logisticsmgmt.

com

Rail Update: Steady as she goes 24

NAFTA Tune-up time 30
The evolving DC tech stack 34
June 2017

Logistics and Supply Chain Education:

OPPORTUNITY
ABOUNDS Page 18

TOP 50 3PLS
Consolidation continues, but at
a slower pace 40S
QUARTERLY TRANSPORTATION MARKET UPDATE
State of Ocean Cargo: Carriers cope
with regulatory restrictions 65S
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Get your daily fix of industry news on logisticsmgmt.com
management
UPDATE A N E X E C U T I V E S U M M A RY O F I N D U S T RY N E W S
IBM subsidiary rolls out weather-related dashboard.
A new offering from The Weather Company (TWC), a
subsidiary of IBM, called the Operations Dashboard
for Ground Transportation is geared toward optimizing
workforce productivity and route selection for freight and
logistics companies. The dashboard is comprised of vari-
ous weather-related data sources, including precipitation,
wind, fog, ice and pooling water and integrates real-time
traffic flow and incident data. According to TWC, the
timing for the dashboard is good, considering weather-
related delays cost the freight sector roughly $8.7 billion
per year, according to the Department of Transportations
Bureau of Transportation Statistics. Users can access
dashboard information, designed as an IOS app, through
tablets or cell phones to get needed information in a
timely manner. Dispatchers have the ability to set up indi-
vidualized alerts of approaching hazards delivered via API
to an in-cab or mobile device, TWC said.
Cost of congestion on the rise. Data from the
American Transportation Research Institute (ATRI) shows
that traffic congestion on the U.S. National Highway Sys-
tem (NHS) added over $63.4 billion in operational costs to
the trucking industry in 2015. According to ATRI, the data
indicate that traffic congestion tended to be most severe
in urban areas, with 88% of the congestion costs concen-
trated on only 17% of the network mileage, and 91% of
the total congestion cost occurring in metropolitan areas.
ATRI said that its analysis also demonstrates the impact
of congestion costs on a per-truck basis, with an average
increased cost of $22,676 for trucks that travel 100,000
miles annually.
Freighter aircraft demand trending up. A new
forecast and independent assessment of freighter aircraft
demand has been released by the air cargo consultancy
Air Cargo Management Group (ACMG). The robust activ-
ity in freighter conversion of narrow body types over the
past four years has led to an increase in the quantity of
narrow body freighters in the global fleet, said Robert
Dahl, managing director of ACMG. This increase reverses
a trend that began in 2000, through which the narrow
body freighter fleet decreased about 40% over a decade-
LOGISTICSMGMT.COM
long period. The report includes ACMGs prediction for
the freighter fleet make-up by aircraft type through 2036,
taking into account the assessment of new-build freighter
production, passenger-to-freighter conversion activity and
the retirement of freighters from the existing freighter fleet.
Analysts expect demand for freighter aircraft to continue
trending higher, albeit not at the same rate as before the
Great Recession.
Amazon sets sights on home furnishings market.
While its no secret that Amazon is building up its logistics
and transportation playbook, The Wall Street Journal (WSJ)
reported that the e-commerce giant intends to build four
massive warehouses to help it deliver bulky appliances and
furniture as part of a strategy to expand furniture offerings
and speed up delivery times. As to why its entering this
segment, Amazon told WSJ that furniture is one of its fast-
est-growing retail categories. This will surely be worrisome
news for furniture and home furnishing shippers, while also
likely leading to a need for more outsourced logistics part-
ners to ship large items like couches and dressers. Whats
more, the report explained that retailers are still figuring out
how best to go about certain aspects of selling furniture
online, such as what variety to offer, coupled with the best
approaches for delivery to customers at home. Amazon is
now focused on expanding product selection, as well as
increasing delivery to 1 day or 2 days in certain cities, the
report added.
DOT Secretary says vision for U.S. infrastructure
plan to be unveiled. In kicking off last months Infrastruc-
ture Week, Department of Transportation (DOT) Secretary
Elaine Chao said that the White House would soon share its
vision of what its national infrastructure plan would look like.
Chao explained that DOT has started an initial regulatory
review process, citing how the Federal Highway Administra-
tion, as an example, has started to reduce the regulatory
burden in an effort to quicken the pace of productivity. Per-
haps the most telling part of Chaos speech was her expla-
nation of how a new paradigm would be created to shift
the focus beyond whats being builtto how projects are
being funded and financed. For example, states and locali-
ties that have secured some funding or financing of their
Continued, page 2
JUNE 2017 | L O G I ST I C S MAN AG E ME N T 1
Get your daily fix of industry news on logisticsmgmt.com
management
UPDATE A N E X E C U T I V E S U M M A RY O F I N D U S T RY N E W S
own for infrastructure projects will be given higher priority
access to new federal funds, she said. The goal is to use
federal funds as an incentive to get projects underway and
built more quickly, with greater participation by state, local
and private partners.
Financing squeeze on U.S. ports? Proposed cuts
to an existing grant program would force U.S. ports to
choose between issuing debt to keep capital improve-
ments on schedule or delaying capital programs to allow
cash from operations to accumulate, Fitch Ratings says.
However, recent partnerships between regional ports
could lower capital expenses in the long run for some
entities, partially offsetting the cuts. The 2018 federal bud-
get proposes eliminating funding for the Transportation
Investment Generating Economic Recovery (TIGER) grant
program, on which many seaports rely to fund a portion of
their capital improvement programs. A new grant program
has been implemented, the Fostering Advancements in
Shipping and Transportation for the Long-term Achieve-
ment of National Efficiencies (FASTLANE), which the fed-
eral government noted should make up for the removal of
TIGER grants. However, FASTLANE mainly targets larger
projects costing more than $100 million.
Werner makes entrance into last-mile market.
Werner Enterprises is the latest company to get on
board in the e-commerce-driven last-mile sector, with
the introduction of Werner Final Mile. Company officials
said that this service will provide nationwide delivery
and related services to residentialand business loca-
tionsand leverage its expansive network of delivery
teams with operations in nearly 200 locations. The
company added that through this service, Werner would
mainly deliver large or heavy goods and items with two
uniformed associates operating a 24- or 26-foot lift gate
straight truck. Craig Stoffel, Werners vice president of
global logistics, toldLogistics Management that there
were a few big drivers behind Werners decision to enter
this market. Its a changing marketplace when it comes
to the buying habits in the U.S. and the global popula-
tion, said Stoffel. Nearly half of our revenue is touching
retail and affecting a large amount of our customer base
2 LOGISTICS MANA GEM ENT | JUNE 2017
and volume. And, for us to continue to add value to our
customers, it was a natural step for Werner to expand
into this part of the supply chain.
Legendary leaders celebrated. Achieving Womens
Excellence in Supply Chain Operations, Management
and Educationa group better known in the industry as
AWESOMEhas presented its Legendary Leadership
award to two highly accomplished supply chain leaders:
Francesca DeBiase, chief supply chain and sustainabil-
ity officer, McDonalds Corporation; and Kristin French,
retired brigadier general, U.S. Army, and principal deputy
assistant secretary of defense, U.S. Department of
Defense. The selection of these two outstanding lead-
ers is evidence of the impact women are having at the
highest levels of supply chain leadership in dramatically
different organizations, said Nancy Nix, executive direc-
tor of AWESOME. The Legendary Leadership award was
created in 2014 to recognize women supply chain leaders
who have achievedextraordinary professional excellence
and success, addressed challenges impacting opportuni-
ties for women and advanced the changing landscape of
womens supply chain leadership.
Working to close the gender gap. APICS, along
with The Manufacturing Institute and Deloitte, recently
released a study that addresses the gender gap in
todays logistics marketplace. Women in Manufactur-
ing is the result of more than 600 survey responses
from women professionals in the manufacturing industry,
along with nearly 20 manufacturing executive interviews.
The study examines how companies can effectively
recruit, retain and advance talented women in manufac-
turing and illustrates ways that women in manufacturing
are making an impact in the industry through programs
like Science, Technology, Engineering and Production
(STEP) Ahead. This study confirms the importance of
increasing the amount of women in the supply chain
workforce and that many companies are missing a criti-
cal talent pool. This study is an important step in under-
standing how we as an industry can make supply chain
careers more attractive to women, said Abe Eshkenazi,
APICS chief executive officer.
LOGISTICSMGMT.COM
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 June 2017 logisticsmgmt.com

CONTENTS
VOL. 56, NO. 6
Logistics Management

LOGISTICS & SUPPLY CHAIN EDUCATION:

Opportunity abounds
18 Here are five trends that every shipper
and potential shippermust watch as the
demand for experienced logistics and supply chain
professionals soars.

GLOBAL LOGISTICS

30 Cross-border Logistics:
NAFTA tune-up time
We take a deep dive into the 23-year-old NAFTA
agreement, the impact it has made on logistics
operations and hear what the experts suggest
Washington shouldand should notdo.

WAREHOUSE/DC MANAGEMENT

34 The evolving DC tech stack

With the growth of e-commerce, the technology
stack for distribution centers is expanding. We
explore why WES/WCS software is gaining
TRANSPORTATION BEST
PRACTICES & TRENDS prominence and share how operations are
expanding their use of data science.
24 2017 Rail/Intermodal
Roundtable: Volumes
stable, business steady SPECIAL REPORTS
2017 TOP 50 U.S. AND GLOBAL 3PLS
While the overall economy is putting an
emphasis on smaller shipments, these two 40S Top 50 3PLs: Equity
stalwart freight transportation markets investment and consolidations
continue to chug along at a healthy clip. maintain traction
Our panel of leading rail/intermodal The trend of mergers and acquisitions has
experts helps shippers put the markets hardly subsided, and fresh injection of equity
into perspective. investment is transforming the marketplace. And shippers may
see 3PLs continue to purchase high-tech solutions and hire
young professionals for their implementation.
DEPARTMENTS
STATE OF OCEAN CARGO:
1 Management update
9 Viewpoint 65S Carriers cope with
10 Price trends regulatory restrictions
12 News & analysis As if global ocean carriers didnt have enough
16 Newsroom notes
trouble managing rates and capacity, govern-
ment agencies have called into question the
17 Moore on pricing
viability of alliances and mergers designed to
72 Pacific Rim report
restore stability in the industry.

Logistics Management (ISSN 1540-3890) is published monthly by Peerless Media, LLC, a Division of EH Publishing, Inc., 111 Speen St, Suite 200, Framingham, MA 01701. Annual
subscription rates for non-qualified subscribers: USA $139, Canada $219, Other International $269. Single copies are available for $20. Send all subscription inquiries to Logistics
Management, PO Box 677, Northbrook, IL 60065-0677. Periodicals postage paid at Framingham, MA and additional mailing offices. POSTMASTER: Send address changes to: Logistics Management, PO
Box 677 Northbrook, IL 60065-0677. Reproduction of this magazine in whole or part without written permission of the publisher is prohibited. All rights reserved. 2017 Peerless Media, LLC.

LOGISTICSMGMT.COM JUNE 2017 | L O G I ST I C S MAN AG E ME N T 5

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 EDITORIAL STAFF
Michael A. Levans Group Editorial Director
Francis J. Quinn Editorial Advisor
Patrick Burnson Executive Editor
Sarah Petrie Executive Managing Editor
Jeff Berman Group News Editor
John Kerr Contributing Editor,
Global Logistics
Bridget McCrea Editor at Large,
Technology
Roberto Michel Contributing Editor,
Warehousing & DC
John D. Schulz Contributing Editor,
Transportation
Chris Lewis Creative Director
Wendy DelCampo Art Director
Kelly Jones Print/Online Production
Manager
COLUMNISTS
Derik Andreoli Oil + Fuel
Elizabeth Baatz Price Trends
Kris Timmermans Excellence
Peter Moore Pricing
PEERLESS MEDIA, LLC
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Group Publisher
Kenneth Moyes President and CEO
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LOGISTICSMGMT.COM
LOGISTICSMGMT.COM
ONLINE
2017 EXCLUSIVE LM WEBCAST
Women in Logistics
According to the findings of Logistics Managements recent Salary Survey, the
vital role women play in the logistics management community continues to gain
traction every year. In this educational Webcast, executive editor Patrick Burnson
will share our recent findings and will then be joined by a panel of women who are
now leading top-level logistics and supply chain operations. The panel will share
their success stories as well as
advice for women who are making
their way up the ladder.
Our featured panelists include:
Tisha Danehl, vice president of
the executive recruiting
firm Ajilon;
Ellen Voie, president and CEO
of the Women In Trucking
Association (WIT);
Andrea Morriera, international
logistics manager for Orchard
Supply Hardware; and
Heather Sheehan, owner of
Crispy Concepts LLC.
logisticsmgmt.com/womeninlogistics
2017 Technology Roundtable Webcast
NOW ON DEMAND
logisticsmgmt.com/2017tech
Are we moving closer to
intelligent logistics?
Everyone is talking about the Cloud, the Internet of
Things (IoT) and distribution automation as enablers to
help logistics managers keep pace with rising customer
expectations in both B2C and B2B. But exactly what sort
of technologies fall under these broad terms, and how
will they actually help logistics operations keep pace with
new customer expectations?
Join group editorial director Michael Levans and a panel of four supply chain technology
analysts as they demystify some of todays buzz terms and share practical insight into how
to better apply the existing technologies that will create a more intelligent logistics operation.
Bob Hood, principal, digital supply chain, Capgemini; Steve Banker, vice president,
supply chain management, ARC Advisory Group; Norm Saenz, managing director,
St. Onge; and Dwight Klappich, research vice president, Gartner set out to answer:
What and how much should we What practical technologies can
move to the Cloud? make our operations intelligent?
Has the integration of TMS and Are logistics professionals actually
WMS been overlooked? prepared to mange the current
disruption?
JUNE 2017 | L O G I ST I C S MAN AG E ME N T 7
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 VIEWPOINT
The improving demographic mix
When you want to take a broad snapshot of the demographics of a
particular industry, its often best to put research reports aside and simply
show up to a few of that markets bigger trade show or conferences.
When theres a trade show floor involved, I first walk
the perimeter to get an idea of the size of the floor. Then I
walk down the middle aisles to get a feel for the buzz at
that moment in time, keeping an eye on attendee engage-
ment with exhibitors. Are these business discussions?
Are they merely catching up? Or is it a little of both?
Its in those early observations that you start to get an
idea of the general demographic makeup. Is it more of a
veteran group? Or, is it younger and savvier? Or possibly
a little of both?
When I roll up my many logistics and supply chain
trade show and conference experiences over the past few
years, Im happy to report that Im starting to see a little of
both in terms of engagement levels as well as a healthier
demographic mix. Im seeing our stalwart veterans mixing
and mingling with a growing number of younger attend-
eesboth male and female.
Back in 2004, when I first started working on
Logistics Management (LM), that wasnt the case. In
fact, the lack of young professionals was notable; so
much so that their absence drove editorials and feature
stories asking why we werent building a deeper bench
for the future.
Its impossible to put a finger on the exact moment
the tables turned, but I can be nearly certain that the
steady growth of e-commerce and the evolution of the
digital necessities that make it work are at the heart of
this currentand absolutely vitaldemographic shift.
Simply put, the demand for experienced logistics
and supply chain managers is increasing exponen-
tially, says contributing editor Bridget McCrea. And
when you consider the growth of e-commerce and
its scalable, digital foundation, the opportunities are
LOGISTICSMGMT.COM
literally endless for younger people looking to build
life-long careers.
Starting on page 18, McCrea offers five emerging
trends in logistics and supply chain education and career
development. While the number of logistics-specific
educational offerings are taking off and becoming more
popular at some of our most esteemed universities, she
cites some shortcomings and advises our base of veterans
to make sure Millennials are getting hands-on-training
not just screen time.
Were also seeing more women entering logistics and
supply chain management positions. In fact, the findings
of our recent Salary Survey said that the role women
play in the logistics management community continues
to gain traction every year.
To further examine this, executive editor Patrick
Burnson put together a panel of three women who rep-
resent three different areas of the marketa recruiter, a
trucking executive and a shipperin our first Women in
Logistics Webcast happening on June 15.
These professionals share their success stories as
well as offer advice for women who are making their way
up the ladder, says Burnson. And while theres still a
steep hill to climb, opportunities abound.
Michael A. Levans, Group Editorial Director
Comments? E-mail me at
mlevans@peerlessmedia.com
Follow me on Twitter: @MikeLeva
JUNE 2017 | L O G I ST I C S MAN AG E ME N T 9
priceTRENDS
Pricing across the transportation modes

2 145
TRUCKING
1 143 Thanks to pressure from fuel costs, margin conditions in
0 141
the U.S. trucking industry have been deterioratingbut slowly.
In the first quarter of 2017, fuel costs increased 7.6%. In addi-
-1 139
tion, worker wages inched up 0.33% as overhead expenses
-2 137
Forecast grew 1%. Adding it all up, total costs increased 1.7%. Mean-
-3 135
2015 2016 2017 2018 while, average transaction prices for trucking services increased
% change (left scale) Index 2001=100 (right scale) only 0.6%. As a result, the industrys pre-tax gross operating
surplus in the first quarter stood at $28.94 per $100 of sales.
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago Thats down 50 cents from the previous quarter and down $1.32
General freight - local -0.1 0.2 -1.4 from the same quarter a year ago. Our trucking forecast call-
TL 0.2 0.1 0.6 ing for a 1.6% average annual price hike in 2017 looks modest
LTL 0.7 2.7 4.4
given these cost trends.
Tanker & other specialized freight 0.2 0.6 1.1

6 170
AIR
3 167 In the first three months of the year, wholesale jet fuel
prices increased 7.3%a sharp turnaround from the big price
0 164
cuts enjoyed a year earlier. Counteracting those cost hikes,
-3 161
worker wages were down 0.7%, although other salaries and
-6 158
Forecast benefits costs were up 0.6%. The good news for U.S. owned
-9 155
2015 2016 2017 2018 airliners: they were able to push through a 4.9% price hike for
% change (left scale) Index 2001=100 (right scale) services. Alas, all that price-hike success was due to increases in
passenger fares. In the three months ending April 2017, transac-
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
tion prices for airfreight on scheduled flights and on nonsched-
Air freight on scheduled flights -0.4 1.7 -1.6
uled flights were down 3.5% and 1.5%, respectively. Taking into
Air freight on chartered flights -2.2 -5.2 -3.2
account all the data, we estimate this industrys margins improved
Domestic air courier -0.5 5.3 7.3
by $2.61 for every $100 worth of sales.
International air courier 0.4 6.5 8.4

6 185
WATER
3 181 The global shipping crisis is reflected in our estimates
0 177
for margins in the U.S. water transportation industry. The latest
results from our U.S. industry cost model show the pre-tax oper-
-3 173
ating surplus sank to $10.89 per $100 of sales in March 2017.
-6 169
Forecast Thats down from a surplus of $14.02 last year and $20.45 in
-9 165
2015 2016 2017 2018 March 2015. The problem for margins in this industry has been
% change (left scale) Index 2001=100 (right scale) the inability to increase prices. In the three months ending April
2017, water transportation transaction prices declined 0.7% from
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago a year ago. However, that price drop was far better than the 6.6%
Deep sea freight 1.0 4.2 9.5 price cut reported in April 2016. With the price trend improving
Coastal & intercoastal freight 0.0 -3.9 -6.2 and margin pressures high, average industry prices are forecast to
Great Lakes - St. Lawrence Seaway na -0.6 1.0 rise 0.4% this year.
Inland water freight 0.0 -2.8 -2.2

4 175 RAIL
2 173 The recovery in rail operators ability to hike prices is continu-
0 171 ing apace with the carload market and intermodalboth trending in
-2 169 a direction that will soon challenge shippers. In the most recent sur-
-4 167
vey of transaction prices, carload operators reported monthly price
Forecast increases in 10 of the past 12 months. Now, in the first four months
-6 165
2015 2016 2017 2018 of this year, carload prices are up 2.3% from the same period a year
% change (left scale) Index 2001=100 (right scale) earlier. Likewise, intermodal rail prices are up 6.4% at the same
time. All together, and including the negligible addition of passenger
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
rail service, it looks like the U.S. rail industry will finally emerge from
Rail freight 0.5 2.1 3.9
Intermodal -0.5 1.9 5.2
its pricing slump as we project a 2.4% price hike in 2017 and 1.1%
Carload 0.8 2.1 3.7 in 2018.

10 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

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NEWS analysis
Also:
Its beyond time to modernize U.S. infrastructure, U.S. Chamber of Commerce urges, Page 13
Shippers make case for U.S. to remain in the Paris Agreement, Page 13
IANA reports Q1 intermodal gains, Page 14

Uber Freight makes official

entrance into trucking market
Long awaited new app matches carriers with loads, puts them into the fray in the
highly competitive, $700 billion truckload brokerage arena.
By Jeff Berman, Group News Editor

WHILE ANTICIPATED for some time,
ubiquitous ride-sharing service Uber said
last month it has officially entered the
freight transportation arena, specifically
truckload brokerage, with the introduc-
tion of Uber Freight. In a blog posting,
Eric Berdinis, Uber Freight product man-
ager, wrote that Uber Freight is an app
that matches trucking companies with
loads to haultaking the guesswork out
of finding and booking freight, a stressor
for drivers.
What used to take several hours and
multiple phone calls can now be achieved
with the touch of a button, Berdinis
explained. Vetted users download the
Uber Freight app, search for a load and
tap to book it. Rate confirmation comes
within seconds, eliminating the common
anxiety about confirmation. And, Berdinis
said that rather than the common practice
of a trucker waiting 30 days or more to get
paid, Uber Freight is committed to pay-
ing within a few days, fee-free, for every
single load, and when things dont go that the company has been testing its
as planned or drivers have to wait longer
than expected, we pay for that, too, with
accessorial rates published on the Uber
Freight blog and Website.
Uber has had its sights on the truck-
load brokerage market for some time, with
a September 2016 Reuters report noting
that it was keen on becoming a freight
hauler through its acquisition of Otto, a
self-driving truck startup for $680 mil-
lion in August 2016, and a technology
partner for trucking. Uber is now pitching
12 L OGISTICS MANA GEM ENT | JUNE 2017
its services to shippers, truck fleets and
independent drivers, not just to outfit
trucks with self-driving technology, but
also to be a player in the highly com-
petitive $700-billion truckload brokerage
arenawhich is replete with major play-
ers such as C.H. Robinson Worldwide,
XPO Logistics, Echo Global Logistics
among others.
Ubers Berdinis said in an interview
tech giant into this space ahead of Ama-
freight platform for several months. We
firmly believe we can make a significant
impact in the future of trucking with a
new way of booking freight and a new
way of connecting small fleets and owner-
operators with the large tail of capacity
out there to the community of shippers
that dont traditionally have the resources
to go out and find capacity, he said.
Prior to this launch, Uber had been
piloting a program with a handful of U.S.-
based shippers as well as a number of small
carriers based in the triangle between Dal-
las, Houston and San Antonio.
Going forward, Berdinis said that
Uber Freight will focus on independent
drivers and small fleets, noting that own-
er-operators may be viewed as a dying
breed these days due to the challenges in
finding consistent freight.
Uber Freights initial focus is on the
two most common freight types in the
United States, dry van and refrigerated
(reefer), which offers a lot of space to route
and optimize movements of these small
fleets using the app. Going into this space
and doubling down on small fleets and
creating a top-quality service for a shipper
base offers room for growth, he said.
According to Morgan Stanley ana-
lyst Ravi Shanker, the move marks an
escalation in the truck brokerage disrup-
tion wars. Thus far, weve seen several
startups vying to be the Uber of freight
achieve scale in the past two years, but
Ubers launch marks the entry of the first
zons impending launch this summer.
In the long-term, Shanker says his
firm is seeing secular margin compres-
sion at all of the 3PLs. This is due to
the threat of increased competition from
startups vying to crowd-source freight,
and they continue to raise meaningful
amounts of private capital; insourcing at
e-commerce and other logistics giants;
and vertical integration into the asset-
light business by asset-heavy players
including, eventually, OEMs.
LOGISTICSMGMT.COM

INFRASTRUCTURE
Its beyond time to
modernize U.S. infra-
structure, U.S. Chamber
of Commerce urges
THE GENERAL MESSAGE SENT
during the recently held Infrastructure
Week was loud and clear: The lack of
U.S. infrastructure modernization is
increasingly causing expensive bottle-
necks at ports and around our cities
that are responsible for
expensive delays in an
ever-complex worldwide
market.
Ive been playing
around with supply chain
issues since I was a young
manwhich is a long
time ago, said Thomas
Donohue, former head of
the American Trucking
Associations (ATA) and
for the past 20 years the
president and CEO of the
U.S. Chamber of Com-
merce. Todays supply chain is not what I
grew up with, and change is inevitable in
this business.
Donohue and others spoke during
Infrastructure Week at the U.S. Cham-
bers fifth annual Global Supply Chain
Summit in May. He added that this is
a once in a generation opportunity to
modernize the U.S. infrastructure to the
tune of $1 trillion in investment.
The quest, as always, is how to pay for
it. Fuel tax increases are apparently back
on the table in Congress, and that was
music to the ears for some in attendance.
Ed Mortimer, executive director of the
U.S. Chambers transportation initiative,
has backed the Chambers call for a grad-
ual increase in the federal fuels taxcur-
rently 18.4 cents a gallon on gasoline, 24.4
cents on diesel, unchanged since 1993.
Its not just time to fix it, Mortimer
said. Its time to modernize it and improve
it, and that not only includes roads and
bridges. He added that intermodal access
to ports around the country is clogged due
to the increase in foreign trade and water
advocates dont want to be left out in any
building boom.
LOGISTICSMGMT.COM
NEWS analysis
Molly Campbell, a director at the Port
Authority of New York and New Jersey,
added that infrastructure is our bread and
butter. She said that their port is under-
going a major dredging program to help
accommodate larger, deeper ships. We
would love to have infrastructure spending
thats more flexible, but the government
needs to invest in projects that make the
most economic sense, not just merely on
political will, she said.
As always, truckers are in the vanguard
of those calling for increased spending on
infrastructure. FedEx and other truckers
have openly called for an
increase in the fuel tax to
pay for improvements to
alleviate bottlenecks.
Bill Sullivan, execu-
tive vice president of
advocacy at the ATA,
said that big investments
are needed for the truck-
ing industry, adding that
ATA officials recently
met face to face with
President Trump and
Vice President Mike
Pence to lobby for more
spending on highways.
Sullivan reiterated ATAs call for an
increase in the fuel taxwhich, notably,
he called a user fee. Trucking interests
are vigorously opposed to tolling of existing
highways, although Sullivan left the door
open for tolls on newer highways.
The highway is our office, Sullivan
said. And we believe that there has to
be a sustainable funding mechanism
to find dedicated funding for highway
investment, adding that a recent freight
bottleneck survey showed that conges-
tion costs U.S. shippers $63 billion a
year in delaysan embarrassingly high
figure for a country with the biggest
economy in the world.
Perhaps the United States could take
a page from smaller countries such as
Panama, which has invested mightily in
infrastructure improvements. In fact, the
newly expanded Panama Canal is mak-
ing a positive impact on worldwide trade,
saidKarla Gonzalez, deputy chief of mis-
sion at the Embassy of Panama.
The East Coast ports are the most
important beneficiaries of the Panama
Canal expansion, said Gonzalez, noting
JUNE 2017 | L O G I ST I C S MAN AG E ME N T
the growth in ports of Virginia, Savan-
nah and Jacksonville and the millions
that are being spend on improvements
in Baltimore and Miami. I cant place
enough emphasis on the need for U.S.
ports to modernize.
Those improvements at ports are wel-
come news to manufacturers, who have
talked about being hampered by an aging
U.S. infrastructure in an increasingly com-
petitive worldwide market
We need infrastructure, said Judith
Marks, CEO of Siemens USA. We need
access to ports and airports. We are
at a unique junction in this country
to double down on infrastructure and
double-down on public-private partner-
ships. We need to think of infrastructure
with a capital I.
Chamber officials have long backed
a comprehensive infrastructure invest-
ment program, and Trump administration
has talked about a $1 trillion investment
for infrastructure, but so far details are
sketchy. And we rolled up all the com-
ments from this recent event, there is no
question: The need for modernizing U.S.
infrastructure is as great as its ever been
in our nations history.
John D. Schulz, contributing editor
SUSTAINABILITY
Shippers make case
for U.S. to remain in the
Paris Agreement
WHILE PRESIDENT TRUMP and
administration officials havent made
their intentions clear in regards to the
United States remaining in the Paris
Agreement, a large faction of well-known
companies have made it apparent that
they want to remain part of it.
13
NEWS analysis
The Paris Agreement by the United
Nations Framework Convention on Cli-
mate Change (UNFCCC) requires each of
the 190 participating countries to strength-
en the global response to the threat of
climate change by keeping a global tem-
perature rise below 2 degrees Celsius above
pre-industrial levels and to pursue efforts to
limit the temperature increase even further
to 1.5 degrees Celsius.
To reach these ambitious goals, appro-
priate financial flows, a new technology
framework and an enhanced capacity build-
ing framework will be put in place, thus
supporting action by developing countries
and the most vulnerable countries, in line
with their own national objectives as well.
The nonbinding agreement also provides
for enhanced transparency of action and
support through a more robust transpar-
ency framework, the UNFCCC added.
Reports stated that the Trump admin-
istration was hoping to make a decision
about remaining in the Paris Agreement
prior to the G-7 and G-20 summits that
were held last month. A Wall Street Journal
report noted that, at those meetings, world
leaders were likely to pressure President
Trump to remain in the agreement. The
report also noted that EPA Administrator
Scott Pruitt is keen on the U.S. withdraw-
ing from it, with other people with close
White House ties urging more tempered
steps, such as pairing the U.S. carbon-
emission reduction targets.
Whats more, while on the campaign
trail, President Trump called the Paris
Agreement a bad deal for the U.S., while
saying clean air and crystal clear water are
important. As for how large U.S.-based
businesses feel about the agreement, its
clear that they want things to remain the
same and not see the U.S. exit.
In a letter sent to President Trump on
April 26, 16 companies, including Apple,
DuPont, General Mills, Google, Intel and
Walmart pleaded their case for why the
U.S. should remain in the agreement.
Climate change presents U.S. com-
panies with both business risks and busi-
ness opportunities, the letter stated.
U.S. business interests are best served
by a stable and practical framework,
facilitating an effective and balanced
response. We believe the Paris Network
provides such a framework.
The letter added that companies based
14 L OGISTICS MANA GEM ENT | JUNE 2017
or operating in the U.S. benefit from U.S.
participation in the agreement in several
ways, including strengthening competi-
tiveness and reducing the risk of competi-
tive imbalance for U.S. companies.
In a May 10 letter to the President,
30 U.S.-based CEOs, including large
shippers like Cargill, Johnson & Johnson,
Unilver and Tesla, expressed their support
for the U.S. remaining in the agreement:
As CEOs of large American companies,
or with significant operations in the Unit-
ed States, we are concerned about keeping
the doors open for the global flow of Amer-
ican manufactured goods and products at
this critical time when our manufacturing
sector is starting to grow from our com-
petitive energy advantage.
Jason Mathers, Environmental
Defense Fund senior manager for supply
chain and logistics, said his organization
sees the agreement as being incredibly
important, because it has ambition, is
global in scope and provides a very broad
framework.
Jeff Berman, group news editor
INTERMODAL
IANA reports Q1
intermodal gains
THE INTERMODAL ASSOCIATION
OF NORTH AMERICA(IANA) report-
ed last month in its Intermodal Market
Trends and Statistics report that first
quarter intermodal volumes saw annual
growth for the second straight quarter.
Prior to the last two quarters, vol-
ume growth saw annual declines during
the second and third quarters of 2016,
which were preceded by 25 consecutive
quarters of growth. Total first quarter
volume movementsat 4,240,884
were up 2% annually, ahead of the first
quarters 1% increase.
International containers led the
individual intermodal categories with
a 2.9% annual increase for its second
straight increase following two quarters
of declines. Domestic containers rose
1.3%, while trailers eked out a slight
annual gain, up 0.3%.
IANA said in the report that this per-
formance is impressive in that it follows
a 2% gain from the first quarter of 2016,
which suggests that the first quarters
increase was real growthas opposed to
having an easier annual comparison.
Looking at international volumes,
IANA said that while first quarter vol-
umes were up 2.9% and U.S. inter-
national volumes were up 2.5%, U.S.
container imports were lower, seeing
a 1.6% gain. The report explained that
international growth and container
import growth tend to be fairly close,
but that was not the case in 2016 and
into this year so far.
IANA president and CEO Joni Casey
said that the first quarter international
volumes were fueled by increased con-
sumer confidence and spending.
As for domestic containers, which
recorded less than half the growth rate
of international and fell far short of the
fourth quarters 6.4% annual increase,
IANA pointed to declines in the Mid-
west, Northeast and Southeast regions.
We would have expected gains to be
a little higher, but there are still strong
headwinds particularly in the east, with
truck capacity relatively loose and cost of
fuel still low by comparison, Casey said.
First quarter intermodal marketing
companies (IMC) total first quarter loads
rose 7.5%, with intermodal loads up 3.6%
and highway loads up 11.6%.
Intermodal revenue was up 5.6% and
highway revenue saw a 13.8% annual
gain. Total revenue saw an 8.4% annual
gain. Average intermodal and highway
revenue per load and each saw matching
1.9% annual increases art $2,608 and
$1,438, respectively.
IANAs Casey said that over-the-road
volumes and loose truck capacity drove
the total increase in IMC loads.
Jeff Berman, group news editor
LOGISTICSMGMT.COM
Sponsored by NEWCASTLE
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I N TODAYS FAST-PACED distribution environ-
ment, the room for error has shrunk just
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Pushed to do more with less, and to
keep workers as productive as possible
in the midst of a labor crunch, warehouse
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tomer satisfaction.
The problem is that the receiving area
is prone to errorsjust one of which can
have a tenfold impact across the rest of
the warehouse or DC. Left to chance,
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productivity and profitability issues.
For example, in many of todays ware-
houses, poor and inefficient physical layout
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great detriment to an entire operation.
MAKING THE CASE REPORT
Making the Case for
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The good news is that the right combi-
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By using barcode technology to stream-
line the warehousing process, for example,
managers can effectively remove redun-
dant processes while maximizing resource
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match changes in demand helps minimize
the negative impacts of seasonal demand,
while developing the right mix of expertise
through workforce planning helps manag-
ers hone the skills necessary for successful
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In this report, we take a look at the role
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How to untether receiving and
watch productivity rise
efficiency and organizational profitability.
Whether the goal is to cut down on the
amount of time a worker spends walking
back and forth to retrieve labels and pa-
perwork, eliminate the time spent bringing
product to a workstation for processing, or
give workers access to a full PC or laptop
out on the DC floor, a mobile workstation
helps achieve those goalsand more.
Newsroom Notes
Jeff Berman is group news editor for
the Supply Chain Group publications.
To contact Jeff with a news tip or
with Jeff Berman idea, please send an e-mail to
jberman@peerlessmedia.com.

Does Trumps gas tax increase

proposal have potential?
Considering that the federal gasoline tax has not been And while President Trump floated the idea of raising
raised from its current levels of 23.4 cents for diesel and the tax, a recent report in The Hill more or less squashed
18.4 for gasoline since 1993, its somewhat surprising that that idea, noting how Republicans are opposed to the con-
it gets as much as attention as it does. cept, calling it a politically fraught issue that lawmakers
Sure, the reasons vary as to why thats the case. How- have avoided for years.
ever, as one of the primary revenue sources for the High- However, that doesnt necessarily mean that its
way Trust Fund (HTF), which routinely pays out more falling on deaf political ears either. A letter recently
than it collects, it really is time for the tax to be raised. In addressed to Senator Mike Enzi (R-WY), Chairman
fact, that exact thought has been expressed by many high- of the Senate Committee on the Budget, and Senator
powered trucking industry executives, as well as a whole Bernie Sanders (I-VT), the committees ranking mem-
slew of other industry stakeholders. ber, from various business and transportation concerns,
As we have written about extensively over the years, including the U.S. Chamber of Commerce, the National
having sufficient capital in the HTF is critical as its rev- Association of Manufacturers, and the American Asso-
enues are allocated for federal highway, transit, and high- ciation of State Highway and Transportation Officials,
way safety programs. Whats more, diesel taxes represent among others, highlighted the importance of federal
about 90% of HTF net revenues.
The issue of Congress being proactive when
it comes to possibly raising the federal gasoline In fact, the premise of raising the gas tax has,
tax is even more elevated now, considering that historically, been nothing more than a long-
our nations infrastructure remains in a full- standing game of kick the can over and over

blown state of disrepair with changes needed
long past yesterdayexplaining why Trumps and over
recent comments that he would consider rais-
ing the tax gained a fair level of attention. transportation investment to growing the U.S. economy
In fact, the premise of raising the gas tax has, histori- and creating jobs.
cally, been nothing more than a long-standing game of Taking that thesis a step further, the letter pointed out
kick the can over and over and over that while the 2015 Fixing Americas Surface Transporta-
Whats more, going back to 2008, Congress has had to tion (FAST) Act provided sufficient HTF resources to sup-
take $143 billion from other sources to put into the HTF port the relatively modest surface transportation investment
to fill needed gaps in investment, due in large part to the it authorized through fiscal year 2020, it also requires $70
fact that the gasoline tax had not been raised. billion in transfers to reach that goal. It also cited CBO
That point gets even more magnified when you con- data stating that there will be a $20 billion average annual
sider that HTF-based revenue didnt even raise $40 billion shortfall between existing revenue and the amount needed
in fiscal year 2015, according to the Congressional Budget to prevent cuts in highway and public transportation invest-
Office (CBO). In the meantime, the CBO has stated that ment upon expiration of the FAST Act.
the HTF will be insolvent in the next 10 years unless a This funding predicament and subsequent impacts
workable funding solution emerges. on both the federal budget and U.S. economy require a
Raising the gasoline tax has never truly been on long-term solution to stabilize and grow federal surface
the table as a viable funding option. The reason? Well, transportation as part of any tax reform initiative, the let-
according to many industry analysts, its been the lack of ter said. It added that should the HTF revenue shortfall
political will or incentive. not be addressed, it would again require Congress to shift
In fact, at an industry conference around five years funds from other parts of the budget to support another
ago, former Department of Transportation Secretary Ray in a long string of one-time trust fund infusions.
LaHood explained to me that the Obama-led White House Remember how fun those were? Needless to say, noth-
was opposed to raising it due to economic conditions at the ing has truly changed when it comes to the state of the HTF
timewhich was his way of saying that raising the tax was and the prospect of raising the gasoline tax. Ignoring a prob-
not under any type of consideration. lem will not make it go away. Does Congress know that?

16 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

Moore on Pricing
Peter Moore is adjunct professor
of Supply Chain at Georgia College
EMBA Program, Program Faculty at
the Center for Executive Education
at the University of Tennessee, and
adjunct professor at the University of
South Carolina Beaufort. Peter writes
from his home on Hilton Head Island,
S.C., and can be reached
at peter.moore@gcsu.edu.

Capturing in-transit inventory on rail

Shippers should be noting that rail is increas- ing, or fixed safety stocks. This can be modeled in an
ingly carrying inventory thats fueling a growing inexpensive, Cloud-based network optimization tool.
U.S. economy. According to the Association of Predictable is critical for in-transit inventory
American Railroads (AAR), intermodal rail traffic items, as were literally promising usability at a given
in March 2017 jumped 21% over February total- time and place for our customers. Can we predict
ing almost 1.3 million units, representing a 4% the transit time on rail? Yes we can. Rail car location
increase over 2016 traffic and a new record in U.S. messages with a history back to the EDI realm are
intermodal volumes. linked in sophisticated systems that can statistically
Further, rail is making an impact on bulk ship- predict transit times. These are adjusted many times
pers, as carload originations also jumped over 22% in a day as rail freight passes intermediate points.
March over the previous month and were 7% ahead Visible refers to tracking at the item level. As
of the same period in 2016. In fact, the railroads have noted above, with more recent systems we know
enjoyed five years of steady growth in the car-
load volumes, according to the AAR.
Indeed, theres a clear need for visibil-
ity into inventory in transit as we move to
Shippers can, in fact, make an impact on overall
shorter and shorter delivery cycles. Howev-
inventory levels by being able to promise delivery
er, rail has historically been a separate, less and allocate inventory while in motion on rail.
visible supply chain, as we could only trace
at the car/container number level. In order to effec- where the product is on a given trailer or railcar and
tively use rail in our in-transit inventory solution, it we can make that product and order information
has to be affordable, capable of being planned, pre- available to our customer through a push-based infor-
dictable, visible and flexible. mation service. Bottom line: The infrastructure of rail
Affordable seems like a no-brainer for rail is in place and the software for making a dashboard
because its so energy efficient and well established. for customers is still improving.
Unfortunately, competition for portions of the rail- Its important to keep in mind that we need
roads market is very limited, as consolidations have flexibility both on an emergency route-change
transpired over the past several decades. In fact, basis and on a sustainability, re-planning basis.
many markets have only one railroad serving them. Flexibility has not been associated with inventory
Weve seen the railroads push price increases on rail in the past; however, were seeing improved
with the rationale that those industries that methods for tracking and a move to paperless way-
depend on them should share margin with them. bills and other documentation is enabling faster
This rationale can push shippers to painful profit response to changes by operations.
levels and act as a disincentive to capital invest- It wont be as flexible as highway, but rail is oper-
ment in rail-dependent plants. ating vastly better than it was just a decade ago.
Capable of being planned refers to the abil- Thus, shippers can plan alternate solutions should
ity to generate information that can be made visible there be a disruption in service.
through forecasting models. With the ability to col- Shippers can, in fact, make an impact on overall
lect data at the item level inside the railcar/container inventory levels by being able to promise delivery
and tie that to the demand in real time, shippers and and allocate inventory while in motion on rail. It
their customers could rely on inventory status while may be past time to integrate on-rail item level
in motion. In turn, this reliability will allow the sub- inventory into the capable-to-promise equation for
stitution of virtual inventorythat which is still com- customer service.

LOGISTICSMGMT.COM JUNE 2017 | L O G I ST I C S MAN AG E ME N T 17

 EXCLUSIVE

Logistics & Supply Chain Education:

OPPORTUNITY
ABOUNDS
Here are five trends that every shipperand potential
shippermust watch as the demand for experienced
logistics and supply chain professionals soars.

BY BRIDGET MCCREA, CONTRIBUTING EDITOR

A s global supply chains continue to evolve, and

as e-commerce and omni-channel continue to put
more and more pressure on our operations, demand for experienced logistics
and supply chain managers is increasing exponentially. Here are five emerging
trends in logistics and supply chain education and career development that
every manager needs to keep an eye on over the coming year.

1 Supply chain programs proliferate, but fall short on the transportation front.
Gail Rutkowski, executive director for the National Shippers Strategic Transportation Council
(NASSTRAC) in Chicago, says that shes seen a big uptick in the recent number of professionals
enrolled in masters supply chain programs.

18 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

 Credit

LOGISTICSMGMT.COM JUNE 2017 | L O G I ST I C S MAN AG E ME N T 19

 EXCLUSIVE: Logistics & Supply Chain Education

When I was young, it was hard to even find any kind How would you rate your understanding
of education related to logistics or supply chain, says of e-commerce and e-fulfillment processes
Rutkowski. Today, I think the universities are doing a within your organization?
much better job of offering those kinds of courses to
students.
However, Rutkowski contends that while most of those Somewhat knowledgeable 53%
programs are focused on broader logistics and supply chain
management, many fall short when it comes to the all- Highly knowledgeable 37%
important transportation segment. Interestingly enough,
Penn States supply chain program, which has been around Not very/Not at all knowledgeable 10%
for years, just added transportation to its course offering
three years ago, she points out. Transportation was some- Salary by level of understanding
thing that most of these guys avoided, because you really of e-fulfillment processes
cant teach transportation in a classroomyouve got to
Average Median
get out and do it.
$128,245
Even with the current transportation gap in education, $105,000 $105,175
$90,000 $82,575
Rutkowski says universities are doing a good job at creating $73,500
current, relevant curriculums for todays budding and vet-
eran supply chain professionals.
There are some very strong programs out there, says Highly Somewhat Not very/Not at all
knowledgeable knowledgeable knowledgeable
Rutkowski, who points to Penn State, Brigham Young,
University of Tennessee, Georgia Tech and Auburn as a Source: Peerless Research Group (PRG)

handful of institutions that are leading the pack. Still, I

think they could all be doing a little better on the trans- the Millennial generation may just change the way we all think
portation front. about worklike it or not. This younger generation is dedicated
and it wants to make a difference, says Rutkowski, but there
2 The oft-misunderstood Millennial generation are some things that will only come with on-the-job training.
needs to learn by doing. That becomes an issue when graduates take gap time instead
Take a look around your organi-
zation and youll see more Millen-
Education level/Salary by education level
nials joining the workforceand
theyre looking for opportunities in Education Salary by education 2016

logistics and supply chain manage- $83,710 $84,525

High school 6%
$75,000 $78,000
ment.
Unlike their predecessors, these $84,620 $77,765
Some college 18%
$75,000 $70,000
digital natives have a different
Collegeassociate's $82,270 $78,955
outlook on what work should look 10%
(2-year) degree $73,500 $67,000
like as well as how to perform their
Collegebachelor's $110,735 $110,050
individual jobs. This reality is hitting 40%
(4-year) degree $95,000 $95,000
hiring and training managers in all $144,955 $146,990
MBA 18%
industries right now, and logistics is $120,000 $120,000

no exception. Millennials definitely $131,135 $118,400

Other graduate 7%
approach work from a different $120,000 $110,000

angle, says Rutkowski, but that Other 1%

doesnt mean that they dont work, Average Median Change from 2016
or that they dont work hard.
Source: Peerless Research Group (PRG)
Due to its sheer size and prowess,

20 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

 EXCLUSIVE: Logistics & Supply Chain Education

of getting right into logistics and

supply chain, for example, and miss
Have you completed Salary by completion
out on the early on-the-job training
any formal education of formal education
in logistics and/or supply $115,600
that they need to get a foot in the $105,620
chain management? $100,000
$90,000
door. Unfortunately, theyre not
going to learn on Snapchat or Ins-
tagram, says Rutkowski. Theyre Yes 43%

going to learn by doing. No 57% Yes, No

At the Institute for Supply have formal education
Management (ISM), chief content 2016 $115,185 $95,000 $98,865 $83,500
and engagement officer M.L. Peck
says that both institutions and Average Median Change from 2016
companies alike need to focus on
learning that combines both theory Source: Peerless Research Group (PRG)

and hands-on experience when it

comes training the next generation of logistics and supply In the meantime, peak 2017 median salaries remained at
chain decision makers. $90,000, matching last years number, with managers at all
ISM, for example, offers an on-demand, subscription-based levels reporting cost-of-living raises.
service that includes hundreds of different learning modules However, those survey respondents who have only been in
that are broken down into 15 minuteor lessdigestible their present position for three years to five yearsthe highest
chunks. They are very narrow and to the point, says Peck, percentage of those questioned in the surveycaptured the
which really appeals to younger generations that grew up greatest gains in income, rising to $97,000 from $87,000 over
learning from platforms like YouTube. just the past 12 months.
And finally, survey respondents who said that theyre highly
3 Supply chain managers are seeing compensation knowledgeable about e-commerce are bringing in a median sal-
bumps, especially for e-commerce. ary of $105,000 compared to the $73,500 earned by those who
According to the Logistics Managements 33rd Annual Sal- say they are on the low end of the learning curve.
ary Survey, new demands facing logistics managersmainly
driven by the continued double-digit growth of e-commerce 4 More women are entering the eld, but both
are pushing salaries up to new levels. genders need to get more interestedand at a
The survey also found that professionals are being lured by younger age.
logistics jobs providing a better standard of living in regions In a recent Women in Supply Chain Survey, Gartner
where new concentrations of e-commerce are being created. and executive womens leadership group AWESOME, exam-
ined the representation of women in supply chain leadership
What would you say have been the most roles. They also identified practices that are increasing the
important steps in advancing your career? engagement with and success levels of women in supply
chain and logistics.
Personal or social networking 50%
In particular, the researchers say that the percentage of
Taking classes/Getting a
degree in business
28% women in supply chain leadership positions decreases as the
Taking classes/Getting a degree corporate ladder rises, and that fewer than half of the compa-
25%
in transportation nies surveyed have goals of attracting, retaining, and promot-
Industry certifications 22% ing more women into leadership roles.
Joining an industry/ In fact, just 47% of respondents have the stated goal of
18%
professional association increasing the number of female leaders in supply chain
Other 20% (16% have formal goals), while just 42% of those respondents
have a planned, supply-chain led initiative in place. Abe
Source: Peerless Research Group (PRG)
Eshkenazi, CEO at Chicago-based supply chain management

22 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

 EXCLUSIVE: Logistics & Supply Chain Education

association APICS, sees a sector thats ripe for change on the Are you planning to take any
human resources front. continuing education programs
We dont see a lot of women leaders, and as a result we or classes during the next 12 months?
also dont see too many women looking at opportunities for
46%
leadership; to us thats a huge issue, says Eshkenazi. On a
38%
positive note, he says that current supply chain grads tend to 34% 35%
30%
be split 50/50 on the gender front, and that some companies
are even offering higher pay to women in order to attract
them to the organization.
But theres still a steep hill to climb when it comes to 2013 2014 2015 2016 2017
women in logistics and supply chain management, and par-
Do you think this class or program
ticularly on the leadership front. Were still not seeing a high
will enable you to earn a better salary?
volume of individuals going to college to seek out opportuni-
2013 33% 18% 49%
ties in supply chain and logistics. Instead, theyre discovering
the opportunity during their third or fourth year in college, 2014 33% 18% 49%
says Eshkenazi. That leaves us with a huge opportunity to
turn that tide and get both men and women interested in our 2015 31% 25% 44%

industry at a younger age. 2016 37% 15% 48%

One way to do that is through partnerships with STEM
(science, technology, engineering, and math) programs at 2017 24% 30% 46%

schools, starting at the high school level. We need to create

their awareness of opportunities in supply chain and opera-
tions management, says Eshkenazi, and develop successful
role models that students can look up to and say, You know
what? I can do that too.
5 Theres a seat in the C-suite for supply chain and
logistics managers, but theyll need to learn the lingo
in order to make an impact.
On the career front, were now seeing more logistics and
supply chain managers occupying C-suite and boardroom
chairs. So, where their jobs were once focused mainly on run-
ning transportation operations or overseeing the warehouse
and DC, logistics professionals are taking on broader roles at
a time when the supply chain itself is growing in importance
and relevance.
Some of this may have started as far back as the last
recession, says Peck, during a time when logistics and sup-
ply chain managers really proved their worth in terms of
mapping out more efficient routes to save on fuel, getting
the goods to their final destinations quickly, and locking in
better supplier pricing. Company leaders sat up and took
notice, she adds, and noted the cost savings and efficien-
cies that came from running a streamlined logistics and
supply chain operation.
As an industry, we really stepped up and started to get a
lot of visibility and recognition, says Peck. That momentum
Yes No Uncertain at this time
Source: Peerless Research Group (PRG)
carried right into 2017, a year marked by a stronger economy,
but also a persistent need to cut costs and save money.
Financial factors aside, Peck says that logistics and supply
chain professionals can also prove their value on the innovation
side, where getting products to market faster and more effi-
ciently is an ongoing challenge.
By including logistics and supply chain in those early,
strategic, C-level planning conversations, companies can
reduce the time it takes to get to market, says Peck, who
adds that supply chain managers that want a presence in the
C-suite can start by getting to know the language and lingo of
business and executive managementwhich, in most cases,
revolves around finance.
As more professionals take this step, everything from job
titles to responsibilities to salaries could be elevated exponen-
tially, adds Peck. So, instead of talking about inventory turns,
talk about working capital and remember that youre in the
C-suite to solve a problem. Thats where you can start to add
real value for your organization.
Bridget McCrea is a contributing editor to
Logistics Management

LOGISTICSMGMT.COM JUNE 2017 | L O G I ST I C S MAN AG E ME N T 23

 Transportation Best Practices/Trends

2017 Rail/Intermodal Roundtable:

Volumes stable,
business steady
While the overall economy is putting an emphasis on smaller
shipments, these two stalwart freight transportation markets continue
to chug along at a healthy clip. Our panel of leading rail/intermodal
experts helps shippers put the markets into perspective.

BY JEFF BERMAN, GROUP NEWS EDITOR

W
hile the overall economic outlook may be best described as
inconsistent, the railroad and intermodal market sectors have
both witnessed consistent growth for the most partespecially over
the last decade. In fact, in terms of volumes, these two vital freight transporta-
tion markets are ahead of where they were just a year ago at this time.
On the rail side, its clear that its no longer the bellwether that it once was,
but growth lost on the coal side has been made up for in other areas, such as
grain and chemicals. And on the intermodal side, domestic intermodal is not as
dominant as it had traditionally been; however, thats due to the international
movements swinging steadily upward. And while rail shippers are still clamoring
for regulatory changes in order to provide what they believe would be needed rate
relief, the railroads continue to allocate massive amounts of capital spending to
maintain and upgrade the nations private rail network in the name of safety,
upgraded track and technological advancementsall with an eye on the future.
To help put the current state of the nations rail and intermodal network into
better perspective, Logistics Management is joined by three of the nations fore-
most experts in the market. Our panelists include Larry Gross, senior partner at
freight transportation analyst firm FTR; Tony Hatch, rail analyst and principal of
ABH Consulting; and Bill Rennicke, partner at Oliver Wyman, a management
consultancy.

24 LOGISTICS M A NA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

Logistics Management (LM): How
would you define the current state of the rail-
road and intermodal markets?
Larry Gross: Intermodal is in the pro-
cess of shaking off the doldrums of 2016.
According to data from the Association of
American Railroads (AAR), volume for the
first four months of 2017 was up 2.3% annu-
ally. The annual growth in movements of
ISO (international) containers exceeded that
of import twenty-foot equivalents (TEU) in
January and February, a welcome change
from last year.
Movements of domestic containers and
trailers were also up slightly annually in Janu-
ary and February. Rail carloads are notching
strong annual increases so far in 2017, but
these are overstating the health of the sec-
tor. While volume is surely better than a year
ago, most of the recovery occurred in the
second and third quarters of 2016. Since that
time, total carload volume has generally been
declining; and if the current trends continue,
volume will once again fall below prior year
during the second half of 2017.
Bill Rennicke: To build on Larrys data,
railroad and intermodal markets are currently
very challenging for rail carriers. The overall
economy is putting an emphasis on smaller
shipments; faster, more reliable service; and
optimizing the supply chainespecially on
the consumer side of things.
Railroads have allowed many intermediar-
ies in the market, and these make a significant
impact on the efficiency and pricing of the
supply chains in which railroads participate.
At the same time, markets are undergoing
significant technological changes that are cre-
ating disruptions in the logistics business and
LOGISTICSMGMT.COM
for much of the traditional customer base of
the railroads. For the year, intermodal traffic
is up a meager 0.5% and automotive traffic is
down 2.5%, suggesting little actual growth in
market share in the consumer sector.
Tony Hatch: Ill add that rail markets
are improving overall, as coal markets have
stabilizedand compare quite favorably to
year-earlier resultsand the high-margin sub-
sector, export coal, is having one of its periodic
boom-lets. The so-called freight recession
is over, for sure.
LM: Carload volumes are showing decent
growth on a year-to-date basis, with these
early Q1 numbers helped by easy compari-
sons. Overall, are things moving in the right
direction for carloads? Credit
Rennicke: Its tough to argue that the
numbers arent moving in the right direction
against weak comps. However, the intermo-
dal and automotive sectors are not growing
faster than GDP like they were two years ago.
Declines in diesel fuel costs and incremental
gains in trucking fuel efficiency are putting
pressure on intermodal traffic. Automotive
business, especially for cars, is down as the
industry slumps a bit after back-to-back record
years for automobile sales.
Sometimes weak demand is actually OK for
rail share, as slower transit times just become
storage-in-transit for slower moving models.
However, this does not speak well of the over-
all value of rail service. Also, anecdotal evi-
dence suggests more production from Mexico
to the Eastern Seaboard is moving via short
sea, while trucks are moving greater volumes
direct to dealer from transplant assembly
plants in the Southeastern U.S. Overall, the
JUNE 2017 | L O G I ST I C S MAN AG E ME N T 25
Transportation Best Practices/Trends: Rail/Intermodal
industry needs to discover a new growth
catalyst to replace energy traffic, and
figure a way to reignite intermodal as a
growth area.
Gross: Although volume is sub-
stantially higher than a year ago, these
year-over-year comparisons dont provide
a full, timely view. The current trend for
carloads in general is negative. Setting
aside the usual seasonal dip around the
holidays, total carloads have been trend-
ing flat to down since the middle of the
fourth quarter of 2016.
For example, carloads of coal for
The overall economy is putting an emphasis on
smaller shipments; faster, more reliable service;
and optimizing the supply chainespecially on
the consumer side of things.
the four weeks ending April 1 averaged
86,400 per week, 14% below the recent
peak achieved in November. However,
the picture is not all bad. Im seeing nice
sequential growth in construction-related
commodities, including stone, sand and
gravel and, importantly, lumber and wood
products. The latter recently reached the
highest level since early 2016, providing
a tentative indication of improvement in
new housing construction.
LM: Shifting to intermodal, year-
to-date volumes are also up, with
domestic continuing to lead the pack
and international starting to regain its
footing. That said, how do you view the
current state of intermodal?
Hatch: General freight is doing
fine, and intermodal is contributing.
Whats unusual is just thatintermo-
dal is contributing but not leading.
Truck capacity remains loose, though
trucking earnings, unlike the robust
results in rail, were quite poor. Inter-
26 L OGISTICS MANA GEM ENT | JUNE 2017
modal is also affected on the interna-
tional side by the confusion over the
alliancesa net neutral short-term
effect that can still cause gyrations
and muted consumer spending.
Gross: Domestic intermodal move-
ments were up less than 2% through the
first four months of 2017, as domestic
container activity grew only sluggishly.
However, there has been strong growth
in the use of 28-foot pup trailers in
intermodal, which I believe reflects
e-commerce related activity being han-
dled by parcel and LTL carriers.
Bill Rennicke, partner, Oliver Wyman
Were expecting to see continued
acceleration in domestic intermodal
activity as the year progresses, espe-
cially as the implementation date for
electronic logging devices on trucks
approaches. This will cause a tighten-
ing of truck capacity, which will work to
intermodals benefit.
Rennicke: The current state of
intermodal is OK, but not great. A small
but perceptible amount of international
traffic is shifting from the West Coast to
the East Coast, where the shorter haul
puts it under extreme truck pressure.
Possible future border tariffs may fur-
ther hamper future international inter-
modal growth.
Domestically the industry is being
challenged by improving truck fuel
efficiency as well as by supply chains
that are getting shorter and more tightly
managed. Driver shortages, so far, dont
seem to be a problem for the trucking
industry, possibly because fuel effi-
ciency gains have enabled truckers to
marginally increase driver payand also
because demand is stronger in shorter-
haul lanes where driver productivity is
higher and railroads are less service and
cost competitive.
LM: How do you view the current rail-
road service levels compared to this
time a year ago?
Gross: The railroads are running as
fast as they choose to thus far in 2017.
In an economic response to lower vol-
umes, the railroads are running fewer,
longer trains in order to lower costs.
This results in longer waits between
departures, boosting yard dwell times.
These huge trains also tend to be slower,
and the resulting average train speeds
are substantially down from prior year,
but in line with the long-term average.
Similarly, average yard dwell is
somewhat higher than it was last year,
also standing above the 10-year aver-
age. Although the service statistics
are negative, I dont view these as
indicative of major service issues. The
network is running smoothly by all
accounts, just a bit slower than was
previously the case, and the situation is
much the same for intermodalspeeds
are down, but barring weather interrup-
tions and the like, service appears to be
running smoothly.
Rennicke: Railroad service levels
are up marginally from a year ago, but
not enough to matter. A continuing
focus on longer trains suggests that
overall railroad service is not going to
dramatically improve, and the weather
woes on the West Coast this winter may
actually drag service numbers down for
a month or so for the western carriers
until service equilibrium is restored.
Ultimately, to really drive strong
growth will require new lanes or a fresh
focus on service. We will be watching
CSX and the Hunter Harrison saga to see
LOGISTICSMGMT.COM
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Transportation Best Practices/Trends: Rail/Intermodal
if new norms are set for eastern railroads.
Interestingly, in Canada, where both car-
riers are highly service focused, railroads
seem to be gaining market share, with
stronger gains in both carload and inter-
Intermodal makes so much sense from a shipper
and public policy point of view, so I expect the next
five years will be pretty good.
Tony Hatch, rail analyst and principal, BH Consulting
modal traffic than we see in the United
States.
Hatch: Rail service is stable, while
down a bit annually according to the
metrics, but has been affected by the
winter weather, which was normal to
bad, compared to an easy winter a year
ago. Stable is not good enough, of
course. It wasnt addressed enough by
analysts in the first quarter earnings
calls. However, I expect it to continue
to improve over the course of the year,
given the focus and the big capital
expenditures of the previous five years.
LM: How are market conditions affect-
ing capacity and rates for rail and
intermodal?
Rennicke: Overall capacity is not
tight in any of the major commodity
areas for railroads or trucks, so rates
are likely to be flat. And with techno-
logical advances in trucking in accident
mitigation and fuel efficiency, truckers
will likely be able to keep reasonable
pressure on rail rates. Railcar supply
is good for most car types and produc-
tion is keeping up with modest growth
rates. There are huge surpluses, though,
in tank cars and hopper cars, and still
some surpluses in centerbeam cars for
forest products.
Hatch: Market conditions are
clearly affecting rail pricing overall,
especially in select merchandise areas,
where trucks are pricing at or close
28 L OGISTICS MANA GEM ENT | JUNE 2017
to costs like paper, and, of course, in
intermodal, where pricing is lagging
overall rail 2% to 3% annually in gains
so far this year. Overall, rail intermo-
dal can expect to see the winter/spring
as the bottom of the pricing cycle,
as their service improves and truck
capacity tightens due to some combi-
nation of regulations like electronic
logging devices (ELDs) and economic
conditions.
Gross: When it comes to rail
carload pricing, the railroads are
somewhat between a rock and a hard
place. Normally, one might expect to
see more aggressive pricing as a result
of challenges in rail volumes. On the
other hand, upward pressure on pricing
is the result of the industrys desire to
maintain good financial results and low
operating ratios.
The industry has limited ability to
increase volume through pricing activity
because most of the traffic moving in
truck is not susceptible to conversion
to rail carload no matter how its priced,
due to service, location, lot size or a
host of other considerations. Therefore,
more aggressive pricing will only result
in market share shifts between carri-
ers, and that is typically a self-defeating
exercise over the long run.
Because of that, I expect a steady-
as-you-go approach to carload pric-
ing that will be a continuation of
the current trends. With regard to
intermodal, there may be some room
for upward movement, particularly as
truckload capacity begins to tighten
toward the end of the year due to ELD
implementation.
LM: Is pricing where it needs to be in
light of the major capital expenditure
outlays made by the carriers?
Hatch: Pricing, of course, needs to
continue to growalong with shareto
justify the big capex spent developing
the domestic intermodal network
including corridors and gatewaysand
the high cost of service.
Rennicke: Capital spending for
line capacity and for rolling stock was
down last year and will be down further
this year, although because of posi-
tive train control (PTC), overall capital
spending remains relatively strong.
Railroads have sufficient margins that
theyre not cutting back on maintenance
spending.
So yes, it seems that railroads are
able to support their capital plans with
current pricing. However, in the future,
railroads can expect pricing gains to
moderate as trucks continually improve
their efficiency. Also growing market
share will have to come at the expense
of margins if railroads want to better
penetrate shorter haul traffic markets.
Gross: Were seeing some dial-
ing back on capital expenditures, and
this makes sense in a time of stable or
declining volume. While it may prove
difficult for the railroads to maintain
their current, rather lofty margins on
lower volumes, their economics should
still be sufficient to continue to support
the needed investments in the business
as required.
LM: While the Trump administration is
very much in its early innings, how do
you view the current state of rail policy
as it relates to things like the STBs
ongoing quest for reciprocal switching,
the possibility of railroad re-regulation,
and PTC?
Gross: I think the chances for
significant re-regulation of the industry
LOGISTICSMGMT.COM
Transportation Best Practices/Trends: Rail/Intermodal
have diminished, but not vanished.
The STB is a semi-autonomous agency
thats more capable of charting an
independent course than the Federal
Railroad Administration (FRA), which
is a part of the executive branch.
FRA efforts such as the two-person
crew mandate are dead, but the PTC
requirement is already enshrined in
legislation and therefore is not subject
to potential delay.
Rennicke: Its difficult to specu-
late, but regulatory changes are likely
to be a mixed bag. PTC implementa-
tion is probably too far along to be
pulled back. The real funding chal-
lenges around PTC are more on the
passenger side than on the freight
side, and public pressure after some
relatively high profile passenger acci-
dents in the Northeastern U.S. will
likely keep the pressure on for PTC
implementation. We think reciprocal
switching (EP-711) is too close to call,
but not likely to be resolved this year,
as filling vacancies on the STB tends
to be a lower priority item for most
incoming administrations.
Hatch: I dont buy into the Trump
infrastructure boost. Quite frankly,
you have to show me the money. And
remember, infrastructure in this case
includes schools, hospitals, internet,
etc. So, I continue to think that the
North American rail network will grow
its infrastructure advantage, perhaps
aided by reduced red tape regulations
and working with trucks to take share at
good returns.
LM: What will the rail and intermodal
markets look like five years from now?
Rennicke: The rail industry is at a
crossroads due to technological innova-
tion and disruptions in the energy and
logistics businesses. Railroads and their
suppliers must either begin to step up
LOGISTICSMGMT.COM
The big question mark is the timing of the
introduction of autonomous or semi-autonomous
trucks. When these begin to meaningfully enter
the marketplace, they will put severe pressure
on intermodal because its likely they will trigger
significant reductions in trucking rates.
Larry Gross, senior partner, FTR
the pace of change in technology and Longer term? I dont know if all of the
service levels to evolve and become talk on autonomous vehicle trucking
more aggressive and competitive in the means that winter is coming, but
marketplace, or they will begin a slow certainly the race is on for the rails to
and inexorable decline. generate enough heat to stay hot over
To thrive, the industry needs to put the long haul.
a strong focus on getting back ahead of Gross: I think the industry will
the technology curve instead of chas- look much the same as it does today.
ing it. This will take some new capex to The carload side will be under con-
pursue things such as integrating various tinuing volume pressure, and it would
technologies to get a driverless train, not surprise me if volume is lower five
LNG as a locomotive fuel, and hybrid years from now than it is today. Coal
technology to improve raw fuel efficiency still accounts for one in four rail car-
by capturing regenerative braking energy. loads. Coal consumption will continue
Further, railroads seem a long ways away to decline no matter what the Trump
from booking systems, dynamic pricing, administration does with regard to envi-
and managing data interfaces to boost ronmental regulations because the major
capacity utilization, eliminate delays and issue is economics, not regulations.
disruptions at interchange points, and There will be no change in the rela-
maximize margin capture. tive standing of coal vs. natural gas,
Hatch: Intermodal makes so much which is currently driving conversion.
sense from a shipper and public policy Its difficult to see where the industry
point of view, so I expect the next five will make up the carload volume that
years will be pretty good. I continue to will be lost.
think that the North American rail net- Intermodal will also not look much
work will grow its infrastructure advan- different, although I expect good growth
tage, perhaps aided by reduced red that will likely exceed that of over-
tape regulations, and work with trucks the-road trucking in most years. The
to take share at good returns. big question mark is the timing of the
As for things that are concerning, introduction of autonomous or semi-
theres rail service improvements on autonomous trucks. When these begin to
a consistent basis; rail capex, where meaningfully enter the marketplace they
good returns will ensure positive will put severe pressure on intermodal
reinvestment; and Trump and trade, because its likely they will trigger signifi-
not only the obvious parts related to cant reductions in trucking rates.
NAFTA, but to any trade wars impact
on international container shipping, Jeff Berman is the group news editor
on agriculture, plastics and exports. for the Supply Chain Group
JUNE 2017 | L O G I ST I C S MAN AG E ME N T 29
Global Logistics

CROSS-BORDER LOGISTICS:

NAFTA
TUNE-UP TIME
We take a deep dive into the 23-year-old NAFTA agreement, look at the impact it
has made on logistics operations in the United States, Mexico and Canada, and then
hear what the experts suggest Washington shouldand should notdo.

Truckingexecutives, hurt logistics and transportation compa-

nies would be a general decline in the
U.S. economy. For instance, Trumps pro-
transportation officials and shippers have enjoyed 400% growth in
posed border adjustment tax could raise
cross-border trade since the North American Free Trade Agree-
costs for consumers and put a damper on
ment (NAFTA) was implemented 23 years ago. However, all three spendingand thus slowing the econ-
contingencies are now openly concerned about Washington mak- omy. Yet, thats exactly what the fledgling
ing impulsive moves that could threaten the open borders that Trump administration is considering.
connect the United States, Canada and Mexico. Whether its called a border tax or an
We are going to make very big Im concerned about it because I import tax, logisticians say its a bad idea,
changes, or we are going to get rid of believe in free trade, says David Con- and one that could harm long-standing
NAFTA once and for all, President gdon, vice chairman and CEO of Old relationships between two of our largest
Donald Trump said recently. We cannot Dominion Freight Line, the nations third- trading partners: Canada and Mexico. To
continue like this. largest LTL carrier. Global trade is a real- top if off, President Trumps harsh rhetoric
All cross-border freight transporta- ity of life these days. The United States is toward Mexico during his campaign and
tion stakeholders are essentially begging a consuming nation; and yes, a lot of our presidency has not have helped relation-
the first-year president to find his fights manufacturing has moved offshore and we ships with our southern neighbor.
elsewhere. Privately and publicly, those import a lot. However, if you start putting In the meantime, trade and tax experts
on the front lines of border trade are a tax on products that U.S. consumers are say that Trump doesnt, or cant, distin-
telling the administration: Please, no buying, thats not good. guish between a border adjustment tax
major changes to NAFTA. According to Congdon, what could that affects all industry and individual

BY JOHN D. SCHULZ, CONTRIBUTING EDITOR

30 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

Dan Vasconcellos

LOGISTICSMGMT.COM JUNE 2017 | L O G I ST I C S MAN AG E ME N T 31

Global Logistics: NAFTA
trade sanctions that he would like to
apply on a company-by-company basis.
At this point, it appears that Trump
believes that his tax proposal would
essentially utilize a border tax as if it were
a trade sanctionwhich its not.
Any way you consider it, NAFTA has
been a phenomenal advantage to both
the United States
The agreement and Canada, says
is not trivial in its John Costanzo,
impact and WOULD president of Puro-
BE EXTREMELY lator International,
DIFFICULT TO a subsidiary of
DETANGLE OR Purolator Inc.
REVOKE. Whether in Canada and
it could be revised the largest parcel
in one easy-to-do delivery service
swoop is probably in the country.
While noting some
unlikely.
manufacturing
Julie Gibbs,
director, BPE Global jobs have left the
United States,
they did not go to
Canadamost went overseas because
of lower wages.
NAFTAs elimination of tariffs has
enabled the United States to become
more efficient in its exports, says
Costanzo. And if we didnt have NAFTA,
wed have to create something like it,
otherwise were giving up manufacturing
to other countries. Its been a tremendous
asset to both the United States and Can-
ada, and I dont see it going away.
Whether Trump knows it or not, the
23-year-old NAFTA is an extremely
complex document that affects might-
ily the economies of three nations, is
politically and legally complicated, and
fraught with minutiae and fine print
legalities that the president probably
knows little or nothing about.
Julie Gibbs, director of BPE Global, a
global trade compliance consulting firm,
called NAFTA the largest free-trade
agreement in the world that has quadru-
pled the trade among the three countries.
32 L OGISTICS MANA GEM ENT | JUNE 2017
The agreement is not trivial in its
impact and would be extremely diffi-
cult to detangle or revoke, says Gibbs,
adding that whether it could be revised
in one easy-to-do swoop is probably
unlikely. As with Trumps non-existent
repeal of the Affordable Care Act, its
highly possible that the president would
just give up first before any hard revi-
sionswhich is actually what most
logisticians are fearing most.
The North American free trade mar-
ket is working extraordinarily well, they
say, and even a whisper of major change
hurts the marketplace. As a rookie
president, Trump has shown intolerance
of delays and compromise, says Gibbs.
And its highly likely that Trump will
tire of renegotiation of NAFTA.
Now, lets take a deep dive into the
23-year-old NAFTA agreement, look at
the impact on logistics operations on all
sides of the border, and then well hear
what the experts are saying Washington
shouldand should notdo.
NAFTA: Size and scope
First, lets look at the North American
market, NAFTAs impact on the U.S.
economy and its enormous scope. Total
value of cross-border freight among the
three NAFTA countries and carried on
all modestruck, pipeline, vessel and
airfell 3.4% from 2015 to $1.069 tril-
lion in 2016. Trucks carried 65.5% of
U.S./NAFTA freight, the most heavily
utilized mode for moving goods.
Mexico exports about $1 billion
worth of goods per day to the United
States, making it the single largest
source of imports and its third-largest
trading partner. According to the Wilson
Center, a Washington research center
and think tank, 25 cents out of every
dollar of goods that are imported from
Canada to the United States is actually
Made in USA content, as are 40 cents
out of every dollar for goods imported
into the United States from Mexico.
Even though trucking hauled slightly
less U.S. freight to Canada and Mexico
in 2016 than 2015, the Department of
Transportations Bureau of Transportation
Statistics own numbers show that still
results in an enormous amount of freight
between the three NAFTA countries.
Value of U.S.-Canada freight flows
fell 5.4% to $544 billion in 2016. Trucks
carried 60.1% of the value of the freight
to and from Canada, followed by rail
at 16.2%. The top commodity trans-
ported between the United States and
Canada in 2016 was vehicles and parts
at $106.1 billion, with trucks moving
56.4% of the value.
In the meantime, the value of U.S./
Mexico freight fell 1.1% to $525.1 bil-
lion last year. Trucks carried 71% of the
value of the freight to and from Mexico,
followed by rail at 14.7%. The top com-
modity transported between the United
States and Mexico in 2016 was electri-
cal machinery at $102.6 billion, with
trucks hauling 91.6% of the value.
However, its not just raw materials
and finished goods coming to and from
this country. A sizeable chunk of the
American economy depends on exports.
And even if the nation runs a deficit in
trade, no less an authority than the U.S.
Chamber of Commerce says thats not
necessarily a bad thing.
While trade deficits often dont tell
us much about the overall health of our
economy, it is a good time to examine
our various trading relationships to
increase opportunities for American
companies to compete on a level play-
ing field, says the U.S. Chamber of
Commerce president and CEO Thomas
Donohue. It is worth remembering
that some of our best years of economic
growth have produced our largest trade
deficits, while the Great Recession was
accompanied by a sharp reduction in
the trade deficit.
LOGISTICSMGMT.COM
Global Logistics: NAFTA
According to Donohue, the Chamber
is supporting strong enforcement of
trade rules and agreements as long as
such enforcement is based on facts and
the proper interpretation of those facts
and not politics.
According to the Department of
Commerce, U.S. exports of goods and
services to Canada supported an esti-
mated 1.7 million jobs in 2014 (latest
data available) with 1.3 million sup-
ported by goods exports and 394,000
supported by services exports.
U.S. goods and services trade with
Canada totaled an estimated $662.7 bil-
lion in 2015. Exports were $337.3 billion;
imports were $325.4 billion; and the U.S.
goods and services trade surplus with
Canada was $11.9 billion in 2015.
Whatever the precise numbers, U.S.
transport executives say that the export
market is a solid, growing, reliable part
of their businesses. Its a market that is
to be cultivatednot curtailed by some
arbitrarily written border tax.
I believe whatever the taxing mecha-
nisms are, they ought to be fair and bal-
anced, says Old Dominions Congdon.
Im for that. I know how much freight
we haul to the Mexico border and how
much we haul back and forth to Canada,
and its good business. The North Ameri-
can markets are good to us, and I dont
want to see our levels of business dis-
turbed. We have to be fair and rational.
So what should be done?
Reminiscing on NAFTAs early days,
many may recall 1992 presidential
candidate Ross Perots reference to
NAFTA as a giant sucking sound going
South. More than 20 years later, some
still argue that NAFTA drove U.S.
jobs south; but at the same time, oth-
ers argue that jobs lost over this period
would probably have gone to China or
elsewhere anyway.
What we can say is that NAFTA
LOGISTICSMGMT.COM
fundamentally reshaped North Ameri-
can economic relations, driving unprec-
edented integration between Canada,
the United States and Mexico, says
BPE Globals Gibbs.
But as in any healthy evolution, Gibbs
says that there are always improvements
to be made. Indeed, she believes that
a 21st century overhaul to address data
flow, a concept that wasnt around in
the 1990s, would be an important tweak
to the agreement as would a look at the
accounting for the online retail market to
ensure that the complex rules of origin
are fair across the three countries.
The Trump administration shared
their NAFTA draft proposal last month,
and its much less forceful than what
candidate Trump was offering. Fortu-
nately, theres no threat of withdrawal.
Included are specific provisions for
snapback, market opportunities spe-
cific toward domestic procurement,
and a leveling of the tax playing field.
All in all, these are elements that
are in line with a much needed overhaul
to the program, says Gibbs. It will be
interesting to watch these provisions
manifest against the administrations
protectionist stance.
Nevertheless, Gibbs adds that there
will undoubtedly be changes. The level
of impact will depend on what Trump
can push through. NAFTA is a big con-
cern because of the immediate impact to
U.S. jobs and the economy, she says.
President Trump has announced his
intention to renegotiate at this point.
Some changes being mulled include:
Temporarily reinstating tariffs if a flood of
imports causes serious injury to domes-
tic industries; improving procedures to
resolve disputes; and employing tougher
intellectual property enforcement.
However, experts contend that the
logistics and transportation markets
shouldnt panic over Trumps rhetoric.
Under the Constitutions Commerce
JUNE 2017 | L O G I ST I C S MAN AG E ME N T
Clause, only Congress may alter our tar-
iff, tax and Customs laws.
According to Gibbs, U.S. companies
should lobby Congress to protect them-
selves from losing this benefit by quantify-
ing what the loss of NAFTA savings would
mean to them in terms of tariff costs and
global supply chain modifications. Com-
panies should also
share this data with PRE-NAFTA,
Congress to avoid a U.S. COMPANIES
devastating impact USED TO DREAD
to the U.S. manu- SELLING TO
facturing sector, CANADIAN
she says. CUSTOMERS.
Purolators And while theres
Costanzo adds that still complexity,
post-NAFTA trade if you do the
harmonization
setup correctly,
rules have made
its seamless and
exporting much
relatively easy.
simpler. Its night
David Congdon,
and day, he says. vice chairman and
Pre-NAFTA, U.S. CEO, Old Dominion
companies used Freight Line
to dread selling to
Canadian customers. And while theres
still complexity, if you do the setup cor-
rectly, its seamless and relatively easy.
The state of the fast-growing B2B
and retail e-commerce is another chang-
ing dynamic, adds Costanzo. E-com-
merce economics are very different than
brick-and-mortar business, but he adds
that only further strengthens the case to
fine-tunenot trashNAFTA.
Weve heard this rhetoric before,
says Costanzo. We had Buy America
back in the 90s, and this too shall pass.
The United States relies so heavily on
exports and imports. In fact, we sell
$300 billion of goods to Canada, so we
cant jeopardize those supply chain effi-
ciencies. Eventually, I think that cooler
heads will prevail.
John D. Schulz, is a contributing editor
to Logistics Management
33
Warehouse/DC Management

The Evolving

T
HE FAMILIAR TECH- not every DC needs the same founda-
NOLOGY STACK OF tion, failure to grasp evolving areas could
BY ROBERTO MICHEL, warehouse management end up stacking the deck against omni-
EDITOR AT LARGE
systems (WMS) to man- channel success. Whats more, while
age transactions and automation hardwareincluding robotic
With the growth of inventory at the distribution center level goods-to-person systems, pick-to-light
e-commerce, the and then hand order requirements down systems and high-end sortationplay a
technology stack for to the automation layer is not as simple role in the tech stack for e-commerce,
distribution centers as it used to be. With the complexities even automation providers say the stack
is expanding. We of e-commerce fulfillment, the need to is software driven.
explore why WES/WCS orchestrate and optimize operations is The new types of automation hard-
driving the need for advanced execution ware are extremely important, but I think
software is gaining
software in the middle of the stack and its a matter of hardware and software as
prominence and share
for more optimization tools. a combined solution that give users the
how operations are
In short, the DC tech stack has advantages and throughput they are after,
expanding their use of
changed. Its no longer just WMS on especially when you have Amazon push-
data science.
top, warehouse control system (WCS) ing the same-day delivery model, and
software in the middle, and automated everyone is chasing and trying to achieve
materials handling systems at the floor that same panacea, says Michael Howes,
level. The stack has expanded, and while vice president of software and controls

34 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

DC Tech Stack
for Swisslog Warehouse and Distribution Solu-
tions (WDS) Americas, which offers automated
materials handling as well as software solutions.
E-commerce means that DCs have a greater
volume of small orders that make it more com-
plex to orchestrate systems, not only within the
four walls of the DC, but with order fulfillment
and transportation management decisions.
Everyone is being pushed to ship smaller and
faster, says Joe Vernon, senior manager of
North America supply chain technologies for
the consulting firm Capgemini. The demand/
fulfill cycle has been cut from days to hours,
and freight costs are more often absorbed now,
rather than passed along to a customer.
Vernon sees distributed order management
(DOM) solutions, as well as new types of optimi-
zation software that can synchronize pick sequenc-
ing, staging and loading, as gaining in importance.
Perhaps the biggest shift in the DC tech
LOGISTICSMGMT.COM
Caption
stack for e-commerce has been the emergence
of warehouse execution system (WES) soft-
ware, an evolution of WCS. WES brings in
richer functionality around order releasing and
wave management, resource optimization and
analytics, in addition to WCS solutions more
traditional role of coordinating automation
and material flow.
The role of WES
WES solutions provide visibility and manage-
ment capabilities around order requirements,
inventory information, and equipment and labor
resources, observes Mike Dunn, group vice
president with Fortna, a distribution consulting
and engineering firm. The interesting technol-
ogy questions inside the DC are: What systems
should I own to have visibility into those three
components, and then, What software can I use
to really optimize my processes? Dunn says.
JUNE 2017 | L O G I ST I C S MAN AG E ME N T 35
Warehouse/DC Management: WMS

Evolving DC tech stack

Distributed order SCM
management (DOM) Supply, demand and inventory planning tools

ERP
Orders/procurement/financials/inventory

Transportation Yard management

management systems (TMS) systems (YMS)

Warehouse management systems (WMS)

Inventory management Order releasing/wave management
Receiving Labor management
Putaway Pack/ship functions
Replenishment Voice pick/scanner integration
Data Mobile
industrial IoT
science
Warehouse execution systems (WES)/ computers platforms/
and
Warehouse control systems (WCS) and devices solutions
analytics
may include:
Order releasing and wave management
Inventory/replenishment management
Labor management
Pick-to-light, voice picking, scanner integration
Pack/ship
Material flow control
Machine control integration

Automation
Inventory aware automation
Sorters PLCs
Shuttle systems
Conveyors Motion control
Goods-to-person robotics
Scales Sensors
AS/RS
Cameras Field devices

Source: Modern Materials Handling

WES tends to be at the center of things in
todays tech stack, says Dunn, because with
its WCS roots, it has real-time knowledge of
equipment processes; it knows labor availabil-
ity details; and it can take the order require-
ments from the enterprise level to manage
the order pool and decide what should be
processed next by the DCs resources. While
some WMS systems are getting better at
grouping orders into smaller waves for pro-
cessing, most WMS systems tend to batch
work into large static waves, says Dunn,
whereas WES excels at releasing chunks
of work to the floor in the right size and
sequence to satisfy orders while squeezing
maximum efficiency from resources.
When we think about how to really optimize
inside of a warehouse, its about creating chunks
of work that are large enough to drive productivity,
but small enough to react to and satisfy customer
demands, says Dunn. And the optimal size for
work may change every hour. In the morning, you
may be able to process a larger chunk of work effi-
ciently while still meeting demand, but later in the
day, you may need to use much smaller chunks of
work, which are suboptimal from a productivity
standpoint, but are necessary to meet demand.
While WES has gained in importance, it
cant do everything, says Dunn. Omni-channel
companies have often turned to DOM to man-
age where orders should be fulfilled from, and at
many companies, a WMS handles overall inven-
tory, says Dunn. Down at the automation level,
he adds, DCs often have strong interest in tech-
nology such as goods-to-person systems or pick-
to-light systems that minimize or simplify the

36 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

 Warehouse/DC Management: WMS
labor requirements for order picking. But Dunn
sees WES as the best solution for the order
releasing and resource management decisions
that need to be made around order priorities.
We believe the best solve for many of these
business problems is going to be a combination
of WCS and WMS capabilities, Dunn says.
Finding a way to have those two types of sys-
tems work well together to release and process
work is going to be the optimal solution.
No one wants chaotic, inefficient peaks and
lulls in the pace of work, so WES providers often
focus on enabling a demand-driven, level pull of
work through a DC and its various points of auto-
mation. So its not just software bells and whistles
to consider with WES, but the approach used to
achieve flow, explains Walter High, vice president
of marketing with Invata Intralogistics, a WES
provider and consulting firm.
In building out system infrastructure, we
take a whole system approach to optimizing
process flows that embraces lean engineer-
ing techniques in the physical layout of our
systems, the intelligence of our software, and
the application of advanced technology that
maximizes the efficiency of human interaction,
while eliminating toilsome labor requirements,
says High. In doing so, we eliminate as much
manual and planned push-based processing as
possible, and replace it with pull-based, self-
regulating and self-maintaining systems.
Projects around orchestrating flow also ben-
efit from a data science approach in which data
analysis, modeling and simulation are used
to determine how to best configure the DCs
technology stack, adds High. Using data sci-
ence, we are able to look an existing operation
and test options to determine their affect on
that operation, he says. So while the technol-
ogy stack can dramatically affect a companys
strategic advantages in the market, changing it
out when productivity languishes is not always
the right answer. The answer is derived through
understanding a customers data, business
requirements and growth expectations, and sci-
entifically modeling that information in a way
that delivers direction.
LOGISTICSMGMT.COM
Broader needs
While some omni-channel retailers are leverag-
ing WES solutions, there remains a big chunk
of the market with simpler tech stack needs,
observes John Sidell, principal with supply chain
consulting firm New Course. For many con-
sumer goods manufacturers or other companies
There are consumer
that arent at the bleeding edge of omni-channel,
goods companies
but do have growing e-commerce needs and
more pressure from small rush orders, the key
and others who
concern is identifying when e-commerce vol- are asking, where
umes force a change to the tech stack, explains is my tipping
Sidell. pointin terms of
There are consumer goods companies and e-commerce volume
others who are asking, where is my tipping and complexity
pointin terms of e-commerce volume and when I either bring
complexitywhen I either bring in a third-party
in a third-party
logistics partner or create a new operation dedi-
logistics partner
cated to e-commerce? says Sidell. Where they
are with that tipping point greatly influences
or create a new
what they need in a technology stack. operation dedicated
For some companies who have relatively to e-commerce?
modest e-commerce pressures, the tech stack John Sidell,
will tend to be more streamlined compared principal, New Course
to what an omni-channel retailer would put
in place at a DC, says Sidell. A WMS with
a more agile approach to wave management,
some zone picking, or perhaps a voice-picking
solution combined with WMS might be key
pieces of a tech stack for many organizations.
For some companies, the current tech stack
can be adapted to support new methods of
order picking, says Sidell. If they can tap
additional functionality from their WMS ven-
dor, turn that on and train the users, that may
meet their needs. That said, as your online
business grows, the need for more automation
grows with it.
The growth of e-commerce also has elevated
the importance of DOM and the inventory vis-
ibility DOM relies on, says Sidell. Well-imple-
mented, accurate WMS systems support this
visibility, says Sidell, as do accurate store-level
systems. One of the most crucial elements with
omni-channel is real-time inventory visibility
across your supply chain network, says Sidell.
To have effective DOM and fill orders with
JUNE 2017 | L O G I ST I C S MAN AG E ME N T 37
 Warehouse/DC Management: WMS
confidence in the promised service level, this
inventory visibility is a must.
The solution stack for DCs increasingly needs
to look beyond the four walls of a single site to
The future
optimally process and ship orders, says Cap-
is to make geminis Vernon. Some sites might have multiple
this whole buildings within a campus, notes Vernon, which
ecosystem adds to the complexities of the DC-level inventory
smart, moves, processing and staging. The whole pro-
optimized and cess constitutes a multi-tiered, multi-constraint
predictive. optimization puzzle, says Vernon, to get the right
goods to the right dock doors at the optimal time
Joe Vernon, senior
for pickup by carriers.
manager of North
America supply chain To solve this challenge, says Vernon, DCs are
technologies, adopting solutions for pick sequencing, staging
Capgemini and loading optimization with integration to robot-
ics and automation. Vendors in the space such as
warehouse optimization can help DCs schedule
complex activities in a synchronous way to achieve
flow and better use labor, according to Vernon.
Capgemini is involved with pick sequencing,
staging and loading optimization by offering
data science services that assess actual perfor-
mance in shipping orders against the model in
the software, so that the model can be improved
for further efficiencies.
Providers of robotic goods-to-person systems
and other warehouse automation systems also
employ data science to refine the effectiveness
of their solutions, says Vernon. The data sci-
ence for pick sequencing and loading will build
on data science from the automated equipment
providers, rather than replicate it, he adds.
Expect to see more data science from solu-
tion providers and consultants, says Vernon,
since some DCs are becoming highly auto-
mated and generate a constant data stream
that can be analyzed to refine optimization
engines. The future is to make this whole eco-
system smart, optimized and predictive, says
Vernon.
On the edge
Another aspect of the tech stack for omni-
channel is various edge hardware such as
38 L OGISTICS MANA GEM ENT | JUNE 2017
sensors, mobile computers, and voice-system
components that enable workers and pro-
cesses. Much of the value from this hardware
comes from the ability to consolidate data
generated on the edge and make real-time
decisions with it, says Bruce Stubbs, direc-
tor of supply chain marketing for Honeywell
Safety and Productivity Solutions.
One enabler of these actionable insights is
Cloud-based gathering of data generated by sen-
sors in trucks or other supply chain locations,
says Stubbs. Honeywell has already leveraged
its Cloud platform capability gained from its
acquisition of Movilizer to do things like gener-
ate Cloud-based insights into cold chain events
in sectors such as food and pharmaceuticals,
according to Stubbs.
Another tech stack evolution Honeywell
is involved with is performance analytics of
data generated by voice systems. Whereas
once the software component of voice systems
was mainly about generating effective voice
prompts and integration to WMS, now there
also is analysis software that combs data gen-
erated by voice-based processes to improve
performance.
To this end, says Stubbs, Honeywell offers
an operational intelligence software for its
voice system that provides actionable insights
for associates on the floor, such as slot skip-
ping that degrades efficiency, while also gener-
ating reports for managers on issues like how
actual, current performance compares against
productivity standards, or to budget targets.
According to Stubbs, such software is an
increasing part of the value proposition today.
Weve transformed from a hardware-oriented
company to a total solutions provider, and
that involves a lot this software on the edge
to enable connected workers, says Stubbs.
Weve enhanced our [operational intelligence]
platform to be able look at all the task-related
data that exists and leverage it in a real-time,
actionable way to improve work processes and
head off problems before they start.
LOGISTICSMGMT.COM
 A SP E C IAL SUPPLEMENT TO:
AND
The trend set over
the past few years
for mergers and
acquisitions has
hardly subsided, and
a fresh injection of
equity investment
is transforming the
marketplace. At the
same time, shippers
may expect to see
3PLs continue to
purchase high-tech
solutions and hire
young professionals
for implementation.
40S L OGISTICS MANA G EM ENT | JUNE 2017
TOP 50
2017
3PLs:
By Patrick Burnson, Executive Editor
44S Top 50 U.S. 3PLs
48S Top 50 Global 3PLs
56S New Transport Intelligence report finds that Asias
outsourcing needs accelerated contract logistics
58S Damco unveils new digitized service for freight
forwarders
58S CBRE data shows decent, but changing trends for
logistics & industrial real estate in the Americas
60S XPO Logistics takes steps to expand last mile network in
Chicago area
62S UPS rolls out new service in Europe for time-critical
shipments
63S Global 3PL Management: Factors to keep top of mind
LOGISTICSMGMT.COM
Your competitors biggest asset
shouldnt be your supply chain.
Out of stock items, late shipments, and poor logistics could turn your customers into
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Ever better is a trademark of Ryder System, Inc. FORTUNE 500 is a registered trademark of Time Inc.
Special Report 2017 Top 50 3PLs A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT

SPECIAL REPORT
2017 Top 50 U.S. and Global 3PLs
eading industry analysts maintain that the mega-deals witnessed over

L the past two years in the third-party logistics provider (3PL) sector have
abated, but that certainly doesnt mean that mergers and acquisitions
(M&A) will fall out of the picture.
According to Evan Armstrong, president
of the consultancy Armstrong & Associates,
the 3PL market is also still ripe for equity
investment. The one outstanding example of
this was when Aerospace, Transportation and
Logistics [ATL Partners] bought a controlling
share of Pilot Freight Services late last year,
he says. We also anticipate more M&A activity
as 3PLs strive to expand geographic scale and
provide integrated solution offerings.
At the same time, says Armstrong, techno-
logical changes are having a dramatic impact
on 3PL operations. Companies such as
project44, MacroPoint and others are driving
improved transit status data and carrier capac-
ity information from transportation providers
to lead logistics companies.
This years electric logging devices [ELD]
mandate could also be a boon for shipment track-
ing and carrier capacity monitoring information,
says Armstrong. These types of advances allow for
more process automation and increased operation-
al efficiencies. Theyre also increasing the quality
of information available to customers of non-asset
based transportation managers.
Specifically, industries such as pharmaceu-
ticals are increasing their digitalization needs,
Armstrongs research reveals, putting more
emphasis on 3PLs to match these new techno-
logical demands. To better ensure counterfeit
products are not being sold within established
sales channels, for example, the pharmaceu-
ticals industry has a 2017 mandate to begin
capturing product serial numbers across its
supply chains.
While this mandate has presented a chal-
lenge for many value-added warehousing 3PL
operations, the ones weve met with are imple-
menting the required operations changes and
will meet the deadline, says Armstrong.

42S L OGISTICS MA NA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

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Special Report 2017 Top 50 3PLs A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT

Armstrong & Associates Top 50 U.S. 3PLs (April 2017)

2016 Gross Logistics
2016 Rank Third-party Logistics Provider (3PL) Revenue (USD Millions)*
1 C.H. Robinson 13,144
2 XPO Logistics 8,638
3 UPS Supply Chain Solutions 6,793
4 J.B. Hunt (JBI, DCS & ICS) 6,181
5 Expeditors 6,098
6 Kuehne + Nagel (The Americas) 4,909
7 DHL Supply Chain North America 4,200
8 Burris Logistics 3,629
9 Hub Group 3,573
10 FedEx Trade Networks/SupplyChain Systems/GENCO 2,916
11 Ryder Supply Chain Solutions 2,659
12 DB Schenker (The Americas) 2,630
13 Coyote Logistics 2,360
14 Total Quality Logistics 2,321
15 CEVA Logistics (The Americas) 2,310
16 Panalpina (The Americas) 2,209
17 GEODIS (The Americas) 2,200
18 Schneider Logistics & Dedicated 2,125
19 DSV (The Americas) 1,798
20 Echo Global Logistics 1,716
21 Transportation Insight 1,710
22 Landstar 1,632
23 Transplace 1,620
24 Americold 1,555
25 Penske Logistics 1,500
26 Swift Transportation 1,431
27 NFI 1,250
28 Werner Enterprises Dedicated & Logistics 1,156
29 OIA Global 1,150
30 BDP International 1,090
31 APL Logistics Americas 1,055
32 Yusen Logistics (Americas) 1,044
33 Cardinal Logistics Management 1,006
34 Mode Transportation 949
35 SunteckTTS 900
35 syncreon 900
35 Lineage Logistics 900
36 Radial 800
36 TransGroup Global Logistics 800
37 Ruan 796
38 Nippon Express (The Americas) 790
39 Radiant Logistics 783
40 Damco (The Americas) 773
41 Neovia Logistics Services 763
42 Worldwide Express 750
43 ArcBest 677
44 Odyssey Logistics & Technology 650
45 Hellmann Worldwide Logistics (The Americas) 640
46 Kenco Logistic Services 626
47 Crane Worldwide Logistics 616
*Revenues are company reported or Armstrong & Associates, Inc. estimates and have been converted to US$ using
the average annual exchange rate in order to make non-currency related growth comparisons.
Copyright 2017 Armstrong & Associates, Inc.

44S L OGISTICS MA NA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

The supply chain never sleeps.
And neither do we.
At Transplace, we are relentless in executing our customers
transportation and supply chain needs to achieve profitable
and predictable results. Continuous improvement and
innovation is core to our culture, and we arent satisfied
until you are.

Learn more about our North America and cross-border

logistics solutions at Transplace.com.
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Special Report 2017 Top 50 3PLs A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT

Armstrong & Associates Top 50 Global 3PLs (April 2017)

2016 Gross Logistics Revenue
2016 Rank Third-party Logistics Provider (3PL) (USD Millions)*
1 DHL Supply Chain & Global Forwarding 26,105
2 Kuehne + Nagel 20,294
3 Nippon Express 16,976
4 DB Schenker 16,746
5 C.H. Robinson 13,144
6 DSV 10,073
7 XPO Logistics 8,638
8 Sinotrans 7,046
9 GEODIS 6,830
10 UPS Supply Chain Solutions 6,793
11 CEVA Logistics 6,646
12 DACHSER 6,320
13 Hitachi Transport System 6,273
14 J.B. Hunt (JBI, DCS & ICS) 6,181
15 Expeditors 6,098
16 Toll Group 5,822
17 Panalpina 5,276
18 GEFCO 4,800
19 Bollor Logistics 4,670
20 Kintetsu World Express 4,415
21 Yusen Logistics 4,169
22 CJ Logistics 3,662
23 Burris Logistics 3,629
24 Agility 3,576
25 Hub Group 3,573
26 Hellmann Worldwide Logistics 3,443
27 IMPERIAL Logistics 3,352
28 Kerry Logistics 3,097
29 FedEx Trade Networks/SupplyChain Systems/GENCO 2,916
30 Ryder Supply Chain Solutions 2,659
31 Damco 2,500
32 Coyote Logistics 2,360
33 Total Quality Logistics 2,321
34 Sankyu 2,275
35 Schneider Logistics & Dedicated 2,125
36 Wincanton 1,720
37 Echo Global Logistics 1,716
38 Transportation Insight 1,710
39 APL Logistics 1,700
40 NNR Global Logistics 1,676
41 Mainfreight 1,640
42 Landstar 1,632
43 Transplace 1,620
44 arvato 1,615
45 Americold 1,555
46 Fiege 1,550
47 Penske Logistics 1,500
48 Swift Transportation 1,431
49 Groupe CAT 1,328
50 NFI 1,250
*Revenues are company reported or Armstrong & Associates, Inc. estimates and have been converted to US$
using the average annual exchange rate in order to make non-currency related growth comparisons.
Copyright 2017 Armstrong & Associates, Inc.

48S L OGISTICS MA NA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

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Special Report 2017 Top 50 3PLs
Adapt or die
Logistics managers should also expect more 3PL
consolidation, says Armstrong, pointing out that the
global market is finding it exceedingly hard to grow
and scale their networks organically.
Acquisitions are required to leapfrog into
and move upward within the Top 50 Global 3PL
rankings, says Armstrong. This will continue to
drive acquisitions like we have seen with DSV/UTi;
XPO/Norbert Dentressangle, and Con-way with
Geodis/OHL.
Finally, the adapt or die imperative is still with
usand will be for
Acquisitions are required to leapfrog
the foreseeable fu-
into and move upward within the Top ture. To keep pace
50 Global 3PL rankings. with omni-channel
fulfillment and
Evan Armstrong, president,
disruptive technol-
Armstrong & Associates
ogies like drones,
3D printing, Internet of Things, driverless vehicles,
advanced robotics and wearable technology, its
become painfully clear that 3PLs must constantly
evolve to anticipate shipper demands.
Fortunately, 3PLs are amazingly good at
embracing change, says Armstrong. For example,
weve been in operations utilizing PINC Solutions
drones for improved trailer yard management and
Google glasses for warehouse picking. In addition,
many applications, such as HubTran, are adapting
machine learning to automate mundane freight bill
payment tasks.
In the meantime, Armstrong adds that 3D
printing remains mired in its growth stage, but will
continue to impact spare and service parts logistics
operations. However, we will see some type of
human-overseen driverless vehicles hit the streets
in the near term, and that could be especially ben-
eficial in long-haul trucking operations.
For Armstrong, the Uberization of trucking,
or what he prefers to call digital freight match-
ing, is still trying to find its legs. However, we
see that theres significant progress being made
to build improved real-time lane pricing informa-
tion with companies such as CargoChief, and
improved carrier management applications from
50S L OGISTICS MA NA GEM ENT | JUNE 2017
A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
industry stalwarts such as C.H. Robinson and
Coyote Logistics, he says.
Building a portfolio
Many of the same observations are shared in
Gartners annual Magic Quadrant report that was
released last month at its supply chain conference
in Phoenix. The aim of the report is to provide a
qualitative analysis of the market, its direction,
maturity and its participants.
Greg Aimi, Gartners director of supply chain
research and co-author of the Magic Quadrant,
says that logistics managers are still pressing for
consolidation in their 3PL portfolios, but not until
providers can demonstrate that they have a truly
global network.
For this to happen, says Aimi, there must
be a significant air and forwarding capability.
Furthermore, 3PLs in the Asia Pacific region have
yet to get started with western acquisitionsbut
I assume they will. He adds that the report
revealed that logistics managers are seeking out
a high-degree of industry vertical expertise and
specialized solutions, thereby driving a number of
tuck-in M&As.
At the same time, the technology area for 3PLs
is just getting started, adds Aimi. Lets just forget
that they were laggards when it came to unifying
software systems to a single global platform in the
past. Today, global operational transparency re-
quirements and digital business drivers from their
shipper customers are just going to increase the
need for 3PLs to be top dogs when it comes to tech
and innovation.
New journey
According to Aimi, this is the second iteration of
the Magic Quadrant for North American 3PLs.
Since the first report, Gartner made significant
changes in the criteria definitions to better identify
what makes a 3PL valuable to shippers seeking a
North American regional provider.
Researchers note that the 3PL industry is pro-
gressing along a maturity spectrum, and trying hard
to accommodate increasing shipper requirements
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Special Report 2017 Top 50 3PLs A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT

through a combination of acquisition and organic competing head-to-head

growth strategies. However, not all are at the same in low-margin pricing
place in their journey. wars and assumed the
According to Gartner, theres a transformation role of an interchange-
underway across todays logistics industry, and per- able commodity. Conse-
ceptions of logistics service providers are changing. quently, the idea of leveraging specialized services
Relationships historically have been transactional, seemed out-of-reachuntil recently.
pragmatic and physical activity oriented. As acceptance has grown for an increased
Researchers note that 3PLs contributed by amount of logistics outsourcing, companies are

3PL: Cultural shift underway

G artner analysts note that in the North American logistics market, most 3PLs started business by predomi-
nantly providing deep capabilities in one of three major logistics service roots: transportation services,
warehousing and fulfillment services, or international freight forwarding and customs brokerage.
In fact, many providers today still predominantly offer services from just one of these main service lines or
root services. Other providers, especially the larger ones, have expanded their offerings to include services
from one or both of the other roots to have a more comprehensive offering.
The truckload brokerage business, for example, has been regarded as one of the stodgier business
models in the logistics sector for some time. However, one firm that appears to be breaking out of that mode
recently came to our attention when we learned of its new age culture and young leadership.
Nolan Transportation Group (NTG) is a company in this high-growth, fast-paced industry, providing third-
party logistical services to over 8,000 customers across the United States, Canada and Mexico. Founded by
Kevin Nolan in 2005 as a truckload brokerage with a box of cash and two employees, the company posted
$278 million in revenue in 2016.
According to Nolan, its all about culture. He notes that the brokerage business is built on effective
sales with a high volume of transactions happening every minute of every day. Hes built a successful sales
organization by hiring recent graduates who believe in a high energy, collaborative work culture with ample
opportunity for growth and promotion from within.
Logistics Management recently sat down with Nolan to gain his observations on the journey so far

Logistics Management (LM): Do you expect barriers to entry in the 3PL space to come down, or will it
be tougher for new players to emerge?
Kevin Nolan: I believe the legalbond, insurance and backgroundbarriers to entry will stay consistent with
current levels due to the new administration. However, the difficult barriers to compete with players of scale
will grow as consolidation and investments continue. Examples of this are technology, hiring and paying
vendors faster.

LM: What advice can you give to new players breaking into this business?
Nolan: Balanceplain and simple. Being a 3PL means were in the middle of customer and vendor. Treat
carriers and customers the same, because you cant exist without either. Its easy to gravitate to the cus-
tomer side more, but the great 3PL sees both sides as equals.

LM: How important is trust in the supply chain?
Nolan: For non-asset and asset light, trust is everything. Production, construction time lines, and end-user
satisfaction are all based on delivery of product. If you dont give correct information, the trickle down will
ruin your reputation across their whole organization. In supply chain, surprises and breakdowns happen. You
have to face these problems head on and communicate with all parties so they can plan accordingly as well.
Patrick Burnson, executive editor

52S L OGISTICS MA NA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

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Special Report 2017 Top 50 3PLs A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT

realizing that their performance is more dependent For example, Manners-

on not only their 3PL providers capabilities and
execution, but also the manner in which they are
managed, says Aimi. This mandates a transition
in the roles and responsibilities of tomorrows lo-
gistics professional from being a master of logistics
execution to a master of provider orchestration; and
it puts an importance on the relationship between
customer and 3PL.
Shareholder
Logistics managers should be ever pressure
mindful that 3PLs are partners who Interestingly,
while the impor-
are re-examining their supply chains
tance of resource
and looking for useful ways to integration is
innovate and transform. widely acknowl-
edged, its not
John Langley, Jr., Ph.D, clinical
uncommon for
professor of supply chain management,
Penn State University logistics compa-
nies to continue
to operate their systems separately, notes John
Manners-Bell, chief executive of the London-
based consultancy Transport Intelligence (Ti).
Bell notes that companies
like DHL, UPS, Deutsche
Bahn and SNCF continue
to operate despite the
fact that there is little integration between many
of their operations or functions. He maintains,
however, that this is a less than optimal situation
and has often led to a significant lag in the realiza-
tion of costs savings or to the absence of expected
cooperation.
Whats more, says Manners-Bell, this lack
of cooperation makes disposals likely if and
when management comes under pressure from
shareholders. While contract logistics companies
typically integrate well, due to their asset-light
nature, they still need to work on the daunting
challenge of integrating the IT systems of the
acquired company.
Ti researchers say that the logistics industry
maintains the consolidation trend, suggesting
that acquisition remains the most favored route
towards building global portfolios of integrated
services. Their analysts agree with Armstrong and

Examples of major contracts in early 2017

Client Company Duration Sector Country Region Description

Mercedes- CEVA 3 years Automotive Brazil South CEVA renewed its existing contract with Mercedes-
Benz America Benz for a further three years. It also signed two new
agreements which will extend elements of the contract
for three and five years respectively.

Carlsberg DHL 2 years Consumer/ UK Europe Carlsberg awarded a two-year contract to DHL Trade-
Supply Retail team for the management of UK distribution services.
Chain

Groupe XPO Consumer/ Global XPO secured a multi-million pound, long-term contract
SEB Logistics Retail with global domestic appliances and cookware giant
Europe Groupe SEB.

SAS Kuehne + 3 years Aerospace Global SAS Scandinavian Airlines extended its contract with
Scandinavian Nagel K+N for global logistics services until 2020. K+N will
Airlines (K+N) manage the international transport of spare parts for
the SAS airplane fleet.

Neue Yusen Industry and Germany Europe Yusen Logistics won a contract for a total supply
Halberg- Logistics Manufacturing chain solution for NHG. The contract covers the move-
Guss (NHG) ment of engine blocks from Germany to the production
plant of a car manufacturer in Ohio, as well as the pro-
vision of a closed loop supply chain back to Germany.

Source: Ti database of major contracts

54S L OGISTICS MA NA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM

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Special Report 2017 Top 50 3PLs
Gartner that the level of
consolidation in 2017 is
estimated to drop com-
pared to 2016, both in
terms of total deal value
and volume.
However, looking ahead, the outlook for con-
solidation activity in the industry remains positive,
says Manners-Bell. In addition to being driven by
the search for growth through global presence and
expertise in high-margin sectors, the continued
growth of e-commerce will also drive M&A activity
in the logistics industry.
John Langley, Jr., Ph.D., clinical professor of
supply chain management at Penn State Uni-
versity, agrees with many of the points raised
by Armstrong, Gartner, and Ti, but concludes
that logistics managers must be aware of other
imperatives as well.
Three factors will contribute to a greater reli-
New Transport Intelligence report finds that Asias
outsourcing needs accelerated contract logistics
ccording to Global Logistics 2017, a recent
A report released by the London think-tank
Transport Intelligence (Ti), the overall contract
logistics market is estimated to have grown by 3.9%
in real terms in 2016.
Despite stronger global growth during this period,
many developed markets struggled to match even the
modest growth rates seen in their contract logistics
markets in 2015. This reflects trends in the global
economy, where growth rates in advanced economies
slowed overall.
According to Ti analysts, it
would be too easy to match these
struggles to the impacts of political
events such as the U.S. presiden-
tial election and the Brexit vote.
In 2016, Barack Obama was still
U.S. president and the European
Union had 28 members. Instead,
56S L OGISTICS MA NA GEM ENT | JUNE 2017
A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
ance on technology as 3D or additive manufactur-
ing comes into play, says Langley. We have the
same forecast for issues related to block chain,
visibility, and optimization.
At the same time, Langley cautions managers to
consider disruption and risk when choosing a global
3PL, particularly if theyre operating in a politically
unstable environment.
Also of significance is that the Amazon con-
cept is resulting in a great need for providers of
all types to reassess their existing capabilities and
essentially transform their strategies and operations
to better fit into the future needs of shippers, says
Langley. Logistics managers should be ever mind-
ful that 3PLs are partners who are re-examining
their supply chains and looking for useful ways to
innovate and transform.
Patrick Burnson is executive editor
of Logistics Management
weak real wage, productivity and consumption growth
dampened global economic growth.
Manufacturing production and retail sales vol-
ume growth remain fundamental drivers of contract
logistics, says Ti Economist, David Buckby. Manu-
facturing expansion in advanced economies remains
weak while Asia Pacific, including China, is seeing
the lions share of growth.
According to Buckby, retail is a different story.
To an extent, e-commerce has bailed out contract
logistics in advanced economies, he said. And I
expect these trends to continue
to shape the background of the
contract logistics sector for the next
few years at least.
Despite stronger global growth
in 2016, many developed markets
struggled to match even the modest
growth rates seen in their contract
LOGISTICSMGMT.COM
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Special Report 2017 Top 50 3PLs
logistics markets in 2015. This reflects trends in
the global economy, where growth rates in ad-
vanced economies slowed overall.
Meanwhile, multinational manufacturers
increasingly consider options outside China (es-
pecially nearby ASEAN) as production locations,
primarily thanks to cheaper labor costs, all the
while ingraining Factory Asia more deeply, a spur
for the regions manufacturing contract logistics.
That being said, even with rising wages, manu-
Damco unveils new digitized service for freight forwarders
hile a bevy of high-tech outfits have threat-
W ened to disrupt the current freight forward-
ing marketplace with its their digitized offerings,
older established players are hardly standing still as
far as innovation is concerned.
Witness, say analysts, the recent moves made
by Damco, the third-party logistics subsidiary of
Danish shipping conglomerate A.P. Moller/Maersk.
Starting last month, Twill, the providers digital
freight forwarding startup, became openly available
to shippers in the U.K. market and will later be
open to shippers worldwide.
John Klompers, the Damcos global head of
freight forwarding, told Logistics Management that
he sees the modern freight forwarder changing into
a global freight supply chain orchestrator.
Service reliability, space allocation guarantees
and a multi-carrier platform have become much
more important to spread risks and to avoid supply
chain disruptions, said Klompers. To that effect,
Damco has positioned itself to compete with Twill
by enabling logistics managers to book, manage and
monitor shipments online with a simple keystroke.
CBRE data shows decent, but changing trends for
logistics & industrial real estate in the Americas
hile many key market themes remain intact
W as they relate to the industrial real estate
market, there are also some apparent changes as
well, according to the recent edition of CBREs
58S L OGISTICS MA NA GEM ENT | JUNE 2017
A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
facturing in China is still undeniably strong, add Ti
analysts. As low cost manufacturing has departed,
this has been offset by China moving up the chain
to more value-added production.
While Europe and North America suffer from
both stagnating retail sales and manufacturing
production growth, Asia is taking advantage, driv-
ing growth for the global market as a whole, adds
Buckby.
Patrick Burnson, executive editor
Damco is a frontrunner in the digitalization of
the supply chain and does this by co-creating with
customers, says Klompers. The focus is on the
customers immediate need, using technology to
provide insights and trends and to spot potential
problems and supply chain stresses before some-
thing goes wrong. We have developed Apps to
provide the visibility needed to effectively manage
supply chains.
Klompers noted that, as the supply chains be-
come increasingly more complex, one may never
be able to take risk completely off the table. But
we believe freight forwarders are the key solu-
tion for logistics managers to avoid supply chain
disruptions in the ever changing freight market,
he added.
So far, the beta model has been focusing on
managing ocean shipments within the China to
U.K. trade lane. Damco spokesmen said that it will
add more shipping routes and products over the
coming monthsand, in the first part of Twills ex-
pansion, all of Asia-Europe trade will be addressed.
Patrick Burnson, executive editor
Americas Industrial & Logistics Trends Report.
The reports data points, which are based on
feedback from more than 950 CBRE brokerage
and investment professionals, highlight the current
LOGISTICSMGMT.COM
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Special Report 2017 Top 50 3PLs
state of the industrial real estate market, which con-
tinue to hit, or approach, all-time highs for certain
benchmarks, including:
net absorption growth of Americas industrial
and logistics space continued for the 28th consecu-
tive quarter in the first quarter, with occupancy at
95.2% for its highest level since 2002, while slowing
on the heels of near-record user demand in 2016;
while net absorption fell sequentially and an-
nually, the vacancy rate dropped 10 basis points to
4.8%, with the availability rate up slightly at 8%;
due to tight supply, the net rent index rose
1.6% in the first quarter and 6.7% annually to $6.24
per square-foot, its highest level since 1980;
new development at 46.5 million square-feet in
the first quarter was down 11% compared to fourth
quarter of 2016 and up 17.4% annually; and
industrial and logistics was the only CBRE
sector to see a gain in investment volume, up 3.2%
to $13.9 billion in the first quarter, with individual
asset sales rising 15% annually.
David Egan, CBRE head of industrial and
logistics research in the Americas, told Logistics
Management that the biggest takeaway is the first
quarter decline in user demand in leasing across the
Americas markets, specifically in the United States.
It is low and noticeably lower than the numbers
that came before it, says Egan, and it raises some
red flags, with people wondering if it is an ominous
sign for the state of the market. In fact, there isnt a
slowdown in users looking for space in the market. It
XPO Logistics takes steps to
expand last mile network in
Chicago area
T aking steps to expand its last-mile
logistics network, freight transportation and
logistics provider XPO Logistics announced that
it has expanded its Chicagoland facility in Bol-
lingbrook, Ill.
Company officials say that this new facility
doubles the capacity of XPOs Chicago-based
market delivery center (MDC), which serves
60S L OGISTICS MA NA GEM ENT | JUNE 2017
A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
has more to do with there not being much space
left, and vacancy rates are so low that the ability to
get a deal done is getting difficult.
CBRE says the dominant users leasing space in
most markets are in the e-commerce, 3PL and food
& beverage markets. The needs for users in these
markets, says Egan, are getting more diverse, with
those three markets dominating demand in the
industrial space.
Earlier in this cycle, from 2012-2014, most of
their attention was focused on super big box facili-
ties that were 500,000 square-feet and above and
largely in major core markets like Chicago, Los
Angeles, Dallas and Atlanta with big regional popu-
lation centers.
There is still plenty of activity happening
in those types of buildings and markets, but we
have seen a significant shift in the diversity of
demand from those types of users from the major
markets to secondary and tertiary markets, which
are smaller and dont have as big of population
centers, added Egan.
Jeff Berman, group news editor
large retailers, e-commerce service providers, and
heavy goods manufacturers, to almost 100,000
square feet.
XPO defines the MDC as a facility that receives
product, schedules product, and, as needed,
LOGISTICSMGMT.COM
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Special Report

LEADERS.
prepares and assembles product
at that site before it heads out
to delivery. It also takes care of
customer service issues, and
conducts a check in of product
that comes off of trucks for
reverse logistics products that need to go back to a retailer or
manufacturer for any reason.
In an interview with Logistics Management, Charlie Hitt, presi-
dent of XPOs last mile business unit, said that Chicago is one of
XPOs three busiest and fastest-growing markets nationwide. We
need to invest in what our customers are having happen in the
growth of their business, particularly in e-commerce.
The impact of a rapidly growing e-commerce market on
the last mile sector, especially for heavy goods, is something
that cannot be overstated, stressed Hitt.
For XPO, that e-commerce activity, in terms of client rela-
tions, continues to grow.
We have had 15% to 20% growth in the last quarter alone
in e-commerce business, Hitt says. Traditional brick and
mortar retailers are expanding out with more e-commerce of-
ferings, and they want it to be seamless and they want it fast.
Prior to this announcement, the Chicagoland MDC was
roughly 50,000 square-feet and handled last-mile for retail-
ers, as well as business that came in from Internet sales than
can plug into the XPO system.
We think this business will grow 30% to 40% next year in
Chicago, but it could be more and were going to be opportu-
nistic about that if that happens, said Hitt. He explained that
this forecast is reflective of an ongoing do it for me theme
among consumers in that they dont want to do something like
pick up a TV at a store and hook it up on their own.
Now, they want someone to take the old TV or washer and
dryer away or have it done for them, notes Hitt. That is what
they want; they want things to be simple.
Jeff Berman, group news editor

UPS rolls out new service in

Europe for time-critical shipments
ast month, UPS announced that it rolled out a new service in
L Europe focused on urgent, time-critical shipments requiring
special handling. Called UPS Express Critical, the company said
examples of these shipments include things like aircraft parts or
surgical tools that are particularly germane to the industries like

LOGISTICSMGMT.COM
 A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GEME NT

healthcare, manufacturing and aerospace. INSIGHT

As for how this service works, UPS Global 3PL Management: Factors to keep top of mind
explained that a UPS team assesses a lobal third-party logistics providers (3PLs) are not a dime a dozen; in fact, there are
shipping request though a 24x7 contact
center and then identifies transportation
G only a few truly global supply chain managersand they are a part of large, diverse
global transportation networks. Most of the major players, such as UPS, FedEx, DHL
alternatives and implements a delivery plan and DB Schenker, all have IT platforms interfacing with their customers to provide global
meeting customer time and cost require-
ments. Services provided through UPS
Express Critical include air, charter and
surface, as well as a personal courier who
can carry the shipment by hand from origin
to destination on a commercial flight.
Daniel Gagnon, vice president of
global logistics and distribution for UPS,
told Logistics Management that increasing
customer demand drove the development
of this new service.
Most major market segments UPS
serves often require overnight express
services, says Gagnon. This service
appeals to customers when next-day
service is not fast enough. Highly
specialized services are needed to meet
the unique requirements of customers
shipping extremely valuable or time-
criticaland this is the case in growing
industries such as life sciences, aero-
space and high-value retail.
Prior to introduction of the Express
Critical Service in Europe, Gagnon
explained that the UPS forwarding group
offered services on a shipment-by-ship-
ment basis, whereas now the network of
third-party couriers and air carriers will
be integrated into the new system.
When asked what the competitive
advantages of this service are from a UPS
perspective, Gagnon cited the companys
experienced industry teams are able to
quickly assess a cost effective delivery so-
lution that meets its customers specific
time and delivery requirements. Hav-
ing this flexibility from a single, trusted
source is an advantage, he added.
Jeff Berman, group news editor

LOGISTICSMGMT.COM JUNE 2017 | L O G I ST I C S MAN AG E ME N T 63S

Special Report 2017 Top 50 3PLs A S P EC I A L S UP P L EMENT T O L OGI S T I C S MA NA GEM E N T
visibility from origins to destinations; theyre experts at Customs
clearance around the globe; and theyre active in all transportation
modes and regularly adjust between ocean, air, trucking and same-
day delivery to best accommodate individual orders.
However, global shippers need to keep in mind that supply
chain management capabilitieseven those managed by the
most expansive global 3PLsvary greatly
between countries. The biggest challenge
is often managing expectations within a
regions physical limitations.
Managing geographical
expectations
Advanced economies generally have better
highways, ports and railways as well as
better communication systems and tech-
nology. Political changes can especially
complicate matters, but those issues are
normally limited to emerging market and
developing economy countries.
As a general rule, logistics costs as a
percent of GDP are lower in advanced
economies and higher in emerging mar-
ket/developing countries. Not surprising-
ly, the countries with the largest econo-
mies dominate infrastructure statistics.
The United States has the most miles
of highways, railways and pipelines. Mean-
while, China, with the second largest
economy, has the third largest amount of
highways and railways. India is second in
the total miles of roadways; however, only
2% to 3% of Indias roadways are modern
highways. Even some of these, like High-
way 9 from Mumbai to Pune, have uneven
surfaces and transportation obstacles.
These persistent infrastructure chal-
lenges create opportunities for modern,
sophisticated 3PLs. Global shippers who
seek to succeed in todays landscape
should remember the following: Even
when a global supply chain is managed by
an experienced and expansive global 3PL,
many regions and countries have limita-
tions such as infrastructure, technology
and carrier service levels. Its important to
manage expectations based on your areas
of operation and seek out true global
3PLs that know the lay of the land.
Richard Armstrong,
Armstrong and Associates
LOGISTICSMGMT.COM
 A S P E C I AL S UP P L E ME N T T O :

Quarterly Transportation Market Update

STATE OF OCEAN CARGO:

Carriers cope
with
regulatory
restrictions

As if global ocean carriers didnt have

enough trouble managing rates and
capacity, government agencies have
called into question the viability of
alliances and mergers designed to
restore stability in the industry.
BY PATRICK BURNSON,
EXECUTIVE EDITOR

T he ocean carrier industry was handed another setback by a major regulatory agency
last month as the U.S. Federal Maritime Commission (FMC) rejected the pro-
posed merger of three Japanese liners.
The unanimous decision to nix the Tripartite Agreement, comprising Kawasaki
Kisen Kaisha, Ltd. (K Line), Mitsui O.S.K. Lines Ltd. (MOL) and Nippon Yusen Kai-
sha (NYK) represents a fresh challenge to the 3-J alliance for the time being. Further-
more, delays in Japanese antitrust approval mean that the carriers contract deadline for
next month will be missed.

LOGISTICSMGMT.COM JUNE 2017 | L O G I ST I C S MAN AG E ME N T 65S

 Special Report:
Ocean Cargo
Much of what the Tripartite par-
ties were asking for, says FMC com-
missioner William Doyle, revolved
around pre-merger or pre-consolidation
coordination. For example, the parties
were seeking authority to share informa-
tion and conduct joint negotiations with
third party businesses in the United
States for as much as a year in advance
of any potential merger.
These provisions would violate gun
jumping laws that forbid the sharing of
competitively sensitive information or the
premature combining of the parties, adds
Doyle. In order to receive the benefits of
a merger, one needs to first merge.
Chris Rogers, an analyst with the
global trade consultancy Panjiva, is not
particularly alarmed by FMCs deci-
sion, which he describes as technical
in nature. More of a worry, however,
is the ongoing Department of Justice
(DoJ) investigation of the container liner
industry and what Rogers describes as
66S L OGISTICS MANA G EM ENT | JUNE 2017
A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
Congressional concerns about alli-
ances more broadly.
In an advisory letter written by DoJ
assistant district attorney general Renata
Hesse, the FMC was called upon to for-
bid the creation of the OCEAN Alliance,
or to at least have the carriers rewrite the
agreement to ensure competition. The
DoJ has long taken the position that the
general antitrust exemption for interna-
tional ocean shipping carrier agreements
is no longer justified, she says.
For the time being, however, both
the Ocean Alliance and THE Alliance
still control 45% of the global business
by sharing vessels and operating joint
services.
Stable forecast
Meanwhile, global credit research
analysts for Moodys Investor Service
maintain that the outlook for the global
shipping industry is stable, given that
after excluding mergers and acquisitions
and spinoffsthe aggregate earnings
before interest, taxes and amortization
(EBITA) of rated shipping companies
will remain at similar levels in 2017
when compared to last year.
But unlike 2016, when the industry
saw double-digit EBITA declines, the
operating environment has bottomed
and earnings will remain on an even
keel, although at a low level during
2017. However, a material level of
industry-wide earnings growth will be
beyond our 12-month horizon, says
Stephanie Leavitt, a Moodys analyst.
Moodys further notes that the
continued scrapping of Panamax-class
vessels, driven by the expansion of
the Panama Canal, and of older ships,
driven by tightening environmental
regulations, are likely to continue, partly
offsetting global capacity expansion.
Market conditions are still weak, says
Leavitt, but are unlikely to worsen from
the levels seen for both segments in 2016.
LOGISTICSMGMT.COM
 Special Report:
Ocean Cargo
We expect that supply growth will exceed
demand growth by less than 2%, or within
our parameter for a stable view.
Freight rates in these two segments
will also gradually increase, she adds. For
the shipping industry generally, Moodys
would consider changing the outlook
back to negative if analysts see signs
that shipping supply growth will exceed
demand growth by more than 2%.
Conversely, we would consider a
positive outlook if the oversupply of
Shippers rate service quality of ocean
carriers poor to average
T he service provided by container shipping
lines is rated as poor to average and
has deteriorated in the past year, accord-
ing to a survey of exporters, importers
and freight forwarders conducted jointly
by maritime shipping advisory Drewry and
the European Shippers Council (ESC).
The ESC and Drewry contacted sev-
eral hundred shippers and forwarders
from all over the world in March and asked
them how satisfied they were with 16 price
and non-price related attributes of the
services provided by ocean carriers. The
survey also looked into areas most in need
of improvement and how quality varies by
type of carrier.
On a scale of 1 (very dissatisfied) to 5
(very satisfied), customers on average did
not rate carriers higher than 3.3 for any
of the 16 service attributes, the survey
showed.
The three areas of service or price
in which shippers and forwarders were
the most dissatisfied with were carrier
financial stability, quality of customer
service, and reliability of booking/cargo
shipped as booked. At the other end of
the spectrum, the three areas where they
were the most satisfied were price of
68S L OGISTICS MANA G EM ENT | JUNE 2017
A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
vessels declines materially and aggre-
gate year-over-year EBITA growth ap-
pears likely to exceed 10%, concludes
Leavitt.
Overcapacity woes
However, despite growing confidence
in a container market recovery over
the past six months, other leading
shipping analysts are forecasting the
return of freight rate volatility to
the worlds major trade lanes as the
service, accurate documentation, and
quality of equipment (containers).
We see that shippers want to be
treated not only as customers, but also
as partners when discussing their con-
tainer transport requirements, says Fa-
bien Becquelin, maritime policy manager
at ESC. In times when supply chains
are becoming more and more complex,
partnership is of key importance and un-
fortunately it is missing.
According to Becquelin the air cargo
industry had been suffering from similar
customer service issues, but has changed
its ways.
Philip Damas, head of the logistics
practice of Drewry, agrees: Shippers and
forwarders clearly see the necessity for
the carrier industry to invest in informa-
tion technology and to balance the needs
for cost competitiveness and for more
predictability and reliability.
Meanwhile, the ESC and Drewry plan
to run the shipper and forwarder satisfac-
tion survey regularly and invite interested
shippers and forwarders to contact them
should they wish to be included in next
years survey.
Patrick Burnson, executive editor
specter of overcapacity comes back to
haunt the industry.
Tan Hua-Joo, executive consultant at
the Paris-based consultancy Alphaliner,
says that although 2016 was the most
balanced year in terms of supply and
demand since 2009, he remains skepti-
cal about a rate rebound. Hopes on
the part of carriers for greater stability
are still some time away, he says, even
though the global fleet growth was con-
strained to just 1.6% last year.
New vessel delivery deferrals, in com-
bination with an unprecedented number
of vessels sent to scrap yards and an un-
naturally large idle fleet propelled by the
collapse of Hanjin last year, complicate
the matter, adds Tan. As we move into
this year, the rate of growth in the global
fleet is going to increase as theres very
little room for the industry to keep the
growth of fleet down.
Alphaliner is forecasting total
fleet delivery of 1.32 million twenty-
foot equivalent units (TEU), most of
which will be new Mega vessels, and
although its also forecasting another
year of record scrapping levelsup to
700,000 TEUthere will still be a net
increase in the global fleet of 620,000
TEU, which would represent a 3.1%
increase.
Altogether, 1.6 million TEU of the
worlds fleet found itself idled last year,
although some 500,000 TEU of this
was Hanjin tonnage. Tan notes that
a lot of the Hanjin vessels have been
brought back into operation, and Pana-
max vessels have seen something of a
spike in demand due to the new alli-
ances demand for capacityleading to
charter rates going back up to around
$10,000 per day.
The idled Hanjin tonnage is now
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 Special Report:
Ocean Cargo
down to about 200,000 TEU, and we ex-
pect this be reintroduced to by June, says
Tan. So, as long as the shipping lines take
back this idle capacity, theres no sign of a
recovery in the market as carriers continue
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to bid for market share and significant
freight rate stability will continue.
In fact, Alphaliner analysts say that
they dont see a genuine recovery
in the freight markets for another 18
months when demand ramps up to fill
ships on a reliable basis.
Robbert van Trooijen, head of
Maersk Line for Asia-Pacific, takes issue
with this forecast however, stating that
2017 will be the year in which all of us
would find that balance. First indica-
tions of this trend will be seen on the
trans-Pacific, Asia-U.S. East Coast and
Asia-North Europe trades, he says.
On the Asia-U.S. East Coast trade
lane, 148,000 TEU were deployed at
the height of capacity last year, and al-
though its been growing since Hanjins
bankruptcy, its now at 144,000 TEU per
week, says van Trooijen.
The trans-Pacific trade is showing a
similar pattern when compared to last
year, van Trooijen adds, with deploy-
ments of 240,000 TEU per week now
compared to 237,700 TEUs last year.
In view of all this, I think we should be
confident that the capacity injected in
the east-west trades is more balanced
than it was, he concludes.
Patrick Burnson is executive editor of
Logistics Management
LOGISTICSMGMT.COM
Pacific Rim Report
By Patrick Burnson
San Diego veteran shapes the
future for Port of New Orleans
Brandy Christian began service as the president
and CEO at the Port of New Orleans this past Janu-
ary after having spent two years as the ports chief
operating officer.
Its important to note, however, that Christian
gained 14 years of valuable experience with the Port
of San Diego, a tenure that culminated in her role as
vice president, strategy and business
development. We recently caught up
with her to learn how that valuable
Pacific Rim experience influences her
current management style.
Logistics Management: How
has the experience you gained on
the West Coast helped you in the
Gulf?
Brandy Christian: The ports
are similar in that both have break-
bulk and container cargo operations,
a robust and growing cruise business, large real estate
portfoliosthough New Orleans is more industrial
than San Diegoand terminals that are located in
the heart of urban areas alongside residential
neighborhoods.
LM: Is there a distinct West Coast management
style that translates well in New Orleans?
Christian: Effective management transcends
geography. My style is straightforward and focused on
succeeding with our mission as an economic engine. I
value transparency and open, honest dialogue through-
out the organization, and Im working to ensure that
employees have a clear path for development, both
through the ports organizational structure and with
employee engagements efforts that will be imple-
mented over the next few years. My management style
reflects my background in quality management sys-
tems, which has been helpful throughout my career.
LM: Youve been on the job for six months. What
have you learned so far?
Christian: Quite a bit. The Port of New
Orleans is well positioned geographically, and were
also fortunate with diverse businesses. To make sure
we take advantage of our opportunities, I initiated
and prioritized a master planning process to guide
our investments for the next 20-plus years. In a
systematic, disciplined manner, were assessing our
72 L OGISTICS MANA GEM ENT | JUNE 2017
Patrick Burnson is executive editor
of Logistics Management. To contact
Patrick with feedback or a story idea,
please send an e-mail to pburnson@
peerlessmedia.com.
current business and identifying strategic opportuni-
ties. We have a tremendous opportunity to grow.
LM: What goals have been achieved so far, and
what challenges are about to surface?
Christian: In addition to moving forward with a
comprehensive master plan, which is already helping
us identify growth opportunities, I have
increased our visibility as a port. In meet-
ings with carriers, shippers, current and
potential customers, national, state, and
local stakeholders, Ive been demonstrat-
ing our commitment to forging strong
partnerships for mutual economic benefit.
Internally, I implemented a reorga-
nization of the port last fall for greater
efficiency, functional alignment and to
provide more opportunities for employees
to grow within the organization.
In terms of challenges, we need to
allocate our finances so that we can capitalize on
opportunities and make sure that our current assets
are maintained appropriately. Going forward, a planned
and disciplined approach is the only way to ensure
long-standing issues dont come as a surprise.
LM: Business with Cuba was one issue
addressed at the recent Cargo Connections
event. Can you speculate on that trade opportu-
nity and others in the hemisphere?
Christian: Cuba was once New Orleans num-
ber one trading partner. The country still represents
tremendous opportunity for the Port of New Orleans
if the embargo is liftedboth for cargo and cruise.
Currently, we ship frozen poultry to Cuba on a
humanitarian basis.
We signed an memorandum of understanding with
the National Port Administration of Cuba last October
and have followed up by hosting delegations here in
New Orleans and by visiting the Cuban Ambassador to
the United States in Washington, D.C.
Overall, were well positioned both in the hemi-
sphere and around the world as a gateway port. The
Panama Canal expansion has been good for us so far,
and we now have a direct Asian service with PEX3 and
were seeing more Asian cargo as a result. Both ship-
pers and carriers are looking at the Gulf due to the
regions robust export market and efficient access to
the Midwest via rail.
LOGISTICSMGMT.COM
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