct their documents to my OA processing bank the way the large retailers do? How do I decide what LC/OA mix is right for my business? How do I evaluate individual vendors and the impact on them? If I’m already using OA, is it beneficial to outsource the PO matching process to a third party?

These are issues for design growth strategies, supply chain integration and working capital management. Bankers will need to provide the right answers.

Jackie Kaiko, Global Trade Middle Market Sales Executive, JPMorgan Chase

John Carr, President, Americas & Europe, YRC Logistics

The economy this past year has made volumes soft both globally and domestically. Our clients continue to try to do more with less because of financial pressures. This has facilitated the need for outsourcing of transportation and logistics. In 2008, we will continue to focus on managing the global supply chain end-to-end for our clients, which means continuing to build our business internationally.

We are currently working with a handful of clients to put “green” solutions in place, with more and more clients indicating an interest. Companies are requiring more collaboration among their partners; we expect to see companies closely aligning themselves with logistics partners that openly want to collaborate in efforts to drive more value in the supply chain.

John Carr, President, Americas & Europe, YRC Logistics

Trade Finance 2008: Innovation and Creativity Are Now The Constants, by Richard Barovick

Innovation didn’t used to be a dominant characteristic of trade finance. The field was tradition-bound, and the letter of credit, its signature product, which dates back centuries, required laborious, error-prone, paper documents.

But in the 1980s, the personal computer arrived, and document creation sped up, as inefficient paper trails gave way to the digital world. The 1990s Internet revolution then ushered in a platform for document and information exchange, and trade finance has never been the same. Change is now constant.

Then too, globalization, trade’s big engine, while driving a furious expansion in product flows, also supported the internationalization of banking and credit insurance—which created a presence on both sides of deals, mitigated risk, and injected credit along the entire transaction cycle.

So, looking ahead at trade finance, the tea leaves are clear enough. Here’s the broad picture of what is coming down the road.

Import Finance

On the import side, where global supply chain finance has been the blockbuster development, online visibility throughout transactions, from purchase order to final delivery, has enabled traders and financial institutions to track events, reduce risk, and offer credit.

The next stage, already underway, can be found in the services offered and the roster of banks and information technology (IT) firms involved.

In services, a major strategy to watch: treating supply chain finance as a cooperative effort among buyers and sellers, and their banks and IT providers. Buyers have begun offering early payments, vendors invoice discounting. As these reduce costs throughout the chain, more large importers can be expected to adopt “best practices” in this strategy as they evolve.

Meanwhile, as open account terms steadily replace letters of credit, small Asian suppliers can expect to be seriously challenged to arrange pre-export finance, especially for sales to major U.S. retailers.

“U.S. importers need to find ways to help their Asian vendors, who traditionally have relied on letters of credit as a basis for obtaining local bank financing,” says Jackie Kaiko, Vice President, Global Sales at JPMorgan Chase Bank. In response, JPMorgan Chase now provides that finance along with its online supply chain services.

Among banks and IT groups that deliver supply chain finance, the patterns now emerging can be expected to shape the field for some time.

Eight to ten large global groups dominate the bank contingent, and will be competing intensely through investments in intellectual capital (systems, software, platforms). These titans (such as Citibank, JPMorgan Chase, and HSBC) need scale to spread the heavy costs of innovation.

The multi-part strategy at JPMorgan Chase Bank is illuminating on what’s ahead. While the bank is expanding services to in-house customers, it is offering a “white label” (outsourcing) service to mid-sized and smaller U.S. banks, and to overseas lenders through its correspondent banking network.

JPMorgan Chase also delivers international payments processing to TradeCard, an information technology-based provider. And, the bank actively supports the Trade Services Utility, a new multi-bank online platform that helps banks enhance their role in open account transactions. Also, it builds closer customer links by broadening its product portfolio, thus acquired Vastera, a global logistics management provider that helps traders improve their supply chain operations and enhance compliance with government rules.

Meanwhile, the ranks of information technology groups moving into global supply chain finance can be expected to grow. Some now just support banks through information services (“visibility” throughout the chain), but others (TradeCard in New York, Orbian Corp. in Norwalk, Connecticut) offer a substantial financial role, working with banks to inject credit at key points in transactions. Orbian has begun securitizing trade finance receivables.

Export Finance

On the export side, several trends are worth watching. One is the steady growth of online open account receivables management, delivered mostly by banks, but by a few IT groups, especially to support large high-tech firms with thousands of overseas buyers.

A second: dramatic expansion in short-term export credit insurance. Large European insurers (Atradius, Coface, Euler Hermes) have built a U.S. presence, bringing in a new underwriting style of qualifying each buyer (U.S. insurers rely on exporters’ own discretionary limits). The European insurers are increasing their online, automatic credit scoring and underwriting, popular among many U.S. exporters.

In equipment exports, additional players, especially dedicated trade finance companies, can be expected to enter the business, tackling stand-alone deals. Some, like New Continent Finance (Miami) and WorldBusiness Capital (Hartford, Connecticut) now work actively with Ex-Im Bank programs. But others—London Forfaiting Co. (New York) and International Assets Holding Corp. (New York)—take their own risk, as well as sell the trade paper to others.

And smaller exporters can be expected to enjoy enhanced support. Many new equipment finance groups have targeted smaller firms. In working capital finance, the Ex-Im Bank’s program (the agency’s only growth product) is dominated by a small group of savvy lenders (with delegated authority to respond rapidly) that have made a priority of expanding the business.

Finally, a sure sign that trade finance has reached a long-term growth mode: leading venture capital and private equity groups are now investing in the finance companies and IT groups in the business. Among them: Merrill Lynch, Carlyle Group, and Warburg Pincus. Others are expected to take the plunge. wt

Air Cargo 2008: More Shippers Are Shifting to Air Freight, by Karen E. Thuermer

In the movie “The Devil Wears Prada,” Miranda Priestly, the ruthless and cynical editor of top fashion Runway magazine, determines whether a collection succeeds or fails simply by pursing her lips.

But in this highly competitive industry made up of fashion retailers, timing to market can make or break the business. If shipments are missed by one week, they are sunk. Consequently, this industry and scores of others find air cargo crucial for profitability and supply chain management.

Greg Andrews, director for Global Logistics-Transportation for high-tech, Alabama-based Adtran, emphasizes that air cargo is important because his company needs “to turn on a dime.”

“It’s all about reducing inventories and being fast to market,” he says.

Not surprising, projections for air cargo are upbeat. Boeing’s World Air Cargo Forecast expects world air cargo to grow an average 6.1 percent annual rate during the next two decades and worldwide air cargo to increase three-fold.

Recent past history shows how important air cargo has become in the world’s economy; it accounts for upwards of $800 billion of global GDP transport. “This is phenomenal because, while 40 percent of the total value of manufacturing exports go by air, this represents only 1 to 2 percent of export volumes,” states Erik Britton, Director, Economics, Oxford Economic Forecasting.  In other words, there’s room to grow.

Going forward, however, there are challenges. With more companies outsourcing product from low-cost countries, the need for air cargo services continues to escalate. For shipments coming out of China, shippers and carriers alike will face escalating capacity issues that can impact not only rates, but supply chain management.

Some large shippers are able to combat the problem by shipping via all cargo freighters or chartering cargo flights. But with manufacturers demanding more control of their supply chains, more are turning to reliable, scheduled passenger service that offers space in their belly holds. Shippers are increasingly also using carriers that offer creative routing options via their extensive network.

American Airlines and United, for example, emphasize routing shipments out of Asia through their U.S. hubs onward to Latin America. In some cases, components are shipped within the local market or back to the United States.

In fact, look for carriers to consider more carefully their routings, especially as more efficient aircraft capable of flying longer distances come on line. These will be able to access a wider variety of airports, meaning the airlines can rely less on hub-and-spoke rotations.

That said, more carriers will emphasize premium ground handling products to distinguish their services and give their customers a competitive edge.

ANA Cargo, for example, flies from Asia to Dulles International Airport from where it can truck cargo to Montreal, Miami, and Chicago in about one day. By doing so, it avoids traffic bottlenecks and delays that surround the more widely utilized and congested airports in New York and Atlanta.

Knowing what airports air carriers plan to offer new service will also become more important to shippers. IBM, for example, is relocating its U.S. manufacturing facilities to Brazil, Russia, India, and China. That’s because these markets not only offer vast opportunity, nine of the world’s top 50 airports are found in these countries. This is key because the company ships the equivalent of 22+ 747/440F (maximum loads), or 9.29 million kilos, of freight every day, not including domestic intra-country airfreight.

“We are quickly moving up the supply chain in airfreight, and do not use much ocean freight,” says Richard W. Macomber, IBM’s program manager for Global Logistics Procurement, Americas, Integrated Supply Chain.

Given the world’s fast and unstoppable track to globalization, the future of air cargo is clear. Carriers will push for more and better access to markets. Shippers will increasingly turn to air cargo to give them a competitive edge. The real competition lies between the supply chains. wt

Supply Chain IT 2008: Google Earth Meets the Platforms, by Amy Zuckerman

Imagine a time when all supply chain partners will enjoy real-time visuals of their shipment, allowing for intervention without having to pick up a phone, and you have a glimpse of the supply chain of the future.

In fact, the technology to enable this futuristic vision for tracking shipments is starting to appear with the evolution of the electronic, Web-based platforms where enterprises and supply chain partners can work together without having to build their own supply chain networks.

Already, Web languages like Asynchronous JavaScript and XML (AJAX) have enabled Google to project satellite images of the earth onto the Web. Experts say the same technology will allow the platforms to provide Web-based visuals of a shipment en route, for example.

Patrick Connaughton, senior analyst for supply chain at Forrester Research in Boston, Massachusetts, believes that the platform world is ascending because 50 percent of the companies Forrester have surveyed “have not realized an ROI on their supply chain IT investments. Why? The number one reason reported was the cost and complexity of integrating the core applications like warehousing and transportation management. That makes a strong argument for a single-vendor solution, or platform in my mind.”

John Fontanella, vice president of research for Boston, Massachusetts-based AMR Research agrees. “The big news over the next 10 years is the platform as a shared transaction backbone along with the advent of managed services where companies outsource advanced planning and other functions to a technology vendor, which could be a platform,” he predicts. “Platforms aren’t going to transform the industry overnight, but there’s an irresistible momentum building for a shared backbone for communication and transaction management between a trading community or a community.”

Vendors like Sterling, industry experts project, are heading in the same direction as transactional shipping platforms like INTTRA and GT Nexus for the ocean industry; Transplace for the trucking world, or Exostar, which provides the aerospace/defense a platform for project collaboration.

John DeBenedette, vice president of information technology at INTTRA, a Parsipanny, New Jersey-based platform for the ocean container industry, recently wrote in Computer Technology Review: “The vast array of successful collaborative supply chain platforms can be viewed as a single larger platform in constant flux, with new interconnections between trading communities springing up all the time.”

Reached at his office, DeBenedette envisions a world where Web 2.0-powered platforms offer everything from visual space planning and asset optimization to utilizing geographic information system (GIS) mapping technology to pin point and reroute shipments. In time, he sees “decision support aided by new media combined with spatial optimization as real-time land and satellite-based video and imagining services become viable.”

Where does all this activity leave the world of enterprise resource management (ERP), which has been the backbone of the networked enterprise and the technology-backed supply chain?

Krish Mantripragada, head solutions manager for RFID and supply chain management for SAP, the ERP software giant, agrees that all types of platforms are evolving but that doesn’t mean abandoning ERP.

“I don’t think it’s an ‘either or’ question or choosing between ERP and platforms. You need the ERP solutions to be a lot more connected to networks and external sources of information,” he says.

And, Stefan Thein, head solutions manager for supply chain planning, execution and collaboration, at SAP headquarters in Waldorf, Germany, says ERP is essential to help companies network cores functions like invoicing.

The bottom line?  In the future look for more companies creating their own business process platforms that utilize suites like ERP, CRM and other solutions to handle core business and then connect to outside supply chain partners. wt

3PL 2008: Global Value-Adds Rather Than Price Wars on Moving Pallets, by Karen Butner, IBM Institute for Business Value

This year’s 3PL CEO study reveals leading third-party logistics providers (3PLs) are looking to find their way in a world in which their roles are growing and becoming increasingly complex. Conducted by IBM Global Business Services, in conjunction with Dr. Robert Lieb, Professor of Supply Chain Management, College of Business Administration, Northeastern University, the study was designed to identify current and projected trends in the logistics industry. Forty-four CEOS from major third-party logistics companies were surveyed. Respondents were from: North America (22); Europe (11); and Asia Pacific (11).

The role of logistics providers is changing in response to globally expanding requirements for integrated transportation and distribution capabilities. At the heart of this change is a continuing drive to transform 3PLs from price-gazing into the mirror into contract service providers to strategic partners that add value for their enterprise customers.

The continued shift to meet customer needs drives 3PL growth both internally and externally. From the outside, scale and geographic reach become more important in the delivery of solutions, perhaps turning management’s focus from lifting pallets and fueling trucks to mergers and acquisitions (M&A) activity and geopolitical prowess. Growth also comes from inside 3PLs, creating challenges in human resources, process effectiveness, and technology.

The top customer demands driving the 3PL industry toward growth include:

Going global with suppliers, customers and resources: Customers are seeking lower cost sources of product supply, manufacturing and logistics services.

Increased speed and effectiveness in conducting business across global boundaries.

Willingness and appetite to move more logistics-related services outside their companies, most likely to improve capacity dynamics, reduce risk in owning/managing logistics operations and take advantage of logistics expertise from external sources.

Greater efficiency and effectiveness across the supply chain and shipping/storage cycle, including better utilization of their own internal logistics resources, more visibility of the entire logistics cycle/process and greater data integration.

Growing capacity globally: China, India, and Eastern Europe

China will remain the most important 3PL growth revenue source into 2008, as projected by the study. Many providers have established operations in China, but have had mixed success in meeting various goals, due primarily to logistics-related capacity and infrastructure constraints. European 3PLs have responded to the 2004 expansion of the European Union (EU) in a number of ways, the most prevalent of which is following existing customers that are expanding into new EU member countries.

Mergers and acquisitions: M&A activity is being driven largely form customer demands to quickly extend geographic reach.

While individual companies grow larger, the competitor base (or provider base, for customers) grows smaller. Two-thirds of the CEOs ranked continued consolidation among the most important regional changes they expect during the next three years. Niche and smaller contenders often have to deepen their specialties to compete or be swallowed up altogether.

M&A and consolidation brings growing pains. CEOs across all regions cited human issues—both at the leadership level and at the staff level—as among the primary challenges. Geopolitical concerns, such as regulation, culture differences and infrastructure, were also cited.

With this in mind, 3PLs will have to extend significant internal energies to help their M&As create the expected value.

Customer selectivity

Third-party logistics providers are becoming more selective about the relationships they enter into, ultimately looking for fewer customers with greater collaboration and larger financial/time commitments. In most industries, M&A activity is pursued to acquire more customers. With 3PLs, it would appear that M&A activity is driven by trying to serve fewer customers with broader and improved service.

Technology

Overwhelmingly, most CEOs across the globe are using technology in attempts to build collaborative working relationships with key customers. These technologies include customer relationship management (CRM) software, supply chain visibility tools, decision-support analytical platforms and electronic data interchange (EDI) linkages

At the same time, technology is not the cure-all. In North America, for example, the high cost and low return of information technology was cited by CEOs as the second largest problem they face.

Interestingly, while Radio Frequency Identification (RFID) technology is often discussed and highly visible in the media, its deployment within 3PLs is quite sparse. On average, less than 10 percent of companies globally are committed to the technology—and only about 10 percent are piloting RFID programs.

Pricing pressure

In all regions, pricing pressure was far and away the biggest issue. There are typically two responses to downward price pressure:

1. Further commoditize service offerings and beat competitors on raw price points. This strategy has been historically difficult to sustain, unless supported by longer-term service level agreements (SLAs) for standardized offerings.

2.     Change the pricing conversation to one of value creation and differentiation. As customers seek more services and 3PLs seek more exclusive relationships, this seems to be the prominent direction preferred by 3PL CEOs. wt