Decartes Systems Group Archives

“We’re toast,” said one of my son’s baseball teammates from the bench last night, as their team quickly fell behind 8-0 against the best team in the league. From my beach chair on the sidelines, I thought the same thing. Then came the bottom of the fifth inning, when my son hit a 2-run home run with two outs, followed by more hits and more runs, and when the dust settled in the infield, the game was tied. An inning later, they won the game 9-8 with a walk-off hit.

We hear it all the time: don’t give up, stay confident, work through it. But sometimes “we’re toast” is what keeps echoing in our minds, which is why experiencing come-from-behind victories are so important, and why they never get old.

In other news…

In the music world, it seems like every artist is partnering up with Pitbull these days to help propel their song to the top of the charts. In the enterprise software world, Netsuite is becoming the Pitbull of the industry, with various supply chain and logistics software vendors forming partnerships with the company to help expand their presence in the small and midsize business (SMB) market.

Last May, for example, LeanLogistics announced that it had partnered with NetSuite to build the LeanTMS™ SuiteApp on the NetSuite SuiteCloud computing platform. This week, both Descartes and HighJump Software announced agreements with NetSuite. You can read the press releases for more details, but here’s what Guido Haarmans, Vice President of Business Development, Technology Partners at NetSuite had to say about each partnership:

“The market for cloud-based business management solutions continues to grow. There is an increasing need to extend these applications beyond the enterprise to improve supply chain and logistics execution. Descartes’ GLN, route planning and transportation management solutions and deep domain expertise can help our retail, distribution and manufacturing customers in managing their global and local inbound logistics and delivery operations.”

“HighJump Software is a longstanding leader in the supply chain solutions market, and an experienced provider of cloud-based services to its customers. We are pleased that NetSuite customers should have the opportunity to further improve their efficiency and customer service by adding proven, integrated supply chain management functionality to their cloud-based NetSuite business management solution.”

These partnerships underscore an important point I’ve made in the past: the real value of cloud computing, particularly for supply chain and logistics applications, is not about having servers and apps reside outside your four walls and paying for them on a subscription basis — it’s about joining a community of connected companies (a network, an ecosystem) where you can communicate, collaborate, and execute business processes with trading partners in more efficient, scalable, and innovative ways. And for solution providers like Descartes, HighJump Software, and LeanLogistics, the cloud is a sales channel, and by linking their networks with NetSuite’s, they have the opportunity to reach segments of the market that are too costly or time-consuming to pursue via other channels.

UPS announced the release of the UPS App for iPad that “enables customers to track packages and find locations where they can send shipments…and allows users of UPS My Choice to access all of the features of the service including the ability to reroute or reschedule delivery.” What I found most interesting, however, was this statistic quoted in the press release: “According to the Pew Internet & American Life Project, as of January 2013, 31 percent of American adults own a tablet computer, up from 25 percent in August 2012 and four percent in 2010.” In my opinion, this growing adoption of tablet computers by consumers will further accelerate the “consumerizaton of IT” we’re seeing, which will further drive enterprise software vendors to design and optimize their applications for these devices in the years ahead.

On the economic front, import volume growth at the nation’s major retail container ports “could trickle to a standstill by the end of the summer,” according to the monthly Global Port Tracker report released by the National Retail Federation and Hackett Associates. Here is a quote from the press release:

“The weak cargo increases expected over the next few months are consistent with other signs that the economy is slowly improving but show that retailers remain cautious, especially when it comes to stocking their inventories,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “We’re looking at barely 1 percent of year-over-year growth through the early summer, and August and September are expected to be basically flat even though they’re supposed to be two of the busiest months of the years.”

In related news, Maersk downgraded its forecast for ocean shipping demand. The company now expects container demand to grow 2 to 4 percent this year, down from the 4 to 5 per cent it forecast back in February. According to a Financial Times article:

First-quarter results showed “modest improvements in the global demand for container transport, reflecting the weak economic situation especially in developed countries,” Maersk said on Friday.

It warned that capacity growth was outstripping demand after Maersk and others took delivery of new, massive ships such as the Danish group’s Triple-E container vessels, the largest in the world.

“Conditions for the container industry remain challenging and managing supply will be even more important this year,” Maersk said.

We’re toast.

Have a happy weekend!

Song of the Week: “Stubborn Love” by The Lumineers

Note: Descartes, HighJump Software, and LeanLogistics are Logistics Viewpoints sponsors.

Over the past few weeks I’ve attend TMC’s Interactive Client Forum and Descartes’ Evolution 2011 User Conference (TMC and Descartes are ARC clients). At both conferences, there were speakers focused on regulatory trends in transportation. The Descartes conference featured Annette Sandberg, a former Administrator of the Federal Motor Carrier Safety Administration (FMCSA). TMC’s conference featured Angie Freeman, C.H. Robinson’s VP of Investor Relations and Public Affairs (TMC is the transportation managed services division of C.H. Robinson Worldwide).

“Hopefully everyone’s had their coffee because I’m going to speak about regulatory issues,” Annette joked at the beginning of her speech. But I found her speech, and Angie’s, interesting and insightful. What I particularly valued is that both speakers – two very smart women – did not just report on where regulations stood, but gave their informed opinion on where things are likely to go.

Here are my four main takeaways from the two speeches:

1. Since we are going into an election year, the pace of regulation will slow down because agencies don’t want to create any controversy. Deadlines have already slipped for several pending rules, and many will slip further.

2. There has been a lot of focus on Hours of Service (HOS). Of all the pending transportation regulations, HOS is the least likely to happen. The Obama administration has admitted that it is one of the most expensive rules pending across all US government agencies. Further, once the rulemaking process is finalized, it is susceptible to a successful court appeal because the FMCSA changed the way it conducted its required cost/benefit analysis for this regulation.

3. If you go to the site where the Carrier Safety Measurement Safety (SMS) data is displayed, there is a disclosure that states “Readers should not draw conclusions about a carrier’s overall safety condition simply based on the data displayed in this system.” Many shippers believe that this disclosure helps protect them from litigation if they use a carrier with marginal or unfit ratings that ends up in a crash. But they are mistaken. Motor carriers are only mandated to carry at least $750,000 in insurance. If there is a crash that causes multiple fatalities, $750,000 does not go very far. Lawyers will go after shippers and brokers with deeper pockets.

So what should a shipper do? Have a policy framework in place and follow it consistently. That policy should include checking SMS scores of your carriers frequently (there are software solutions that have proactive alerts for this). The policy should also set standards for which carriers can and can’t be used based on their scores. One key piece of advice: don’t make this policy too restrictive. In case of a lawsuit, it is worse to have a policy in place and not follow it then not to have a policy at all. So before deciding what sort of policy to implement, shippers are advised to do a simulation and see how many carriers would fall out of their routing guide based on a particular driver scoring threshold. But also realize that using carriers with overall ratings of “Unfit” or “Marginal” could be dangerous.

4. Electronic On-Board Recorders (EOBRs) are being proposed as a way to replace paper documentation to show compliance to HOS. While the mobility revolution is driving down the cost of GPS-enabled mobile devices, EOBRs are actually pretty expensive – a $1,000-$4,000 purchase price – based on the requirement that law enforcement officials must be able to plug into the device to download data. Despite the expense, there will likely be an industry-wide EOBR mandate within the next 5 years.

The FMCSA, as part of its ongoing responsibilities, audits carriers and asks them if they use GPS to track their trucks. If a carrier says yes, they compare the GPS data to the paper logs. Between 30 and 70 percent of the time the entries don’t match. As a result, a carrier’s rating can move from satisfactory to conditional and the carrier can lose business. In short, there are good reasons for a carrier to use an EOBR even if it is not required.

Whenever regulations are discussed, carriers and shippers assume that transportation costs will rise. But transportation costs are far more correlated with the price of fuel than anything else. In fact, there is a graph in Morgan Stanley’s June 2011 freight transportation report that shows drivers have lost ground during this economic downturn as compared to an index of the Wages & Salaries of Private Industry Workers and the Consumer Price Index. As of now, there is no real proof of a driver shortage because if there was a shortage, driver wages would be rising.

Transportation Regulatory Trends

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