About.com has a very good article about selecting third party logistics providers (3PL).    Some of it is quoted below.  3PL's, such as DHL and others provide outsourced services that are critical supply chain components.  They enable more effective use of corporate cash reserves and extend a firms supply chain.  Global 3PL's can assist in getting into markets in far off locations and in unique service offerings such as Service Parts Logistics, reverse logistics and exchanges.  

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Warren E. Buffett is officially a railroad tycoon, joining folks like Cornelius Vanderbilt and John D. Rockefeller.    For $34 billion dollars his investment company, Berkshire Hathaway, now will assume 100 percent control of the Burlington Northern Santa Fe Railroad (BNSF).  

Buffett has been investing in railroads and railroad rolling stock for a couple of years now.   First with minority investments in BNSF as well as Norfolk Southern Railroad.   Now, he has declared himself "all in" regarding investment in what he considers Americas economic future.

Buffett is quoted as follows regarding what is now Berkshire Hathaway's largest investment ever.

“Our country’s future prosperity depends on its having an efficient and well-maintained rail system,” said Warren E. Buffett, Berkshire Hathaway chairman and chief executive officer. “Conversely, America must grow and prosper for railroads to do well. Berkshire’s $34 billion investment in BNSF is a huge bet on that company, CEO Matt Rose and his team, and the railroad industry.  “Most important of all, however, it’s an all-in wager on the economic future of the United States,” said Mr. Buffett. “I love these bets.”

BNSF is the largest railroad in the western US.   They move the largest amount of coal, corn and wheat from the region.   These are strategic energy commodities.   Coal is used for fueling electrical generation plants as well as for export for the same use overseas.   Corn is a multi use product, providing both feedstock for animals as well as food for people.   Further, corn is used as a raw product in the US for the production of ethanol. 

Buffett gets the concept that raw energy must move by rail. Even potential energy sources like coal shale originate mostly from within the western footprint of the BNSF, so if major fields are developed and mined, the shale oil products will eventually hit the BNSF to move to market.   Berkshire Hathaway bought control of a tank car manufacturing firm a year or so ago, so not only is Berkshire Hathaway involved in the locomotion of ethanol products, its also involved in providing leased movement capacity in the specialized equipment required.

BNSF is also a major player in the operation of doublestack trains for the movement of intermodal containers.   This makes BNSF critical to the movement of international cargoes from the US West Coast to the heartland of America. 

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SEATTLE, Oct. 28 /PRNewswire-FirstCall/ -- Boeing (NYSE: BA) today announced that it has chosen its North Charleston, S.C., facility as the location for a second final assembly site for the 787 Dreamliner program. Boeing evaluated criteria that were designed to find the final assembly location within the company that would best support the 787 business plan as the program increases production rates. In addition to serving as a location for final assembly of 787 Dreamliners, the facility also will have the capability to support the testing and delivery of the airplanes.

"Establishing a second 787 assembly line in Charleston will expand our production capability to meet the market demand for the airplane," said Jim Albaugh, president and CEO of Boeing Commercial Airplanes. "This decision allows us to continue building on the synergies we have established in South Carolina with Boeing Charleston and Global Aeronautica," he said, adding that this move will strengthen the company's competitiveness and sustainability and help it grow for the long term.

The US Department of Transportation Federal Highway Administration produced the following video which does a great job of describing the complexities and opportunities in international transportation. 

This is why I have spent the last 25+ years of my life in this business and why I am committed to supporting supply chain education.  The business is highly complex, yet still based on both the elements and human relationships.  It is just a great business to be in, especially if you love large toys.  

What sold me was 1000 ft container ships, 75 ton locomotives and smoky old jet airplanes. I started in the business as an intern for Delta Airlines in the late 1970's.  I spent a lot of time around DC-8's, DC-9's, 707's and a lot of smoky breakbulk oriented jets. After college, I was a trainee at US Lines and learned to be a proper steamboater there.   Like American muscle cars, heavy iron is just testosterone laden. I loved it.

Every day is different and if you love some level of chaos in your life this is a great industry to be in.

Eric

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Despite the slick advertising you see on Sundays between NFL games, shipping by any mode is still more of an art than a science.   Nature plays a factor in the movement of anything.  No whiteboards involved at all.

Check out the video below, which shows a container ship at sea in heavy weather.  The ship takes an absolute beating and rest assured, nobody on deck is very happy.   That HDTV you have in your living room right now might have been on this ship but you'd never know it.

This takes me to another subject... How many of you know what "General Average" is?   Do you know where it came from?   Methinks its time for a maritime history lesson!

General Average is a maritime legal term that allows a carrier to charge its customers for damage done to the ship while at sea.   The video above shows a major storm.   If the ship were damaged with massive cargo loss etc., the carrier could legally take the cost of the repair and divide that by the cargo interests on board and send you a bill.  Look at the back of your ocean bill of lading.  Its on there. 

Here's the history. 

Back in the "olden days", prior to the early 1800's,  merchant ships would be commissioned for voyages.   A British merchant with wool to sell, along with other merchants with other native products, would commission a vessel and a captain and crew to sail to a foreign market like China or India.   On arrival, the captain became a trader and would sell the goods in exchange for money or other local goods like silks, tea, Chinese pottery, anything!   How much money the enterprise made, including the captain and crew, depended on how good he was at trading.   Now, if the ship got damaged in transit from weather, pirates, acts of god, etc., the commission contract said that the commissioning merchants could be billed for the damage repair cost.    That tradition in maritime history continues to this day though carriers are very sensitive about whether to charge this because it is very unpopular with major customers.

The reason shippers get so mad about General Average today is that they enjoy what's called full liner terms on their ocean bills of lading, which is a contract of carriage.   The shipping company promises to run a regularly scheduled service with predictable schedules.  Given that people expect that what they buy will be fulfilled, they are very surprised when something happens to their goods and they themselves are held responsible.  Most protest vehemently!   That wasn't the case prior to 1837.

In 1837 the Peninsular and Oriental Steam Navigation Company (P&O) was commissioned by the British Government to make scheduled runs between England and Spain and Portugal in support of the British mails. A country trying to run an empire needs regular mail service. 

P&O was the international mail company long, long before UPS, DHL or FedEx ever delivered an envelope.   P&O started what became known as Liner Service.   England is an island nation and this was a common way that shipping companies got started.  NYK of Japan started the same way.  Nippon Yusen Kabushiki Kaisha means Japan Mail company. 

This idea of commissioning ships with trade goods created strong trades with China long before Wal*Mart ever existed.   Ever heard of the Opium Wars?   Shipping companies (P&O in particular) wanted to trade British wool with the Chinese.  The Chinese already had silk, which was not only cooler, it was lighter and much more suited to the weather in China.   Frustrated, the Brits needed a different product.  They were already active in India and noted that the Indians had a nice local trade in opium poppies. 

So...rather than trade that smelly old wool,  the Chinese were offered opium.   That's a product that creates instant demand if you weren't already aware...  and a nice but infamous trade took place for awhile between India and China and P&O made good money on it.  That's something the company wasn't real proud of in the view of history, but that's what happened.

In case you didn't know it, I spent many years working for P&O Containers, then P&O Nedlloyd.   Both now part of Maersk Lines.   The heritage of our commerce is directly tied to our global maritime history.  That's evolving to suit current markets, but the old history is worth knowing.   I'm intensely proud to be an old steamboater, even though I now wear a forwarders clothing! 

Eric

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2009 has been a rough year in transportation.  Virtually every carrier and freight forwarder has had to tighten the belt in some form.  Office consolidations, revised business services, reduced product offerings, layoffs, you name it, its happened. 

Just this week CGM sent a letter to its major customers explaining the creation of a financial governance board to supervise its strategic direction and to secure the financial backing to survive.  Hapag-Lloyd meantime has announced that it has secured financial backing from the German government.  

I started in the container shipping business in 1983.  It seems like container carriers have been both cutting rates and dying like flies ever since.   I used to keep a list of the names of the carriers.   When it got to over 30 I stopped.  It was too depressing.  The maritime history that was simply dying was too painful.

I get data from a couple of consultant firms that show that while the market curves have been precipitously downward in direction for well over a year, some rebound is happening.  Freight volumes from Asia for retail are up in a mini-peak, trucking volumes are weak but also on a slight uptick.   Year over year retail store figures are still down, but sales are up over the last quarter.

The point is, there is a pulse.  The patient isn't dead yet.

Jobs still are out there.

I get calls from executive recruiters all the time.  Since I run this blog, people assume that my Rolodex is pretty fat.   What I hear is that good jobs are still out there.  Our industry still needs good employees and even better management.  What I am also hearing is that the position that paid 100K two years ago is now 80K.  Simply put, there are a lot of candidates and with corporate income depressed, so are the resources to pay job candidates.  

I'll write an article soon on strategies for job networking in the shipping industry and also how to use some online tools.  I'm not a fan of social networking generally, but there are some resources that are professionally focused.  Stay tuned!

Eric

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I never thought I'd see the day when APL would leave Oakland, California.   The company has been a bay area maritime fixture for decades.  However, costs being what they are, the company has completed its headquarters relocation to the Phoenix area.  Approximately 300 people will occupy the headquarters building located on North Scottsdale Road.    Approximately half the staff transferred from Oakland. 

To APL employees:  Just remember..."its a dry heat".   One other thing... the Phoenix police use traffic cameras on North Scottsdale Road.    I know.  The last time I was in Phoenix I got a ticket for $164.00 in the mail courtesy of the the local shutterbugs.

Maersk gets ready to jack up the Trans Atlantic trade

Maersk will replace its 4000 TEU vessels in the Med trade with 2900 TEU vessels as part of its 2010 trade strategy.   The company thinks the Atlantic trade has hit economic bottom and feels that restriction of capacity will force higher demand for the remaining slots.

Eric

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