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THEMAGAZINEOFIWLAINNORTHAMERICADECEMBER2012
Supply Chain
Management in the
Health-Care Sector
A First Look at
the 2013 IWLA
Convention & Expo
w w w.IWL A .com
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PUBLISHED FOR:
International Warehouse Logistics
Association
Joel Anderson, president & CEO
2800 River Road, Suite 260
Des Plaines, IL 60018 USA
Tel: (847) 813-4699
Email: janderson@IWLA.com
Managing editor
John Levi, IWLA Canada
3PLAmericas
T H EM AG A Z I N EO FI W L AI NN O R T H A M E R I CAD E C E M B E R2 012
By Joel D. Anderson
Consulting editor
David Long
Associate editors
Kim Biggar, David Sparkman
Editorial coordinator
Marian McGuire
IWLA liaison
Camille Golden
Sales representative
Cheryl Ezinicki
Design and layout
Pagecraft Computer Services
Publisher
J.M. Levi & Associates Ltd.
PO Box 30039
RPO New Westminster
Thornhill, ON, Canada L4J 0C6
Tel: (877) 305-6587
Fax: (905) 756-1115
Email: jlevi@primus.ca
Canada Post
Agreement Number: 42128520
3PL Americas
A First Look at
the 2013 IWLA
Convention & Expo
w w w.IWL A .com
By Kim Biggar
By UPS Communications
33 Advertiser Index
34 Radical Times Call for Visionary Leadership
By Chip Scholz
Supply Chain
Management in the
Health-Care Sector
By Arthur Barrett
Cover photo:
iStockPhoto.com
36 Editorial Calendar
Presidents message
Joel D. Anderson
President & CEO
International Warehouse
LogisticsAssociation
Chairmans message
Arthur Barrett
Chairman
International Warehouse
Logistics Association
Company Profile
Accuristix: Thriving in
the Highly Regulated
Health-Care Sector
By Kim Biggar
A
The companys handling
ofpharmaceutical products, many
of them critical to peoples health,
contributes to employees sense
ofresponsibility in their work.
ccuristix is a third-party-logistics provider exclusively to clients in the health-care sector. That fact influences the company and
its staff at all levels, in all that they do. It not only creates specific technology
and facility needs; it also affects staffing requirements and shapes employee
thinking.
Tanis Gardner, Executive VP at Accuristix, believes that the companys
handling of pharmaceutical products, many of them critical to peoples
health, contributes to employees sense of responsibility in their work. She
tells of one supervisor, as an example, who delivered an urgently needed lifesaving product to a rural hospital during a major ice storm when no carrier
could be found to make the trip. The decision was his own; senior managers
learned of it only after he had safely returned.
While making perilous journeys to save lives is not part of everyday life
at Accuristix, the sense of ownership that prompted this particular drive is.
Management actively promotes the sense of ownership in employees for a
couple of important reasons: It encourages good work and instills pride,
which likely has the further benefit of keeping employees engaged and on the
payroll.
To develop employees pride in their work, says Tanis, Accuristix often
brings its clients into the warehouse to talk to staff about the real-life impacts
of the products theyre moving. The clients, she notes, are keen to make such
Three days of training are mandatory for new employees in Accuristix warehouses. Because of the
highly regulated nature of the pharmaceuticals industry, employees
Continued on page 19
W
Worldwide, increasing regulations
and compliance comprise most
health-care decision-makers
topconcerns.
ith much change in the health-care industry, from legislative and regulatory hurdles to rapid globalization and changing
consumption patterns, UPS launched its annual Pain in the (Supply) Chain
survey five years ago to measure the impacts of industry changes over time on
the health-care supply chain and to gain insights into future drivers of growth
and change. First launched in the U.S., the survey has expanded over time to
include global health-care supply chain decision-makers from pharmaceutical, biotech and medical-device companies based in the U.S., Western Europe,
Asia and Latin America.
Pain in the (Supply) Chain explores health-care decision-makers top business and supply chain concerns, and probes priorities and plans around supply chain investments over the next three to five years. The 2012 study was
conducted by TNS in March and April 2012.
Health-care decision-makers were beginning, at the time of the survey,
to see glimmers of improvement, suggesting hope for economic recovery in
Western Europe. At the same time, U.S. health-care executives expressed caution about the state of the industry. Their uncertainty about the future centers
on the economy and on complex dynamics emerging within the health-care
landscape. Executives are recognizing upcoming challenges and seeing a need
to develop strategies in response. (See Figure 1.)
Worldwide, increasing regulations and compliance comprise most healthcare decision-makers top concerns. With slight regional variations, the
Figure 1
How is the recent economic downturn still impacting your company in terms
of tightened spending, and other reductions and cutbacks?
12
13
More than ever before, healthcare companies are seeking transformative change in their supply chains
to drive additional value.
Global Health-Care Growth
Explodes: 2008 to 2012. Global
growth has been a focus area for
supply chain decision-makers since
2008. In that year, executives ranked
access to global markets as their second-highest supply chain concern.
By 2011, 70 percent of respondents
reported that they had successfully accessed new global markets. In
2012, this number grew to 77 percent of industry decision-makers.
Even more, 83 percent report they
intend to tap into global markets to
improve their competitiveness in the
next five years.
Health-Care Reform Continues
to Change the Industry. Health-care
decision-makers continue to grapple
with the impacts of reform on their
organizations and the industry in
general. UPS began asking healthcare logistics decision-makers about
reform in 2010. Then, more than
half (55 percent) ranked it as their
number-two business concern. After
concern peaked in 2011 (60 percent), reform remains the secondmost-important business concern
in 2012, underscoring how pivotal
issues and concerns around reform
have been impacting the industry.
Product Protection Emerges as
a Top Supply Chain Issue and Concern. In 2008, only 13 percent of
health-care decision-makers named
security as a supply chain issue.
In 2012, 57 percent reported being highly concerned about product security. Innovative technology
and supply chain solutions, and best
practices have shown that meaningful progress in this area can be
achieved.
Concerns about IntellectualProperty Protection Rise Year Over
Year. As health-care companies continue international expansion at a
rapid pace, intellectual-propertyprotection concerns have grown
every year since 2010. Geographically, concerns were highest in Asia
in 2011 (cited by 50 percent as a
14
Conclusions
15
Regional Perspective
Provincial Health-Care
Supply Chain Creates
Benefits Beyond Savings
By Jim Eckler and Jennifer Simpson
Jim Eckler
Jennifer Simpson
17
Reducing Costs,
Increasing Capacity
Provincial Health Services Authority, one of six health authorities in B.C., is not
included due to differences in OR cost-center structure.
18
19
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aul, can you tell us a little about the theme for next years conference
and why you selected it?
The theme for our conference next year is Grow Your Own Way. As I
was thinking of a theme to pay tribute to our outgoing Chairman, Arthur Barrett, I was reminded that, as professionals and leaders of our great warehouse
trade association, we are all faced with the challenge of growing our business.
Our conference will present and invoke conversation to help our members
grow, through top-line growth strategies, cost-reduction ideas, value-added
services, the addition of family members, acquisitions, geographic expansion,
and many other ways put forward in thought-provoking sessions.
Where will the 2013 IWLA Convention & Expo take place, and when?
The IWLA conference will be at the fabulous Loews Portofino Bay Hotel
in Orlando, Florida, from March 10 to 12, 2013. You can register now at
www.iwla.com.
Who is involved in planning the conference to ensure that it will be a
success?
Paul Verst
21
22
Book Review
23
current economic and political climate is that these jobs are sustainable; it is not easy to outsource local
distribution work to offshore contractors. Cluster-based postponement operations, for example, delay
the final assembly of products as
late as possible in the production
cycle, in order to take advantage
of demand forecasts that are more
timely and accurate. It follows that
these operations must be completed
in close proximity to end markets.
Since these jobs remain in the
host country, employers need skilled
workers to fill the positions, and
many companies devote resources
to building the educational facilities needed to meet the demand for
talent. The availability of top-notch
training and education programs
helps to attract individuals and
employers to the locale, another
feedback loop that fuels the growth
of these clusters.
An area of expertise that is gaining in importance is environmental
sustainability, and logistics clusters
are becoming innovators in this
field. This is driven, in part, by the
volume of traffic that flows in and
out of clusters. Loads can be consolidated, for example, a strategy
that reduces the number of vehicle
movements in distribution networks
and shrinks the carbon footprint of
supply chains. In addition, many of
Continued on page 27
MEMBER
SM
MEMBER
MEMBER
24
Maximizing Productivity
in E-commerce 3PLs
By Jeffrey B. Graves
s e-commerce continues its rapid growth into virtually every market sector, retailers are anxious to expand their presence
online to capture this market share. Between 2006 and 2010, global online
retail sales grew by 16.3 percent annually, according to Global Online Retail
2011, published by Datamonitor. Online retail sales for 2010 alone showed
an annual growth rate of 17.8 percent on total revenues of US$434.6 billion.
This level of expansion of Internet sales is fundamentally changing the nature
of the retail supply chain.
E-commerce Challenges
25
As an alternative to in-house fulfillment, a large number of retailers have turned over processing of
their Internet orders to third-partylogistics providers (3PLs) that are
equipped and experienced to handle
these online needs. Retailers whose
online orders are growing at an accelerated rate often prefer the flexibility of working with a 3PL that can
help them continue to expand. 3PL
usage is experiencing rapid growth,
expanding at the rate of 12 to 15
percent annually, clearly influenced
by the corresponding growth in online purchases.
But 3PLs are also continuing to
gain acceptance by online retailers
because of the sophisticated software engines they have put in place
to capture orders on the front end,
and process these orders through
26
These systems allow 3PLs to record the relevant details of each item
and parcel being shipped. Parcel
shipments can be tracked and proof
of delivery quickly confirmed. A
customers transportation costs and
performance can be analyzed, thus
helping the 3PL to negotiate rates
and improve service.
Integrated ordering and parcel
tracking is made possible through
the 3PLs WMS, which is an ideal
system for the precise and efficient
tracking of products. The WMS,
communicating with the ERP, along
with PLCs and sensors in the pickand-pack systems, and conveying
equipment are capable of monitoring
individual SKUs as they are stored
and moved through the facility.
3PLs now also have the opportunity to record every customer transaction, and track consumer behavior
and sentiment. Forwarded to their
clients, this data makes it possible
for retailers to analyze millions of
pieces of data, resulting in a real understanding of what its consumers
are purchasing, how to get into their
online carts, and how to become
part of their repeat purchase cycle.
This level of supply chain analytics allows 3PLs to maintain precise
control of their products through every stage of supply chain handling,
from receipt of products to storage
and picking, through shipping.
Pick, Pack and Ship
Within e-commerce, unpredictability is a constant factor. Flexibility in the 3PL supply chain, therefore,
becomes critical. This can be derived from implementing the right
software and automated systems
that can support the fluidity that ecommerce requires.
3PLs under consideration for
handling a retailers e-commerce fulfillment should be assessed against
the following criteria as to their performance capability. These points
represent potential troublesome areas frequented in e-commerce fulfillment:
(a) Large SKU counts, with a high
percentage of slow movers;
(b) Small number of pieces per order;
(c) Extreme peak-season volumes;
(d) Under-stocking, due to unpredictable changes in market demand;
(e) Front-end order processing;
(f) Fast, 24-to-48-hour delivery;
(g) High volume of returns from end
consumers;
(h) High potential for brand damage from poor fulfillment performance; and,
(i) Real-time and accurate inventory
and order visibility.
These points can best be addressed in concert with an independent logistics consultant, who can
provide considerable value to logistics executives at both the retailer
and 3PL.
The methodology of independent
logistics consultants permits an objective examination of all e-commerce options, helping both parties
to determine underlying costs and
design for facilities, automation and
labor within the 3PL. Consultants
size the facility based upon the retailers requirements, the anticipated
level of operator cost, and what the
3PL plans to invest, factoring in the
optimum level of automation.
Independent consultants draw on
solutions from many e-commerce
3PL options used in different applications, thus providing a broad perspective on potential solutions that
might otherwise not be considered.
This depth of experience can make
the critical difference in selecting the
right 3PL and the right equipment
that will meet retailers requirements
for throughput and efficiency, and
the 3PLs need for minimized capital
outlay that will deliver the expected
return on investment.
Jeffrey Graves has held the position of President of Sedlak Management Consultants since 1989. He
can be contacted at (216) 206-4700
or jgraves@jasedlak.com.
CLUSTERS from page 24
these clusters have become environmental-innovation hubs, supporting
the development of alternative-energy transportation.
These benefits, coupled with the
increasing complexity of global supply chains, point to a bright future
for logistics clusters. They can help
both the private and public sectors
to meet the demands of globalization, to deliver operational flexibility, and to create new ways to
stimulate economic growth. One
of the main aims of the book is to
highlight these possibilities, and to
help build a consensus for more investment in logistics clusters.
Yossi Sheffi, an international expert in supply chain management, is
Professor of Engineering Systems at
MIT and Director of the MIT Center
for Transportation and Logistics.
3PL Americas December 2012
27
28
29
Legal Issues
Transportation in the
Litigation Limelight
By Marc Blubaugh and Ann Christopher
Marc Blubaugh
Ann Christopher
30
ne key area where liability exposure has significantly increased for 3PLs in recent years is in the area of transportation. More
specifically, aggressive plaintiffs attorneys have successfully imposed liability
on 3PLs in personal-injury cases arising from catastrophic truck accidents
where the 3PL merely arranged for the transportation of certain goods but
did not actually operate as the carrier. The 3PL industry must recognize and
respond to the growing trend of extreme transportation verdicts as plaintiffs
attorneys will continue to capitalize on this trend. Several recent cases vividly
illustrate this point.
For instance, on February 12, 2012, a jury in Cook County, Illinois, entered
a $27.7-million verdict against a transportation broker in the case of Hoffman v. Crane. In that case, a transportation broker arranged for the transportation of steel coils to Iowa. The truck driver was involved in a catastrophic
accident on the way home and severely injured another driver, a 50-year-old
mother who became a paraplegic. The plaintiff alleged that the truck driver,
the transportation broker and the shipper acted together as a joint venture
due to the nature of their relationships. In essence, the plaintiff argued that
the 3PL had the ability to control the motor carrier and should, therefore, be
jointly and severally liable. The jury agreed.
Similarly, on March 1, 2012, a federal-court jury in Oregon entered a
$5.2-million verdict against a transportation broker in the case of Linhart
v. Heyl. In that case, Nestl hired Heyl Logistics, a transportation broker, to
arrange for the transportation of goods. Heyl Logistics hired a motor carrier
whose driver ended up causing a serious truck accident while high on crystal
methamphetamine, killing another driver who was standing outside of his
truck inspecting his brakes.
It turned out that the motor carrier had had its operating authority revoked for failing to drug test its drivers. As a result, and in light of other operational red flags at the motor carriers operations, the estate of the deceased
claimed that the transportation broker negligently selected this particular
motor carrier. Once again, the jury agreed, to the tune of a multimilliondollar judgment.
Unfortunately, these cases are not outliers. For instance, another fairly
recent case of significance in this area is the case of Sperl v. C.H. Robinson,
which signaled a further expansion of transportation-broker liability. In
Sperl, C.H. Robinson (Robinson), the transportation broker, was subjected
to a $23.8-million jury verdict arising out of the deaths of two people and
serious injury of another, following a motor-vehicle accident involving the
carrier hired by Robinson.
The jury found that Robinson controlled the driver, which made the
driver Robinsons agent, and made Robinson vicariously liable. Robinson and
the carrier, Dragonfly Express (Dragonfly), had a standard broker/carrier
agreement in place, which included an independent contractor clause that
confirmed that the carriers drivers were not employees or agents of Rob-
TORONTO
VANCOUVER
www.mckennalogistics.ca
1-800-561-4997
31
Financial Benchmarking:
How It Works and
WhyDo It?
By Ken Ackerman and Arthur Barrett
any trade associations offer financial benchmarking as a service to their members, including IWLA the last time
in 2005. This article will focus on the many benefits of benchmarking, and
present our members an opportunity to benchmark their own financial performance against those of their peers.
How It Works
Ken Ackerman
Arthur Barrett
ADVERTISER INDEX
Ancra International LLC................. 11
Benesch, Friedlander, Coplan
& Aronoff LLP............................... 24
Dehnco........................................... 3
Elite Storage Solutions............... OBC
IWLA Convention & Expo............. 20
Konstant Storage Systems.......... IFC
McKenna Logistics Centres.......... 31
MercuryGate................................IBC
Rack Armour Ltd........................... 16
Redirack Storage Systems........... IFC
Sackett Systems Inc..................... 29
SolarWorld...................................... 8
Sonwil Distribution Center.............. 4
Waddell Insurance Brokers Ltd...... 22
33
34
35
3PL Americas
T H E M AG A Z I N E O F I W L A I N N O R T H A M E R I C A FA L L 2 012
3PL Americas
Complexities of Latin
American Supply Chains
w w w.IWL A .com
w w w.IWL A .com
Allied Logistics: Capitalizing on New Opportunities
T H E M AG A Z I N E O F I W L A I N N O R T H A M E R I CA W I N T E R 2 012
IWLA Demonstrates
Sustainability Leadership
Freight Forwarding
to Alaska:
Dreaming Up
Solutions to Logistics
Challenges
Emerging Markets
and the Global
Supply Chain
3PL Americas
w w w.IWL A .com
2012 IWL A Convention & Expo San Francisco
36
hard-to-imagine possibilities?
Visioning: How well can you take
an idea and translate it into a
workable vision with measurable
goals?
Motivating: Do you inspire others to buy into your vision and
execute your ideas?
Partnering: How well do you forge
strategic alliances, both internally
and externally? Do you recognize
that alliances are two-way streets,
and encourage collaboration?
Summary
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2800 S. River Road, Suite 260 Des Plaines, IL 60018 tel: (847) 813-4699 fax: (847) 813-0115 www.IWLA.com mail@IWLA.com
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