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2IDEAS FOR LEADERSHIP IN LOGISTICS AND TRANSPORTATION©

The Official Magazine of The Logistics Institute

Volume 12, Issue 5, October 2006

PAGE 10LQ’s Special Report on the Top 30 North

American Third Party Logistics Providers (3PLs)

by Dick Armstrong

Richard Armstrong, Co-editor and Publisher of Who’s Who In Logistics, and President, Armstrong & Associates.

David J. Closs, Ph.D.,John H. McConnell Chaired Professor, Eli Broad College of Business, Department of Marketing and Supply Chain Management, Michigan State University, LQ Executive Editor

Jim Davidson, President, iWheels Dedicated Logistics

Peter Hall, Vice-President and Deputy Chief Economist, Export Development Canada

Rich Moskowitz, Assistant General Counsel and Regulatory Affairs Counsel, American TruckingAssociations

Nicholas Seiersen, B.Sc.(Hons.), M.B.A., P.Log, Senior Manager, KPMG, (Toronto),and LQ Executive Editor

Herbert W. Shear, Chief Executive Officer, Genco Distribution System

Carol West, President, Canadian Society of Customs Brokers and the Secretary of the International Federation of Customs Brokers Associations

LQ's Executive Exchange affords its strategy-setting executives with a unique opportunity to share ideas and learn from some of the most exceptional minds in the business and network with leaders in business and academia. You can't afford to miss it. Register by visiting:

http://www.logisticsquarterly.com

Seating is limited.

The Supply Chain as a Well for Innovation in BusinessA NORTH AMERICAN BUSINESS FORUM ON INNOVATION IN SUPPLY CHAIN MANAGEMENT

Featured Speakers and Chairmen (Partial list)

Richard Armstrong, Co-editor and Publisher, Who's Who In Logistics? & President, Armstrong & Associates

David Binks, President, FedEx CanadaDavid J. Closs, Ph.D., John H. McConnell Chaired Professor,

Eli Broad College of Business, Michigan State University & LQ Executive Editor

William (Bill) L.Conley, President, ATC Logistics & Electronics,a subsidiary of Aftermarket Technology Corp. (ATC)

John Dischinger, Program Director, IBMVictor Deyglio, President and CEO, The Logistics Institute

Jim Eckler, President and CEO, Progistix-Solutions Inc.Claude Germain, EVP and COO, Schenker Canada

Arun Kumar, Director of Americas Logistics, Dell, Inc.Tim Maloney, Managing Director, Newport Group Inc.

Robert Martichenko, President, LeanCor LLCNicholas Seiersen, B.Sc.(Hons.), M.B.A., P.Log.,

Senior Manager, KPMG, based in Toronto,& LQ Executive Editor

Gene Tyndall, President, Supply Chain Executive Advisors, LLC.

Jonathan E. Zakary, Director of Strategic Supply Chain Initiatives & Logistics

Management, Darden Restaurants

LQ'S EXECUTIVE EXCHANGE, Toronto Board of Trade, Airport ClubNovember 9, 2006

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3LQ™ October 2006LogisticsQuarterly.com

5 Announcements 8 Contributors

10 The Top 30 3PLs 2006This introductory article to LQ’s Top 30 North American 3PLs ranking provides aninsightful perspective on trends in this cross-border segment of the industry. DickArmstrong answers the question: “Are

customers better off?” as 3PLs continue to grow in order toincrease their portfolio of services There’s also a downsidelogisticians should be mindful of.

27 The Transition to Ultra-Low Sulfur DieselIn the near future, 80 percent of the on-roaddiesel fuel refined or imported must be ultralow sulfur (ULSF) compliant. For motor carriers, few issues are likely to be bigger

this year. Will this move risk disrupting the steady supply of fuel that is essential to the industry?

28 What’s Your Secret: Accounting for Success?How can your company recruit the brightestand the best, and create acorporate culture of innovation? Too often, taking businessrisks associatedwith innovative practices isconsidered the domain of entrepreneurs. And

encouraging such behavior within a corporation may seemcounterproductive. This commentary makes a compellingcase for innovation.

30 Heading for Another Capacity Crunch?Will North America’s Pacific ports be ready for more business as China, Korea and Singapore implement aggressive multi-billion-dollar investment plans toincrease their container capacity?

American importers have begun to look beyond their borders for solutions, and Canadian ports may gain more business as a result.

32 Hiring a Customs BrokerCustoms brokers’ knowledge can save your company time, reduce costs, and heighten customer satisfaction. Here are some important tips on how to select the best and the brightest

brokers for your business.

34 The Global Experience of the Supply Chain ManagementProfessionalOne of the more controversial topics in defining a supply chain management professional focuses on the type of

global experience required for this discipline. In this article, LQ’s Executive Editor shares his insights on the best ways to develop this global expertise.

36 No Niche is an Island:Do you want to perfect your company’s service offering? Here are five examples of value-added solutions that a 3PL can provide within a reverse solutions“niche.” This article sheds light on how

companies can outperform their competitors.

CONTENTSLQ™

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5LQ™ October 2006

ANNOUNCEMENTS

LogisticsQuarterly.com

LQ is pleased to announce thatWalter Zinn, Ph.D., Ohio StateUniversity, has accepted LQ'sinvitation to join its AdvisoryBoard.

Walter Zinn, Ph.D., Ohio State University,Professor Zinn's research interests focusprimarily on the impact of customerservice policies on the determination ofsafety stocks. As part of this focus, hisresearch addresses issues such as the

effects of inventorycentralization andsales forecasting onsafety stocks, logisticspartnerships and,morerecently, consumerreactions to stockouts.Professor Zinn is also

interested in logistics issues in LatinAmerica and received a logistics inno-vation award from the Latin AmericanLogistics Center. His research has beenpublished in such academic journals asthe Journal of Business Logistics, Euro-pean Journal of Operational Research,Journal of the Operational ResearchSociety, The International Journal ofLogistics Management, Journal of theAcademy of Marketing Science andBusiness Horizons. Professor Zinn isalso a member of the editorial reviewboard of the Journal of BusinessLogistics and The International Journalof Logistics Management. He recentlycompleted two studies for the WorldBank, both discussing supply chainmanagement problems generated byimperfections in public policy, andworks regularly with the business com-munity as a speaker at logistics confer-ences and meetings in the UnitedStates,also Brazil and other countries inLatin America.

As a resource for 35,000 logisticians,academics and executives in other dis-ciplines in the United States andCanada, LQ offers ideas for leadershipin logistics, supply chain managementand transportation, and provides aunique bridge between academia andpractitioners.LQ’s Advisory Board playsa vital role in ensuring LQ provides itsreaders with afford authoritative think-ing on the complex and fast-changingwork of the logistics business - with aunique focus on best practices in theUnited States and Canada.

Meridian IQ Canada Scores Hat Trick with RelationshipBuilding EventCamaraderie, dinner and a chance tosee the famous Stanley Cup trophy cre-ated a memorable event for MeridianIQ Canada and its clients, prospects,vendors and employees. The event,recently held in the historic HockeyHall of Fame in downtown Toronto,pro-vided the setting to launch theMeridian IQ name in Canada andthank those who are important to thesuccess of its business.

Founded in 1943, the Hockey Hall ofFame collects,preserves,researches andexhibits the objects and memoriesimportant to the history of ice hockey. Italso pays tribute to the players,builders,officials, writers and broadcasters whomade significant contributions andachievements in hockey by electingthem into “Honoured Membership.”

The Hall of Fame is both a museumand an entertainment site, with interac-tive, audio-visual and multimedia pre-sentations, in addition to its regular dis-plays. One of its more popular displaysis the Stanley Cup, the championshiptrophy of the National Hockey League,

the major professional ice hockeyleague in Canada and the UnitedStates.

Distinguished Service AwardThe Council of Supply Chain Manage-ment Professionals (CSCMP) has pre-

Valerie Bonebrake, Meridian IQ, Frank Washburn, Reimer Express Lines, Tim Marsh, Reimer Express Lines

Bill Leach, Research in Motion, David Salter, Research in Motion, Chuck Davis, Meridian IQ

Pat Di Berto, Ri-Go Lift Truck Ltd., Susan Promane, Meridian IQ

6 LQ™ October 2006

sented the 2006 Distinguished ServiceAward (DSA) to Herbert S. Shear, chiefexecutive officer of GENCO in Pittsburgh,Pennsylvania. Mr. Shear received CSCMP’sDSA at a special ceremony at CSCMP’sannual conference, held this October, inSan Antonio,Texas.The award is the high-est honor that can be bestowed upon anindividual for achievement in supplychain management.

The CSCMP is the preeminent world-wide professional association of SupplyChain Management professionals. Itsmission is “to lead the evolving supplychain management profession by devel-oping, advancing, and disseminatingsupply chain knowledge and research.”

The Canadian Courier Associationand Canadian ProfessionalLogistics InstituteIn tandem with its recent name change,the Canadian Courier & Logistics Asso-ciation (CCLA) has announced a newpartnership with the Logistics Institute.This strategic partnership in profession-alism aims to build a stronger, moreskilled courier and logistics workforce.As a member benefit and with profes-sional development at its core, this newpartnership will not only diversify, butalso increase the profile of CCLA. Thispartnership automatically gives allCCLA members an affiliate membershipwith the Logistics Institute.

As affiliate members of the LogisticsInstitute, CCLA members have access totraining programs and professional devel-opment opportunities for all employees,and many other resources, such as theInstitute’s Logistics Gateway; available atits website: www.canadiancourier.org

Hans Hickler Appointed U.S.Chief Executive, DHLDHL has recently announced that HansHickler will succeed John Mullen asChief Executive Officer for DHL Expressin the United States.

"Given the excellent developmentsin our U.S. business and operationsover the last year, and the presence ofa strong management team, I ampleased to ask Hans to succeed me asCEO for the U.S.," said John Mullen,Chief Executive Officer, DHL Express,and member of the Deutsche Post

World Net (DPWN) Board of Manage-ment, in a press release.

In September Deutsche Post WorldNet, DHL's parent company, announcedthat its DHL Express business will be ledglobally by John Mullen. In this newglobal position, all DHL Express region-al CEOs will report to Mr.Mullen, includ-ing Mr.Hickler.

Jerry Levy Named New VicePresident of Marketing at PWC Logistics PWC Logistics, a leading global trans-portation and logistics company, hasnamed Jerry Levy as its new VicePresident of Marketing.

Mr. Levy joins PWC Logistics fromBAX Global, where for six years he wasVice President of Marketing. While atBAX, Mr. Levy was responsible for

launching their newglobal product suiteand establishing its e-commerce program. Inhis new role, Mr. Levywill be responsible formarketing across allPWC Logistics compa-

nies, including GeoLogistics, and will beinstrumental in all global marketing andbranding initiatives. He reports directlyto Christopher Logan, Senior VicePresident, Strategic Marketing andGrowth Initiatives, PWC Logistics andGeoLogistics. Mr. Levy is based in SantaAna, Calif.

He has more than 20 years of salesand marketing experience in the logis-tics and transportation industries, hold-ing key positions with Exel, GeneralElectric, and Conrail.

Mr. Levy Levy joined BAX Global inJuly 2000 as the marketing head wherehe had the responsibility of reposition-ing the $2.4 billion transportation com-pany from a primarily North Americanintegrated air cargo provider to a fullservice,global supply chain firm.Prior toBAX, he served five years as Director ofStrategic Alliances and Logistics for ExelGlobal Logistics. Before Exel, Levy wasU.S. Marketing Manager for Trade andTransportation Network Solutions at GEInformation Services,a $500 million dol-lar networking and communicationsfirm based in suburban Washington,D.C.

LQ™ ADVISORY BOARD

David J. Closs, Ph.D.Department of Marketing and Supply Chain Management,Michigan State UniversityExecutive Editor, LQKaren CooperSenior Media Relations Specialist,FedEx Canada Ltd.Jim DavidsonPresident,iWheels Dedicated LogisticsBruce DanielsonExecutive Communications Manager,UPS. Richard Dawe, Ph.D.Associate Professor,Operations ManagementGolden Gate UniversityRuss DixonSenior Manager,TNT Logistics North AmericaRuss J. DoakDirector, Global Logistics, Kodak Graphics & Communications.David FaoroDirector, Supply Chain The International Group, Inc.Sue Gadsby, C.P.P. C.P.M.,Director, Procurement, Apotex Inc.Benjamin GordonManaging Director, BG Strategic AdvisorsThomas J. Goldsby, Ph.D.Associate Professor,Supply Chain Management,University of KentuckyDavid GriffithVP Global Supply Chain Management,BAX GlobalJoe GrubicSenior Manager, Alliance/Network Management, Nortel Networks Global LogisticsGeorge KuhnExecutive Director, CIFFAJean LétourneauPresident E-Zsigma (Canada) Inc. Program Director for the Centre of Excellence Six Sigma, Schulich School of BusinessRobert MartichenkoPresident, LeanCorJames MahoneyVice President of the Supply Chain Excellent PracticeAuxis, Inc.Diane Mollenkopf, Ph.D.Assistant Professor, Marketing and Logistics, University of TennesseeJeff MooreManaging Director,Lakeside Logistics Inc.Mark Morrison, Senior Vice President of Business Development, TNT North AmericaTom NightingaleVP Communications and Chief Marketing OfficerCon-way IncChristopher Norek, Ph.D.Senior Partner, Chain Connectors, Inc.NASSTRAC Contributing EditorRobert NovackAssociate Professor,Business Logistics,Department of Business LogisticsPenn State.Peruvemba S. RaviAssistant Professor,Wilfrid Laurier UniversityKurt M. RitceyPartner, Deloitte ConsultingMichael RubinfeldDirector, Customer Logistics, Ryder Logistics & TransportationSolutions Worldwide Nicholas SeiersenSenior Manager, KPMGExecutive Editor, LQMichael SneddenManager of Distribution Operations, IBM-Canada Ltd

Volume 12 Issue 5

PUBLISHER & EDITORFred [email protected]

CPLI PRESIDENT & EDITORIAL DIRECTORVictor [email protected]

CREATIVE DIRECTORCraig [email protected]

WEB DESIGNER Beylah [email protected]

COPY EDITORLinda [email protected]

ADVERTISING SALESGerry JenningsSales [email protected]

CIRCULATION MANAGERBill [email protected]

ACCOUNTINGChristine Raffan, CGA Independant [email protected]

LQ™ Inc.2 Bloor Street W., Suite 100, Box 473, Toronto, Ontario, M4W 3E2,Telephone: (416) 461-8355Toll Free: 1-800-843-1687Fax: (416) 465-7832 Email: [email protected]

Logistics Quarterly (LQ™) (ISSN 1488-3309) is published six times annually by LQ™ Inc. LQ™ is written for professionals in logistics. Subscription Services at: www.LogisticsQuarterly.comCanada Post Publications Mail Sales Agreement Number: 40032602. CANADIAN POSTMASTER: send subscription orders, address change notices and undeliverable copies to LQ™, 2 Bloor Street West, Suite 100, Box 473, Toronto, Ontario, Canada M4W 3E2

EDITORIAL POLICYThe opinions expressed in this publication do not necessarily reflect the policy of LQ™ Inc. The editors reserve the right to select and edit material submitted for publication. Not responsible for unsolicited material. LQ™ Inc. is a Toronto-based corporation and publisher. All rights reserved © by LQ™ Inc. 2006. Reproduction without written permission of the publisher is forbidden. LQ™ welcomes your comments, letters to the editor, or written submissions for consideration. (LQ™ is available on-line at: www.LogisticsQuarterly.com)

LQ MAGAZINE’S STATEMENT OF OWNERSHIP The trademark LQ™, LQ Magazine (ISSN 1488-3309), LQ Newsletters and theLQ Conference, including the “ExecutiveExchange,” its trade marks and publishedmaterial are wholly owned by LQ Inc., a private Canadian family-owned and operated corporation. LQ’s valued sponsors are independent of LQ Inc., and LQ’s editors do their utmost to uphold independent and impartial views in all of their publishing initiatives.

LQ is honored to have the status of the “official magazine” of The LogisticsInstitute. The Logistics Institute and LQ are independently owned and operated organizations.

.com.com

8 LQ™ October 2006 LogisticsQuarterly.com

OCTOBER CONTRIBUTORS

LQ’s mandate to provide “Ideas for Leadership in Logistics,” is clearly evidenced thisissue with articles written by professionals and logisticians from America and Canada who are leading and transforming

business by creating new roadmaps and definitions for leadership in this exciting field.

OUR CONTRIBUTORS

RICHARD ARMSTRONG is a third-partylogistics expert who specializes in supplychain evaluation and outsourcing. Dick isthe co-editor and publisher of Who'sWho In Logistics? Armstrong's Guide toGlobal Supply Chain Management. Hehas over 20 years experience as a consult-ant, educator and motor carrier executive.He is licensed to practice before FMCSAand FMC. His publications cover theglobalization of logistics, supply chainmanagement, transportation operatingefficiency and DOT regulations.

DAVID J. CLOSS, Ph.D., LQ ExecutiveEditor: Dr. Closs is the John H. McConnellChaired Professor of the Eli Broad Collegeof Business, Department of Marketingand Supply Chain management, MichiganState University. He has consulted withmore than 100 of the world's Fortune 500corporations regarding logistics strategiesand systems. He is an active member ofthe Council of the Supply Chain manage-ment professionals.

JIM DAVIDSON, President, iWheelsDedicated Logistics, began his career inlogistics at The Ford Motor Company in1963 working in all aspects of logistics for 17years. Mr. Davidson joined TNT in 1983and held various management roles,including roles in operations, staff, admin-istration and general management for anumber of different divisions. He alsoserved as the TNT board member repre-senting North America at their European-based board meetings. He has served onthe executive of the Canadian GeneralMotors Supplier council as well asExecutive Vice President of the ATA councilof Logistics located in Alexandria, VA.

PETER HALL is Vice-President and DeputyChief Economist at Export DevelopmentCanada. In this capacity, Mr. Hall over-sees economic and political risk analysisat EDC, in addition to managing the cor-porate information centre. Mr. Hall hasbeen in the economic forecasting andanalysis business for 18 years, and fre-quently addresses business audiencesacross Canada on a variety of economicand industrial issues. He holds a

Bachelor's degree in business and eco-nomics from the University of Torontoand a Master's degree in economics fromCarleton University.

RICH MOSKOWITZ is the AmericanTrucking Associations’ (ATA’s) AssistantGeneral Counsel and Regulatory AffairsCounsel. He has practiced environmental,administrative and corporate law for morethan 15 years and is a frequent lecturer onregulatory issues affecting the truckingindustry. Mr. Moskowitz represents thetrucking industry before the EnvironmentalProtection Agency, the Department ofTransportation, Courts and Congress on awide variety of regulatory issues, andpresently specializes in environmental,energy, hazardous materials and otherissues. Prior to joining ATA, Mr.Moskowitz, served as General Counsel toWellesley Group, a solid waste transporta-tion company, and as General Counsel tothe National Solid Wastes ManagementAssociation. Mr. Moskowitz also workedas an attorney at the law firms of Beveridge& Diamond and McKenna & Cuneo inWashington, D.C. Mr. Moskowitz graduat-ed from Brandeis University in 1986 withhonors in economics, and received his lawdegree with honors from George Washing-ton University in 1989.

NICHOLAS SEIERSEN, B.Sc.(Hons.),M.B.A., P.Log, LQ Executive Editor, is aSenior Manager with KPMG, based inToronto, Ontario. He specializes inSupply Chain consulting, with particularattention to Strategic Sourcing andSupply Chain Planning & Operations. Mr.Seiersen is the Canadian Service Line leadfor Operations Cost Management atKPMG. Mr. Seiersen holds a B.Sc. (hons.)in Biochemistry and an M.B.A. inIndustrial Management. He teaches exec-utive development courses at top universi-ties in Europe and North America. He isthe past President of the TorontoRoundtable of the Council of LogisticsManagement, (now CSCMP).

HERBERT W. SHEAR is president andchief executive off icer of Pittsburgh-based GENCO. As the third-generation

member of the family-owned business,Mr. Shear joined the business in 1971.With logistics knowledge and experiencespanning more than 30 years, he hastransformed GENCO from a regionaltrucking and distribution managementcompany into a leading third-partylogistics company that offers full prod-uct life cycle management services. Mr.Shear serves on the advisory boards forSouthern Illinois University College ofBusiness Administration, the Universityof Nevada, Reno Logistics ManagementProgram and Northwestern UniversityTransportation Center. He is an activemember of World Presidents Organiza-tion, CSCMP, Warehousing Educationand Research Council, Reverse LogisticsExecutive Council and the DefenseBusiness Board, a group of industryleaders who advise the U.S. Departmentof Defense on best industry practices.He received hi! s bachelor's degree inFinance from Southern Illinois Universi-ty and has also completed executiveentrepreneurial and leadership pro-grams at Stanford University, CarnegieMellon University and NorthwesternUniversity.

MS. CAROL WEST is the President of theCanadian Society of Customs Brokers(CSCB) and the Secretary of the Interna-tional Federation of Customs BrokersAssociations (IFCBA).

Ms. West's academic backgroundincludes studies for an Honours Bachelorof Arts degree, a Master of Arts Degree inCanadian Studies and a PhD. specializingin public administration and Canadianpolitics. She has taught as a SessionalLecturer with the Department of PoliticalScience at Carleton University in Ottawa.

Ms. West is a founding director and theSecretary of the International Federationof Customs Brokers Association (an inter-national organization with members inmore than 40 countries). She was theIFCBA spokesperson at meetings of theWCO Task Force on Security and Facilita-tion, and participates in the work of theCommission on Customs and TradeRegulations of the International Chamberof Commerce.

Border crossing.When shipping cross-border,go with the expert.

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Analysis

Systems

Transportation Management

Inventory Management

Visibilty

Lakeside Logistics has 20 years of experience getting customershipments across the US/Canada border. We know thecurrent complexities that are involved. In fact, cross-borderlogistics is our core business.

Our point-to-point shipping gets the job done efficiently withno re-handling of your goods between pickup and delivery.This saves you time, claims and money.

With over 250,000 trucks across North America, Lakeside isready to handle your transportation and logistics needs fromeither side of the border. And with 24/7 coverage, we keepyour supply chain moving.

You can make production and distribution decisions withconfidence using our web-based support services. Lakesidecontinuously updates records of all carrier and shippingdata for each customer. This gives you a clear line of sightto all your shipping and inventory information - anytimeyou need it. And our data retention can help you with yourSOX compliance.

Lakeside Logistics is a multi-service 3PL – a single point ofcontact for planning, transportation management, inventorymanagement, warehousing and monitoring throughout thesupply chain.

It’s worth a call to find out how we can help you.

LogisticsQuarterly.com10 LQ™ October 2006

ARE CUSTOMERS BETTER OFF with verylarge acquisitive global 3PLs? Does cus-tomer service suffer when a very largeacquisition like DHL’s purchase ofExel has to be split into over 900separate projects? The two standalone companies were so large thatit will take years before they arereally one company.

Similarly, Deutsche Bahn, theGerman railroad, not only has thechallenge of integrating BAX andSchenker but has some political prob-lems in Germany. Some German legisla-tors are questioning why German taxpay-ers who own a big piece of Deutsche Bahnneed to support Deutsche Bahn’s global expansion.

In other cases, customers have been treated to less thansatisfactory acquisition results. UPS Supply Chain Solutionshas had major problems integrating Menlo Forwarding.Then there is TNT Logistics’ lukewarm offering to the 3PLmarket.

It seems that every big deal has generated a host of prob-lems, disrupting some customer relationships and loweringprofits for the new companies. Turnover of key personneland procedures because of purchases are a regular com-plaint. Our analysis indicates that the net income margin* isonly 4.1% for 3PLs with net revenues greater than one billiondollars. If we take Expeditors and Caterpillar Logistics out ofthe group, the margin drops to 2.5%. Expeditors andCaterpillar have primarily grown organically rather thanthrough purchases.

The strongest group financially among 3PLs includes thosewith net revenues between $500-1000 million.The net income

margin for this group is 8.2%. C.H. Robinson,Kuehne + Nagel, J.B. Hunt Dedicated and

Werner are in this group. In general,com-panies in this group have size of scaleand advantages over many smallercompetitors while not being so largethat they are unwieldy, procedurallyrigid or in danger of losing touchwith customers.

The feedback we get from cus-tomers indicates more “A”performanc-

es from these midsized 3PLs.Aside from the disruptions caused by

major acquisitions, the North American3PL market continues to grow. Transportation

capacity shortages have been a diminishingproblem as 3PL gross revenues grew to $104 billion for

2005. They are expected to expand by 9-10% for 2006.There are positive signs for each segment. Transportation

management continued to be more profitable than the asset-based segments. At the same time, dedicated contract car-riage has expanded the last three years in response to marketdemands for assured capacity. For value-added warehous-ing/distribution (VAWD), the net income margin hasincreased to 4%.

Much of VAWD in North America has moved to a new level.We are regularly visiting large,radio frequency monitored andWMS labor assisted operations. Inventory controls are good –shrinkages are minimal, labor productivity is high. In ourstudy of U.S./Canadian warehousing, we found that the aver-age contract warehouse is 250,000 square feet. Contractsaverage $4.4 million per year – operating margins run 13.5%.Pricing is consistently divided into fixed cost components forbuilding and related non-variable items. Labor and other vari-

*Net income/net revenues; Armstrong & Associates, Inc., “Is Bigger Better? Third-Party Logistics Financial and Acquisition Results for 2005.”

THE TOP 303PLs 2006

By Richard Armstrong

This preface to LQ’s Top 30 North American 3PLs ranking provides an insightful perspective on trends in this cross-border segment of the industry, and identifies potential advantages and pitfalls logisticians should be mindful of.

11LQ™ October 2006LogisticsQuarterly.comLogisticsQuarterly.com

able items are priced on a unit basis. For example,per-carton prices have become fairly common.

This pricing change is occurring at the expense ofopen-book cost-plus agreements. An advantage forthe 3PL is that closed-book arrangements tend to bemore profitable. These arrangements,by their nature,provide greater incentive to 3PLs. This incentive oftentranslates into better quality operations. Menlo, UTiand Kuehne & Nagel are examples of VAWD who con-tinue to improve processes across their operations.Menlo now has over one half of its customers inmulti-client warehouses. It shifts personnel to newtasks every two hours as demands change. Muchmore efficient utilization of personnel and systemsare standards of modern warehousing.

The same applies for automotive 3PLs like Ryder,Penske,TNT and Linc. Sequencing centers run in sup-port of operations are tightly controlled in coopera-tion with inbound transportation management.Exact JIT delivery of the right product to the rightplace at the right time is now routine in this VAWDbusiness.

An important change is also taking place in dedi-cated contract carriage (DCC). Greatwide’s emer-gence from the shadows shows a DCC with 3,300 trac-tors provided by owner-operators. J.B. Hunt also hasseveral hundred owner-operators in DCC. CardinalLogistics has extensive owner-operator operations forHome Depot stores. Most potential customers are notconcerned whether DCC drivers are employees orowner-operators as long as they perform. A list of theTop 20 DCCs is provided.

In this article, we tend to emphasize cross-border3PLs with significant Canadian operations and welimit ourselves to 30 companies. We do not want tooverlook a couple of important items that were out-side our top 30. Those items were two importantacquisitions involving companies that are likely tohave significant future impact:

Firstly, PWC Logistics, based in Kuwait, boughtGeoLogistics. PWC has grown rapidly during the Iraqwar. It continues to do well with the U.S. DefenseDepartment. GeoLogistics is a well known freight for-warder, which has needed a financial savior for overa decade. The integration has gone well andPWC/GeoLogistics has the momentum and financialresources to become a major player.

Similarly,Ozburn-Hessey Logistics,a regional ware-housing company three years ago, has acquiredBarthco, a medium-sized Philadelphia based freightforwarder, and Turbo Logistics, a Georgia basedfreight broker. In addition, it picked up Freightek, abrokerage-forwarder software company. These pur-chases will put Ozburn-Hessey above $450 million innet revenues for 2006. Scott McWilliams, ChiefExecutive Officer of Ozburn-Hessey,and his team willnow have all of the pieces for global SCM. So far theyhave been able to integrate and move quickly. Let’ssee how they handle this new challenge.

Net Income Margins by 3PL Size ($ million)

Top DCCs

*Schneider has 5000 additional tractors which supply dedicated capacity.

1 J.B. Hunt Dedicated Contract Services 50512 Ryder System 38513 Werner Enterprises 35004 Greatwide 33005 Penske Logistics 30976 Ruan Transportation Management Systems 27647 Schneider National* 25008 DHL Exel Contract Logistics 20219 Cardinal Logistics 1811

10 Meridian IQ 160611 U.S. Xpress 160012 Logistics Insight Corp. 110013 UPS Supply Chain Solutions 94014 TNT Logistics North America 86415 NFI Industries 85016 Crete Carrier 78117 Averitt Express 73418 England Logistics 62519 Scully NationaLease 60020 Salem NationaLease 550

Turnover Net(Gross Net Net Income

Revenue) Revenue Revenue (Profit)3PL Segment $ Billions $ Billions Growth Margin

Domestic Transportation Management 30.3 4.8 18.3% 12.1%International Transportation Management 38.2 14.0 13.6% 6.3%Dedicated Contract Carriage 9.9 9.9 10.2% 4.6%Value-Added Warehouse/Distribution 22.3 18.6 9.5% 4.0%Contract Logistics Software 3.0Total 103.7 47.3 11.7% 5.6%

Revenues and Profitability by 3PL Segment - 2005


UPS Supply Chain Solutions – Atlanta, GA – NYSE: UPS (United Parcel Service)800-742-5727Bob Stoffel, Presidentwww.ups-scs.com

$7.7b Parent $42.5

Service to 99% of World GDP; NA locations: 239 U.S., 58 Canada, 11 Mexico

25,000 employees1,238 warehouses900 tractors, 2,450 trailers

ExcellentTMS – i2WMS – operates all major systems

Air and ocean freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply chain consulting, dedicated contract carriage, trade finance and insurance, equipmentleasing, mail services

Computers and electronics, telecommunications, healthcare, automotive, retail, consumer goodsKey Customers: Alcatel, Adidas, Cisco, Daimler/Chrysler, Fabricut, General Motors, Honeywell, Hitachi,Kingsdown, Nikon

UPS SCS grew 11% in 2005. It has become the most well known U.S. 3PL brand name. Revenues for contract warehousing were $1.2 billion in 2005. Freight forwarding net revenues were $3.3 billion. EBITmargin was 3%. UPS SCS’ EBITA target is 8%, but it may take two to three more years. In the mean time,it contributes $1 billion per year in package business to its big brother. UPS handles 660,000 TEUs peryear as a freight forwarder. UPS Capital Freight and Consulting continue to be important contributors.

3PL Turnover:

Service Area:

3PL Assets:

Information Systems:

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C.H. Robinson Worldwide – Eden Prairie, MN – NASDAQ: CHRW952-937-8500John Wiehoff, CEOwww.chrobinson.com

$5.7b

North America, Europe, Brazil; NA locations: 126 U.S., 33 Canada, 15 Mexico

5,776 employees100 warehouses and crossdock affiliates

Very goodTMS – Express, COSMOSWMS – High Jump

Freight brokerage, air and ocean freight forwarding, transportation management, warehousing, print logistics

Technology, food and beverage, retail, paper products and printed materials, agriculture, consumer goodsKey Customers: Anheuser-Busch, AOL, Ball Foster Glass, Best Buy, Clorox, Dana Corp, International Paper,Wal-Mart

C.H. Robinson continues to be the most profitable 3PL. John Wiehoff and his cohort of young execs continue to refine the excellent business model put in place by the founders. While most of Robinson’srevenues are transportation management related, it has solid services including domestic intermodal,international ocean, food sourcing, truck fueling and supply chain management. Employees are highlyincented to take care of customers. European and Asian operations continue to grow. C.H. Robinson hasmade careful purchases of companies with specializations and has the free cash flow to make more.

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LogisticsQuarterly.com 13LQ™ October 2006

Schenker USA/BAX Global – Freeport, NY516-377-3000Dennis Eittreim, CEOwww.schenkerusa.com

$5b Parent: $30b

Europe, Asia, South America, Africa, North America; N A locations, 150 U.S., 33 Canada, 15 Mexico

12,000 employees80 warehouses

Very goodTMS – SWORD, CAPS, i2, ILSWMS – EXE, HTS, SAP R/3, SoLiNET

Air and ocean freight forwarding, customs brokerage, warehousing and distribution, transportation management

Automotive, computers and electronics, consumer goods, healthcareKey Customers: Apple, BMW, Boeing, DaimlerChrysler, IBM, Intel, Phillips, Procter & Gamble, Subaru

Schenker made a significant move to expand its previously limited U.S. presence by acquiring BAX GlobalLogistics earlier this year. Its parent, Deutsche Bahn AG, continues to need to find significant growth andprofit opportunities outside of “old Europe.” Schenker’s contract logistics and forwarding operations inCanada are good. South American and Mexican operations are respectable. European trucking operationsaccount for half of revenues. Contract logistics is 10% of business and both companies are strong in thisarea. Deutsche Bahn’s rail operations were profitable for 2005. Schenker handled 900,000 TEUs in 2005.BAX adds significant new air freight forwarding with good Asia-pacific and North American operations.

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Expeditors International of Washington – Seattle, WA – NASDAQ: EXPD206-674-3400Peter Rose, CEO & Chairmanwww.expeditors.com

$3.9b

Africa, Asia, Americas, Europe, Middle East; NA Locations: 67 U.S., 8 Canada, 15 Mexico


GoodTMS – ProprietaryWMS - Proprietary

Air freight forwarding, customs brokerage, transportation management, warehousing and distribution,supply chain consulting

Automotive, electronics, retail, chemicals, healthcareKey Customers: Ace Hardware, Cisco, General Motors, Merck, Motorola, Toyota, Trane

Expeditors continued its strong organic growth in 2005. Net revenues reached $1.06 billion and produceda 27.2% gross margin. Net revenues are 38% air freight forwarding, 38% customs brokerage and 24%ocean freight forwarding. U.S. and Asia business account for 70% of revenues. Expeditors is the largestforwarder/NVOCC in the Asia/U.S. lane. It handles 350,000 TEUs per year with a 4:1 imbalance. 210,000TEUs are from China to the U.S. Expeditors’ European operations are primarily in airfreight and constitute 16% of revenues, growing 4% in 2005. Expeditors continues to be one of the best run freightforwarding operations. It has had some recent personnel defections and their impact needs to be watched.

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Schneider Logistics/Dedicated – Green Bay, WI800-525-9358Tom Escott, President-Logisticswww.schneiderlogistics.com

$3.8b Parent: $5.3b

North America, Europe; 36 NA locations

10,650 employees8,750 tractors, 17,450 trailers

Very goodTMS – SUMIT

Transportation management, freight brokerage, supply chain consulting, dedicated contract carriage,freight payment and auditing

Consumer products and retail, automotive, heavy equipment, computers and electronics, food and beverage, chemicals, healthcare, paperKey Customers: Delco Remy Electronics, Dow Chemical, Ford, General Motors, Honeywell, Kimberly-Clark,Miller Brewing, PolyOne, Quaker Oats, Shell Oil, Thomson Multimedia

Schneider Logistics’ major vertical emphasis continues to be in automotive spare parts for U.S.-based auto manufacturers. However, it has significantly expanded its freight brokerage operations. This expansion has improved profitability and revenues which grew 30% last year. Schneider also acquired atransloading/deconsolidation operation and has moved into distribution center operations. Schneider’sdedicated contract carriage operations are large in North America and new emphasis is being placed ontheir expansion. Schneider Logistics’ freight payment services handle $7 billion per year.

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DHL Contract Logistics (Exel) – Westerville, OH614-865-8500Bill Meahl, CEOwww.exel.com

$3.4b Parent: $55.9b

Service to over 99% of World GDP; 300 U.S. locations

19,000 employees352 warehouses1,027 tractors, 3,242 trailers

Very goodTMS – i2, G-LogWMS – HK Systems, Topex, Red Prairie, Manhattan

Air and ocean freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply chain consulting

Electronics, automotive, consumer products, healthcare, industrialKey Customers: Agilent Technologies, Colgate-Palmolive, ExxonMobil, Ford, DaimlerChrysler, Maytag, SunMicrosystems, Unilever, Wal-Mart

DHL’s purchase of Exel puts together a world-class freight forwarder (DHL/Danzas) with the largest contract logistician. DHL should improve Exel’s (MSAS) forwarding operation. Exel gives the world’sbroadest VAWD network. Integrating these large companies will be a major challenge for 1-3 years. Thefinished project should be a major, single-source global supply chain manager but how agile will it be?

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Penske Logistics – Reading, PA800-529-6531Vince Hartnett, Presidentwww.penskelogistics.com

$3.2b Parent: $4.8b

North America, Europe, Brazil


Very goodTMS – LMS, i2, proprietaryWMS – EXE, RT Systems, MARC, proprietary

Dedicated contract carriage, transportation management, supply chain consulting, warehousing and distribution, equipment leasing

Automotive, retail, food, appliances, utilitiesKey Customers: DaimlerChrysler, Delphi Corp, Eaton, Ford, General Electric, General Motors, InternationalTruck and Engine, Mission Foods, Pepsi, Samsung, Steelcase, Whirlpool Corp.

Penske Logistics is a major automotive logistics player. It is Ford’s lead logistics provider and provides significant services for General Motors, DaimlerChrysler and tier-one suppliers. Penske is one of fivemajor automotive 3PLs with over $400 million per year in revenues in this segment. Penske is a master of inbound supply chain management, cross-docking, sequencing, dedicated contract carriage and just-in-time support. Penske continues to expand its activities in other verticals. Mexican and Brazilian operations are particularly strong. European business continues to grow and gain in a much tougher market.

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EGL Eagle Global Logistics – Houston, TX – NASDAQ: EAGL800-888-4949James Crane, Chairman & CEOwww.eaglegl.com

$3.1b

Asia, United States, Europe; NA locations; 80 U.S., 9 Canada, 11 Mexico

10,500 employees87 Warehouses

GoodTMS – proprietaryWMS – proprietary

Air and ocean freight forwarding, transportation management, warehousing and distribution, customs brokerage, expedited, project management

Automotive, aerospace, heavy equipment, retail, trade shows, telecommunications, computers and electronics, pharmaceuticals, printed materials, oil and gas, apparel and entertainment equipment, government and militaryKey Customers: Neiman Marcus, U.S. Military Traffic Management Command, Visteon Corp.

Eagle’s 2005 was a year of major improvement. Its integration with Circle took years but is completed.Net revenues grew 10% and net income margin was 5.8%. Eagle has had major success as a logisticsprovider for U.S. Iraq operations using 40-ton Antonov aircraft. Airfreight forwarding is 66% of businessand customs brokerage is 20%. Europe continues to be a challenge.

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UTi Worldwide – Rancho Dominguez, CA – Nasdaq: UTiW310-604-3311Roger MacFarlane, CEOwww.go2uti.com

$3.1b

Europe, Africa, Asia, North America

16,800 employees856 tractors, 1,334 trailers130 warehouses

GoodTMS – eMpowerWMS – eMpower

Ocean and air freight forwarding, value-added warehousing and distribution, transportation management,customs brokerage, supply chain management

Automotive, building materials, retailing, chemicals, industrial, technology, healthcare, consumer goodsKey Customers: Case New Holland, Dell Computer, Dow Corning, GAP, Home Depot, International Paper,Wal-Mart

UTi net revenues increased 25% last year through acquisitions and strong organic growth. UTI’s VAWDoperations are now 38% of net revenues. UTi’s purchase of Standard Corporation is the most successfulacquisition we have seen. Airfreight forwarding, ocean forwarding and customs are the other major functions. A major success was winning the contract for Wal-Mart’s 8 million square foot distribution center near Houston, Texas. The contract is worth about $75 million per year. UTi is particularly strong inthe British Commonwealth countries. CEO Roger MacFarlane has been masterful at moving UTi forwardrapidly using a tight core of executives. One of his best, Alan Draper, President Asia/Pacific, has retiredand may be hard to replace.

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Kuehne + Nagel Contract Logistics, North America – Naugatuck, CT – SWX: KNIN888-246-8726Dan DeSoto, E.V.P. Managing Directorwww.kn-logistics.com

Americas: $2.6b Parent: $10.7b

Service to over 85% of World GDP; NA locations: 24 U.S., 6 Canada, 6 Mexico


Very goodTMS – Oracle/GC3WMS – MARC, Cielite

Ocean and air freight forwarding, value-added warehousing and distribution, transportation management,customs brokerage, supply chain management

Automotive, retailing, chemicals, technology, telecommunications, healthcareKey Customers: BMW, Nortel, Roche Pharmaceuticals, Sun Microsystems, Wal-Mart, Xerox

Kuehne + Nagel has large ocean freight forwarding operations handling over 1.6 million containers peryear. It is also the fifth largest airfreight forwarder. Contract logistics operations grew 13% in 2005 andare now 31% of net revenues. Americas business for Kuehne + Nagel is 26% of net revenues. U.S. netrevenue was $341 million in 2005 with 52% from freight forwarding. Americas CEO, Altorfer is a hard driving operations man who runs a tight ship.

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Ryder System – Miami, FL – NYSE: R888-887-9337Gregory Swienton, Chairman & CEOwww.ryder.com

$2.2b Parent:: $5.7b

North America; NA Locations: 95 U.S., 35 Canada, 7 Mexico


Very GoodTMS – i2, proprietaryWMS – OPTUM, V3, PkMS

Supply chain consulting, transportation management, warehousing and distribution, dedicated contractcarriage, air and ocean freight forwarding, equipment leasing, returns management, freight payment andauditing.

Automotive, industrial, computers and electronics, food and beverage, building materials, utilities, consumer products and retailKey Customers: Applied Materials, Carrier, Coca Cola, CVS, DaimlerChrysler, John Deere, General Motors,Hewlett Packard, Lucent Technologies, Nestle, USPS, Whirlpool, Xerox

Ryder, one of the most recognizable 3PL brand names, is a big-5 automotive logistics 3PL. It has a new,state-of-the-art logistics optimization center near Lansing, Michigan to serve General Motors’ new styleplants. Ryder is a lead logistics provider for most GM plants, services DaimlerChrysler, Saturn, Toyota andHonda plus a multitude of tier-one suppliers. Ryder runs top notch inbound supply chain management,sequencing centers, just-in-time and dedicated contract carriage. Non-automotive, outbound operations arethrough the Dallas-Ft. Worth TMC, which continues to expand. Vicki O’Meara, president of SCS, will pushthis expansion and margin improvement. O’Meara has a new team of core managers for the challenge.

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Caterpillar Logistics Services – Morton, IL – NYSE: CAT800-240-2126Mary Bell, CEOwww.catlogistics.com

$2.1b Parent:: $36.3b

160 countries

11,680employees105 warehouses

ExcellentTMS – CAT TIS, i2WMS – CLSS, SAP, Facility Logistics, ProAct

Warehousing and distribution, transportation management, logistics consulting

Automotive, industrial, aerospace, manufacturing, technology, consumer goodsKey Customers: BMW, Bombardier, DaimlerChrysler, Delphi, Kodak, Harley-Davidson, Hewlett Packard

Caterpillar Logistics has heavy U.S. and European operations with a growing presence in South Americaand Asia, distributing to more than 160 countries from over 50 facilities. Caterpillar Logistics’ scope reflectsits parent’s global reach and dealer network. Caterpillar Logistics’ business is split equally between NorthAmerica and the rest of the world. It continues to expand its automotive logistics business in Europe andthe U.S. Caterpillar Logistics is a 3PL which has completely integrated warehousing and manufacturingsupply chain software. Visibility in its integrated system CLSS is very good. Demand and supply forecastingand material planning is based on proprietary probability models. Forecasting for low turnover items hascontrolled standard operating procedures. Caterpillar’s transportation department was merged intoCaterpillar Logistics in 2001, bringing its transportation management capability. Caterpillar Logistics focuses on customers with high-value durable goods. Caterpillar Logistics uses a combination of brokersand forwarders for selected customs functions. A major initiative involves automotive logistics for China.

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Hub Group – Downers Grove, IL – NASDAQ: HUBG630-271-3600David Yeager, Vice Chairman & CEOwww.hubgroup.com

$1.5b

North America; 21 U.S. locations

1,200 employees500 tractors, 10,000 trailers

GoodTM – Nulogx

Intermodal transportation/drayage, transportation management, supply chain consulting

Air and ocean freight forwarding, customs brokerage, transportation management, supply chain consultingKey Customers: Big Lots, Home Depot, Invacare, Pfizer, Sears, Target

Hub is a major North American intermodal company. It controls 23-24,000 containers on any given day - 3,400 are owned and 6,600 are rented from BNSF and Norfolk Southern. It has a particularly closerelationship with Union Pacific. Hub has acquired drayage operations (Contrak and Quality Services) thathelp it keep pace with J.B. Hunt and Schneider. About 8% of revenues are from Unyson Logistics, a 3PLand cross-dock specialist. Twenty percent are from its expanding truck brokerage.

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Menlo Worldwide – Redwood City, CA – NYSE: CNF650-378-5200Robert Bianco, Presidentwww.menloworldwide.com

North America: $1.3b Parent: $3.7b

North America, Europe, Asia and Latin America

4,300 employees55 warehouses34 tractors, 165 trailers

ExcellentTMS – TTMS, LMSWMS – WMS (Provia-modified)

Transportation management, warehousing and distribution, forwarder management, global supply chainmanagement, supply chain consulting, inventory management and light assembly/packaging

Automotive, computers and electronics, chemicals, consumer goods, retail, beverageKey Customers: 3M, AO Smith, Dow Chemical, Cisco, DaimlerChrysler, Delphi, Dow Chemical, Electrolux,General Motors

Menlo has been one of the leading U.S.-based 3PLs. It has solid inbound supply chain management, goodautomotive logistics and finished goods distribution. Menlo’s LMS provides good technology and SCMsolutions. Menlo has retooled many operations to a multi-client, lean logistics base. The new manage-ment team works well together. Parent CNF has a set of strong, profitable, less-than-truckload operations.

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Meridian IQ – Overland Park, KS – NASDAQ: YRCW877-285-9126Jim Ritchie, President & CEOwww.meridianiq.com

$1b Parent: $10b

North America, Europe, South America, Asia

2600 employees45 warehouses

TMS – i2, PowerTMSWMS – Provia, Manhattan, PowerTMS

Transportation management, warehouse management, air and ocean forwarding, dedicated contract car-riage, brokerage and technology

Automotive, chemicals, metals, publishing, retailingKey Customers: Albertson’s, Arch Chemicals, Barnes & Noble, Bosch, BP Amoco, Charter Steel, DollarTree, Kennametal, Ryerson-Tull, Scholastic Inc.

Yellow Roadway’s acquisition of USF Corp. added USF Logistics to Meridian IQ and more than doubled itssize. It also added a large retail distribution network with 16 regional centers, a large dedicated contractcarriage operation, the i2 technology platform and solid, big-box value-added distribution. Meridian IQ, which started as a dotcom, has grown quickly to become a leading transportation management andcross-dock 3PL. In addition, it recently purchased a Hong Kong-based 3PL to add to its Asian capabilitiesand has some European presence. The new combination provides solid operations in the major logisticsareas and good IT coverage.

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J.B. Hunt Dedicated Services – Lowell, AR – NASDAQ: JBHT800-643-3622John Roberts III, Presidentwww.jbhunt.com

North America: $844m Parent: $3.1b

North America; NA locations: 300 U.S., 2 Canada, 2 Mexico

5,733 employees20 terminals11,925 tractors, 50,070 trailers

GoodTMS – Proprietary

Dedicated contract carriage, IMC

Food and beverage, retail, building materials, paperKey Customers: Anheuser Busch, Circuit City, Family Dollar, Pacific, Home Depot, Office Depot, PPGIndustries, Target, Wal-Mart, Weyerhaeuser

J.B. Hunt Dedicated Services continues to grow and has spread into integrated transportation management. J.B. Hunt has over 300 dedicated contract carriage customers and is the largest Americanpure dedicated carrier. A significant part of Hunt’s DCC operations involve direct store delivery. Servicesutilize owner-operators for 10% of the driver base. Hunt revenues run $560 per load and most round tripsaverage 300 miles. Van, flatbed and reefer services are provided.

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TNT Logistics North America – Jacksonville, FL – NYSE: TP888-564-4789David Kulik, President & CEOwww.tntlogistics.us


Asia, Europe, Americas; NA locations: 158 U.S., 18 Canada, 4 Mexico

6,738 employees76 warehouses837 tractors, 2,965 trailers

ExcellentTMS – MatrixTM, i2WMS – Red Prairie, Manhattan

Manufacturing support and subassembly, transportation management, supply chain consulting, dedicatedcontract carriage, warehousing and distribution, returns management

Automotive, electronics, rail, consumer goods, industrial, retailingKey Customers: Andersen Corp., BMW, CSX, DaimlerChrysler, Eaton, Ford, General Motors, Home Depot,Honda, Michelin, NACCO Materials Handling Group, Otis Elevator, USSCO

TNT is the world’s largest automotive 3PL. It is expanding in other sectors and spreading geographically,primarily with existing customers. As of this writing, TNT Logistics is for sale on a global basis. Finalnegotiations for the purchase should be completed by the end of the third quarter. North American operations have been consistently profitable. TNT Logistics operates in 28 countries with 1350 customers.The TNT operations we have visited get top marks. - TNT is very good at value-added support activities.Its Matrix software suite reflects its range of logistics capabilities, including materials management.TNT’s core services include fulfillment centers, high-velocity cross docks, sub-assembly, modularization,dedicated contract transportation, network designs/redesigns.

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Werner Dedicated Services – Omaha, NE – NASDAQ: WERN800-228-2240Marty Nordlund, S.V.P. Specialized Serviceswww.werner.com

North America: $800m Parent: $1.9

United States, Canada, Mexico; NA locations: 12 U.S., 2 Canada, 2 Mexico

3,800 employees12 terminals8,650 tractors25,080 trailers

GoodTMS – Proprietary

Dedicated contract carriage, IMC, brokerage, warehousing, cross-docks

Food and beverage, retail, building materialsKey Customers: Coca-Cola, Dollar General, Family Dollar, Jimmy Dean Foods, Sears, Target, Wal-Mart

Werner is a major dedicated contract carrier and U.S. trucking company. Its financial results are amongthe best in the business year after year. It has 140 dedicated contract carriage accounts. Werner’sarrangements with these accounts include primarily exclusive use of equipment deals with backhauls generated from regular company loads. Werner is using electronic logging in all operations and is a stepahead of its competitors in this regard. Werner has extensive logistics service operations through itsvalue-added services division (VAS). VAS has over $100 million per year in revenue. VAS operationsinclude cross-docks, warehouses, intermodal and brokerage. Werner is a C-TPAT/PIP/FAST participant.Among the 3750 units it has in dedicated service are 600 reefers and 100 flatbeds.

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Landstar Global Logistics – Jacksonville, FL – NASDAQ: LSTR800-862-9256Jim Handoush, Presidentwww.landstargloballogistics.com


North America; NA locations: 80 U.S., 2 Canada


GoodTMS – proprietary (Orbit & Express-Trak)WMS – Provia FourSite, ViaView

Transportation management, brokerage, freight forwarding, warehousing

Automotive, LTL carriers, food and beverages, industrial, consumer goods, technologyKey Customers: Dell, Glazers Wholesale, GlaxoSmithKline, Hewlett-Packard, Max Packaging, Procter &Gamble, Kohler, United Technologies

Landstar is organized around a network of 160 agents. The agents rely on Landstar for i2 and other software technologies, cash flow coverage, IMC and broader geographical services. While Landstar is moreentrepreneurial and decentralized than many of its competitors, it does have a new national sales group.Landstar agents take on accounts with annual transportation costs as low as $2.5-$3 million. In so doing,they provide high quality logistics options for smaller and mid-sized companies. Agents do not haveassigned geographical areas and are free to pursue any account. One specializes in the wine trade –another in automotive and so on. International freight forwarding and warehousing services are expanding.

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Greatwide Logistics Services – Irving, TX972-443-9889Raymond Greer, President & CEOwww.greatwide.com

$714m

North America

2500 employees25 warehouses4511 tractors, 5381 trailers

TMS - ProviaWMS - Provia

Dedicated contract carriage, warehousing and distribution, transportation management, specialized transportation

Food & beverage, building materials, retailingKey Customers: CHEP, Georgia Pacific, Nordstrom, Publix, Super Valu, Wal-Mart

Greatwide is an emerging national 3PL with strong transportation components. Fenway partners owns Greatwide and emphasizes non-asset operations. Greatwide Dedicated, the fourth largest dedicatedcontract carrier in North America, uses owner-operator power. Transportation manager, Greatwide TB,provides the overall glue, blending the trucking operation. Specialized trucking operations include dedicated refrigerated (3300 tractors), flatbed/dropdeck and Panther Expedited.

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Transplace – Plano, TXJun-Sheng Li, Chairman & CEOwww.transplace.com

$650m

North America; NA locations: 4 U.S.


ExcellentTMS – Dense Network EfficiencySM

Transportation management, consulting, temperature controlled

Building materials, food/beverage, healthcare, retailing, technologyKey Customers: AutoZone, Del Monte, JC Penney, Kroger, Office Depot, Tyson Foods, Target, Unisource,Wal-Mart, Weyerhaeuser

Transplace is a leading domestic non-asset based transportation manager. Under its new leadership, ithas moved away from strictly selling its large transportation network planning “DNE” business model andis increasing its people-centric transportation management operations. This has improved its profitability.

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NFI Industries – Cherry Hill, NJ800-280-2922Sidney Brown, CEOwww.nfiindustries.com

$644m


4,000 employees70 warehouses2,000 tractors; 7,200 trailers

ExcellentTMS – proprietary, InnovativeWMS – EXE-Exceed, Accuplus

Transportation management, warehouse management, air freight forwarding, temperature controlled, consulting

Food/beverage, consumer goods, building materials, technology, retailingKey Customers: Anheuser Busch, Colgate-Palmolive, Georgia Pacific, Hasbro, IBM, Lowes, Mead Westvaco,Ocean Spray, Pitney Bowes

NFI is a full-service 3PL with strong operations in California, Texas and the Eastern U.S. NFI has a profitable motor carrier and financial parent. Sid Brown has put together an experienced, qualified teamwith solid experience in value-added warehousing and transportation management.NFI relies on Vineland Construction, an NFI sister company, for new warehouse facilities and NationalDistribution for established locations. NFI has a solid base and should grow quickly over the next 2-3years.

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PBB Global Logistics – Fort Erie, ON905-871-6500Ken Chalmers, President & CEOwww.pbb.com

$577m

North America, China; NA locations: 41 U.S., 45 Canada 1 Mexico


GoodTMS – proprietaryWMS – proprietary

Freight forwarding, NVOCC, IMC, customs brokerage, warehousing, trucking

Retail, chemicals, high-tech, industrialKey Customers: Best Buy, Costco, Dow Chemical, McCain Foods, Office Depot, Procter & Gamble, Sears

PBB has been acquired by Livingston International and will be integrated to Livingston this fall. PBB has good representation in China, IMC operations (Clarke) in North America and expanded customs brokerage. Livingston is the largest U.S./Canada customs broker. The combined operations emphasizeU.S./Canadian trade – the largest trade lane in the world at a time when U.S. security measures havemade border crossings much more complex.

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GENCO – Pittsburgh, PA800-224-3141Herb Shear, CEOwww.genco.com

$514m

NA locations: 94


TMS – NistevoWMS – (D-LOG, R-LOGplus)

Transportation management, warehouse management, manufacturing support, freight forwarding, dedicated contract carriage, customs brokerage,

Building materials, consumer goods, food, healthcare, industrial, retailingKey Customers: Best Buy, Briggs & Stratton, Dell, Heinz, Hershey Foods, Hewlett Packard, Levis, Reebok,Sears, Target, Unilever, Wal-Mart, Whirlpool

GENCO dominates the reverse logistics area, including asset recovery. It also specializes in return centermanagement supported by software specifically designed for the task. Vertical industries percentage mix:automotive (4%), building materials (4%), consumer goods (18%), cosmetics and personal (22%), health-care (5%), retailing (29%), technology (4%), transportation and moving (4%) and all other (10%). In addition, GENCO runs a host of quality value-added distribution operations and has steadily improved itstransportation management.

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Logistics Insight Corporation – Warren, MI800-334-4883Scott Wolfe, CEOwww.4linc.com

$501m

NA locations: 27 U.S., 1 Canada

2530 employees30 warehouses700 tractors, 2050 trailers

TMS – TMW, Appian-Direct RouteWMS – proprietary

Value-added warehouse and manufacturing support

AutomotiveKey Customers: Auto Alliance, DaimlerChrysler, Ford Motor, General Motors, Guardian Automotive,Nissan, Nummi

LINC is a major player in automotive logistics. LINC delivers quality services for GM, DaimlerChrysler,Ford, Nissan, Auto Alliances (a Ford/Mazda partnership) and tier 1 suppliers. LINC’s operating excellenceis demonstrated by its gold award from DaimlerChrysler for its Auburn Hills operation and it’s A+ assessment rating for its seven GM operations. LINC’s service list for major automotive manufacturersinvolves transportation management, dedicated contract carriage, sequencing and subassembly, returncontainers management, kanban, JIT to plants, kitting and export-import. These services are integrated tosupport automotive assembly plants. Some LINC locations delivery 2-3 services; others do the whole list.LINC’s sister company, Central Transport, is a major LTL carrier and Detroit mainstay.

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Ozburn-Hessey Logistics – Brentwood, TN877-401-6400Scott McWilliams CEOwww.ohlogistics.com

$414m

North America; NA locations: 18 U.S.,


ExcellentTMS – Oracle TM, WIS:DOMWMS – Zethcon-Synapse, WIS:DOM, LDS-Accuplus

Transportation management, warehouse management, freight forwarding, temperature controlled, consulting, customs brokerage, duty drawback

Chemicals, food/beverage, retail, consumer goodsKey Customers: BASF, Cargill, Overstock.com, Red Bull, Remington Arms, Starbucks, Sysco

Ozburn-Hessey Logistics has been aggressively expanding its logistics network and capabilities via acquisition. Most recently it acquired freight forwarder Barthco International and non-asset based domestic transportation manager Turbo Logistics. This follows its 2004 acquisition of Lanter and ODC in2003. Once the new operations are integrated, OHL will be a major North American 3PL with internationaltransportation management capabilities to compliment its large North American value-added warehousingand distribution operations. This should make its customers such as Red Bull very happy. The real question is when will they change the name?

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Total Logistics Control – Zeeland, MI800-333-5599Bob Koerner, President & CEOwww.totallogistics.com

$280m Parent $19.9b



ExcellentTMS – Oracle – OTM, Load MasterWMS – SSA Global, FourSite

Transportation management, warehousing management, DCC, temperature controlled, consulting

Food/beverage, retail, automotiveKey Customers: Dean Foods, General Mills, Johnson Controls, Kraft Foods, Meijer Stores

TLC has risen to be a leading 3PL in providing value-added warehousing and transportation managementservices to customers in the food & grocery and retailing industry verticals. It is a specialist in handlingrefrigerated and frozen commodities and has developed solid skills in packaging, contract manufacturing,and procurement value-added services. Its growth has not gone unnoticed and TLC was recently acquiredby SuperValu. The acquisition is providing TLC with significant cross-selling opportunities with SuperValuaffiliated companies and has provided SuperValu with significant supply chain management expertise.

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BNSF Logistics – Springdale, AR – NYSR: BNI877-853-4756Eric Wolfe, V.P. General Managerwww.bnsflogistics.com

159m Parent: $13b

NA locations: 20

188 employees

GoodTMS – i2

Transportation management

Agriculture, building materials, industrial, consumer goods, paper, retailing, food, telecommunicationsKey Customers: Campbell Soup, ConAgra, Dial, Frito-Lay, Heinz, Home Depot, Jefferson Smurfit, LucentTechnologies, Merillat, Office Max, US Borax, Wal-Mart

Rapidly growing BNSF Logistics is on track to generate $270 million in revenue by the end of 2005.Acquisitions make up a large chunk of BNSF’s plan, but organic growth contributes to half of its expansion. Much of BNSF’s organic growth comes from its ability to manage rail in addition to intermodaland truck transportation. This multi-modal competency coupled with value-added services and stronginformation technology provides BNSF Logistics with a competitive advantage, awarding it entry into large accounts with rail and truck transportation needs. Value-added services include: cross-docking,transloading, expedited truck/rail service, pool distribution, and supply chain network analysis and re-design.

3PL Turnover:

Service Area:

3PL Assets:


Services:




A.N. Deringer – St. Albans, VT800-523-4357Wayne Burl, President & CEOwww.anderinger.com

$125m



Very goodWMS – SSA Global; EXE Technologies

Customs brokerage, duty drawback, freight forwarding, NVOCC, meat inspection, warehousing

Apparel, electronics, food, furniture, industrial, retail, paper and wood productsKey Customers: Bombardier, J.D. Irving, Ltd., Rolf C. Hagen

Deringer is a very good Canada/U.S. cross-border 3PL. Customs operations are emphasized and Deringerexcels at them, particularly duty drawback through a wholly owned subsidiary. Deringer’s IT skills matchthose of larger companies. Deringer has expanded its coverage along the border west of the Rockies. Thisorganization is flat, cohesive and has good technical abilities.

3PL Turnover:

Service Area:

3PL Assets:


Services



Kelron Logistics – Mississauga, Ontario905-795-8400Geoffrey Bennett, President & CEOwww.kelron.com

$64.2m

North America; NA locations: 63 Canada; 2 U.S.


TMS - MercutyGateWMS - Proprietary

Transportation management, freight forwarding, warehouse management

Food, retailKey Customers: Ashland, Frito Lay, Inventure Group, Ocean Spray, Office Depot, PBG, Wal-Mart

Kelron started as a freight brokerage and has added 3PL functionality. Kelron does transportation/distribution management throughout Canada for several companies. Major locations are Toronto, Dallas,Vancouver, Chicago and Montreal. Cross-border transportation management is a staple.

3PL Turnover:

Service Area:

3PL Assets:


Services:




27 LQ™ October 2006LogisticsQuarterly.com

AN INCREDIBLY VOLATILE dieselfuel market is undergoing a radicalchange. The United States is in theprocess of transitioning to ultra-low sul-fur diesel (ULSD) fuel, raising fuel sup-ply and pricing concerns throughout thetrucking industry.

The trucking industry depends uponan uninterrupted supply of affordablediesel fuel to move 70 percent of UnitedStates’ goods. Over the past year, dramat-ic increases in crude oil prices, causedin part by geopolitical instability andcoupled with significant domestic refin-ery outages in the wake of several hurri-canes, led to the highest diesel prices inU.S. history and threatened the stabilityof this critical market.

The Environmental Protection Agencymandated that by June 1, 80 percent ofthe on-road diesel fuel refined or import-ed must be ultra low sulfur compliant,which has no more than 15 parts per mil-lion. Retail outlets and centrally fueledfleets must comply with the rules Oct.15.The new standard reduces the amountof sulfur in on-road diesel by 97 percentand is necessary to support the next gen-eration of engines, which will beequipped with advanced emission con-trol equipment. For motor carriers, fewissues are likely to be bigger this year.

The transition to ULSD has been inthe works for more than five years; how-ever, no amount of planning will com-pletely ameliorate the unanticipatedproblems associated with such a majorchange. The greatest challenge present-ed by the transition to ULSD will not beits cost to produce or distribute, butrather the more critical issue of supply.Historically, introducing a new on-road

fuel generates supply and demandimbalances. And the transition to ULSDwill be no different.EPA has said that thechangeover to ULSD initially mightdecrease domestic refining capacity foron-road diesel.

The on-road diesel supply problemmay be exacerbated by the fact thatULSD can easily be contaminated dur-ing transport. As ULSD moves throughthe national network of fuel terminalsand pipelines,which also transport high-sulfur products such as home heating oiland jet fuel, the risk of it picking up sul-fur is substantial. Refinery tests alreadyhave shown that ULSD leaving the refin-ery gate at 7 parts per million mayexceed the 15 ppm regulatory limit bythe time it reaches the destination termi-nal in certain parts of the country.Delivery from terminal to point-of-salepresents an additional opportunity forsulfur contamination. Such contaminat-ed fuel cannot be sold as ULSD.

In light of the challenges associatedwith the distribution of ULSD, there is arisk of temporary localized shortagesand ensuing price spikes. Indeed, truck-ers in Denver already have experiencedtemporary supply shortages, the causesof which might be partially attributed tothe ULSD transition.

Other challenges presented by the

transition include misfueling scenarios,as two grades of diesel fuel will be avail-able until 2010. Refueling a post-2007truck with fuel exceeding 15 ppm sulfurcould reduce fuel economy, damageafter-treatment emission devices, invali-date certain warranty claims and resultin increased air emissions.

Clean air is not free. EPA estimates thatULSD will cost an extra 5 cents a gallonto refine compared with today’s low sul-fur diesel fuel.The cost of ULSD distribu-tion could further increase its price.Another economic concern for thetrucking industry is that ULSD containsless energy than today’s diesel fuel and isexpected to reduce truck fuel economyby about 1 percent.

The American Trucking Association(ATA) remains committed to the intro-duction of the next generation of heavyduty diesel engines and recognizes thecritical role that ULSD plays in ensuringfuture emissions reductions.Technologi-cal changes are necessary to achievethese reductions, but trucking can illafford petroleum supply disruptions.

If trucks are to continue moving thenation’s economy, a steady supply offuel is imperative. ATA has been work-ing with EPA and the petroleum indus-try to discuss the concerns that ourindustry has over the transition toULSD. While everyone is hopeful thatadditional supply disruptions do notmaterialize, it is clear that the transitionto ULSD must occur in an expeditiousmanner so that the inevitable marketdisruptions are behind us by the timethe new generation, cleaner burning2007 diesel engines, roll off the assem-bly line next year.

COMMENTARY

By Richard Moskowitz

The Transition to Ultra-Low Sulfur Diesel In the near future, 80 percent of the on-road diesel fuel refined or imported must be ultra low sulfur (ULSF) compliant. For motor carriers, few issues are likely to be bigger this year. Will this move risk disrupting the steady supply of fuel that is essential to the industry.


WHENEVER I SPEAK publicly and alludeto our company’s phenomenal growthrate, I’m always asked the same ques-tions; “How do you do it? What’s yoursecret?”

My answer is simple. There is nosecret. Just do common things uncom-monly well.

As for how to actually accomplishthis, my answer goes beyond adoptingindustry best practices. To performuncommonly well,an organization mustdevelop a culture of innovation andmethodologies that capitalize onemployee empowerment,team building,adopting an entrepreneurial spirit andbeing a learning organization.

The quest for superior performancebegins with empowering employees withthe ability to make decisions and takeaction.When employees know they havethe obligation to contribute, they believein their ability to influence the compa-ny’s agenda and overall performance.They are inspired to be exceptionallyproductive and consistently proactive.

Empowering employees is the firststep to building a highly functioningteam.The last thing you want is a groupof All-Stars that can’t function as a cohe-sive unit. I know the analogies betweensports and business are a bit tiresomebut nevertheless excellent for illustratingthe effectiveness of a team in competi-tion. A good manager needs to operatelike a coach,pulling together his employ-ees’ best efforts and overcoming theweaknesses of an individual with thestrengths of the team. The power of team-work lies in the ability to get individualsworking towards the same goal, in thesame direction at the same speed.

To build an effective team your com-pany must be committed to hiring, train-

ing, nurturing, managing and retainingexcellent people. Your employees willmake or break your business.

Luckily,when you run a company thatdemands the best of its people word getsout. If you’ve succeeded in creating apositive,nurturing environment you don’thave to go hunting for top candidates.They come to you.Once you have recruit-ed your team, constantly demand andreward peak performance from everyonein the organization and don’t settle forsecond best.At the same time provide asafe environment built on mutual trustand respect. Let your team members

know they can make mistakes withoutfear of the consequences. Develop amodel for measuring and evaluating per-formance that encourages risk takingand rewards a “no fear”attitude.

Taking business risks is often consid-ered the domain of entrepreneurs.Encouraging such behaviour within acorporation may seem counterproduc-tive, but it isn’t. When employees havethe desire and capability to achievegreat things, why impede their develop-ment by eliminating the element of risk?Risk is what fuels innovation.

Willingness to take calculated risks is

COMMENTARY

By Jim Davidson

What’s Your Secret: Accounting for Success?How can your company recruit the brightest and the best, and create a corporate culture of innovation. Too often, taking business risks associated with innovative practices is considered the domain of entrepreneurs. And encouraging such behaviour within a corporation may seem counterproductive, but it isn’t.


the key component in developing anentrepreneurial spirit within a company.Recognize that risk can be expensive,particularly when time, money andhuman resources are in short supply. Italso increases your chances for failure.Yet those who muster the courage tocommit what it takes usually aren’t dis-appointed. Even in failure you can suc-ceed.Failure provides an opportunity tounderstand what went wrong and tolearn something that makes youstronger for the next challenge.Chalk upenough failures and you can eventuallywin big, but only if you learn from yourmistakes.

Which leads me to my final point, thatof being a learning organization.

In a learning organization, employeeshave the desire to learn, the capability tolearn and the opportunity to apply theirlearning for everyone’s benefit. Becom-ing such an organization takes tremen-dous focus and commitment of bothtime and resources. Yet the rewards ofhaving everyone in the company at thetop of their game are enormous.

Learning (to execute plans, solveproblems,attain goals) is extremely grati-fying. Learning enables employees tocontinually expand their capabilities andshape their futures. A learning organiza-tion cultivates the ability to proactivelymeet the challenges of change anduncertainty. What better way is there toensure long term success than to keeplearning from your mistakes? If you arereally smart, you learn from the mistakesof others before making them yourself.

Our company has recently committedtime and resources to becoming a learn-ing organization. We are a work inprogress.What comes of this process is atopic for future discussion. I am certainthat organizational learning has becomea critical component in developing andsustaining competitive advantage.

How your company performs is a mat-ter best evaluated by your customers.How they respond to your products andservices is your best report card. Sincethe bulk of our company’s growth is withexisting customers we consider it a voteof confidence,a testimonial that they likethe way we do business. When our cus-tomers give us more responsibility weknow they trust us. Our job is to keepimproving performance so we never letthem down.

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INNOVATION AND THE SUPPLY CAHIN


CURRENT NEWS FLASHES areperhaps causing us to forgetthat the world economy hasrecently been expanding sig-nificantly.Following two yearsof global rebuilding, growthvaulted to a stellar 5.2 percent pace in 2004 – a 20-yearhigh. From there, global per-formance decelerated, butonly moderately, expandingby 4.5 per cent in 2005, and arepeat is all but certain in2006.

Not a bad run at all, but itgets better. Trade intensity –the share of Canadian (orU.S.) Gross DomesticProduct (GDP) accountedfor by imports and exports –has risen markedly since theearly 1990s, a trend that hascontinued in recent years. Inother words, as fast as GDPgrowth has been, it has beenoutpaced – in fact,doubled –by growth in internationaltrade.

Heady growth like this is hard tokeep up with. A crunch occurred infall 2004, when west coast ports werejammed to capacity, and goods flowwas seriously delayed. All modes oftransport were responsible. Thereweren’t enough ships to go around.Demands on rail capacity was past itslimit,stranding containers on the dock.Clogged road networks prevented thetrucking industry from filling the gap.

Cargo handlers were in short supply insome cases. As containers piled up inports, laden ships idled in harbours, insome cases waiting weeks to offload.

Clearly, a crisis for a just-in-timeworld. Retailers panicked, contemplat-ing empty shelves in the pre-Christmasshopping season.Facing long port line-ups, shipping companies diverted theirwest coast cargoes through thePanama Canal to less busy Gulf and

east coast ports. Los Angeles-Long Beach (LA-LB), thelargest west coast port by awide margin, hired thou-sands of new cargo handlers.Other west coast portsembarked on aggressiveexpansion plans. Americanrailway companies increasedinvestment, committing $8.1billion to new tracks andadditional equipment. Back-orders for rail cars are at theirhighest level since 1979.

The investment is impres-sive, and has helped to staveoff capacity problems – fornow. North American portsare expected to operatesmoothly through the fallrush, and the freight industryhas assured U.S. politiciansthat logjams will not occurthis year. So far, so good.

Doomsayers might addhere that slowing globalgrowth is timely, taking thepressure off capacity limita-

tions. However, the consensus is thatglobal growth will slow,but remain rela-tively robust. Export DevelopmentCanada (EDC) is forecasting growthwill moderate to 4.1 percent – enoughto cause a ripple across world markets –but trade growth will still tip the scalesat twice that pace. In addition, Asianmarkets will be well above average,powered by growth in China and India.

Asian ports are preparing for future

TRANSPORTATION COMMENTARY

By Peter Hall

Heading for Another Capacity Crunch?Will North America’s Pacific ports be ready for more business as China, Korea and Singapore implement aggressive multi-billion-dollar investment plans to increase their container capacity in the near future? American importers have begun to look beyond their borders for solutions, and Canada may stand to gain with its Gateway Strategy plans to increase freight capacity at Canadian ports.


trade growth. China, Korea andSingapore have aggressive multi-billiondollar investment plans that collectivelywill increase container capacity by 3.7million Twenty Foot Equivalent Units(TEU) each year through 2011. Add tothis other regional expansions andIndia’s export aspirations, and the tallycould go well beyond 5-6 million TEUper year.

Will ports on this side of the Pacificbe ready? Granted, Asian containerswon’t all end up on U.S. shores, butgiven current trade flows, largeamounts will. Los Angeles-LongBeach, destination for 80 percent of allU.S. imports from Asia, is criticallyimportant. However, post-2004 capacityhas only increased marginally. Extrahiring has helped, but productivity atthe port is a fraction of the Asian aver-age, even after accounting for trans-shipments. To handle present andfuture flows, it is estimated that the railand highway systems supporting LA-LBrequire an estimated $20-$25 billioninvestment.

At best, this investment will only bepartly met. Significant funds will bediverted in the near term to securityrefits and ongoing maintenance activi-ties. In addition, public funds are likelyto be tight and private investment hasbeen stymied by the recent Dubai PortsWorld debacle.

Can other U.S. ports handle the over-flow? Not likely. Diversion of LA-LB traf-fic has been a successful short-termstop-gap, but has key long-term limita-tions. Size dictates that other west coastports would have to expand radically tohandle LA-LB overflow effectively. Eastcoast and Gulf ports are similarly con-strained, and the Panama Canal, itself achoke-point, won’t be able to handlethe new,larger container ships for about10 years.

American importers have begunlooking outside their borders for solu-tions, and Canada stands to gain.Canada’s Gateway Strategy plans toincrease freight capacity at BritishColumbia’s ports by 5 million TEUthrough 2020, a significant addition towest coast capacity. The plan calls forexpansion of Vancouver, but a key ele-ment is development of Prince Rupert,

a low-maintenance deep-water portwith large capacity potential.Previously a liability, Prince Rupert’ssmall domestic economy is nowviewed as an asset. Free of local con-gestion, the port can whisk freight toU.S. Midwest cities as quickly as fromLA-LB, despite the considerably longerdistance. In addition, Prince Rupert istwo days closer to Asian ports by sea.Expansion is underway – capacity willhit 500,000 TEU by 2007, and could rise

to 2 million TEU in the medium term.Canada clearly has potential as a

Pacific conduit to the U.S. market.However, winning the business is notguaranteed. Mexico already has similarplans for its Pacific coast, although theyappear further from realization. U.S.interests may also thwart cross-borderplans by playing the security card.However, with careful planning andtimely investment, the prospects forCanadian port activity are bright.

Space Logistics focuses on new technology and procedures to enhance the ability of humans and robots to explore our solar system. Last year nine researchers traveled to the Canadian Artic to investigate how a research station on Devon Island could be used to simulate Lunar or Martian base research. Using logistics strategies they looked at interplanetary supply chain issues, automated technologies such as radio frequency identifi cation (RFID) and movement of surface vehicles, people and supplies from base to various exploration sites. The result was the development of an innovative four-step approach to the logistics of space.

The Professional Logistician (P.Log.) certification program develops your ability to create value through innovative thinking, leadership strategies, insight, and team building. The P.Log. designation is a public statement of your competency and integrity in the field of logistics and supply chain management.

The benefits of earning your P.Log. include:

• Create and apply long-term business strategies• Give your company a competitive edge• Develop your leadership abilities • Increase your earning potential• Connect with professional and business leaders in logistics

For more information on the P.Log. Certification Program, visit our Gateway at www.loginstitute.ca or call us at 1-877-363-3005.

Logistics. The driving force of human achievement.

Space Logistics:Travelling to Mars in four easy steps


AS A GLOBAL MANUFACTURER,whose customers expect expeditiousreceipt and delivery of their internation-al goods, you’re very familiar with thenewspaper stories regarding rising tensions in international trade and thecall for enhanced cross-border securitymeasures.With these increased demands,are you aware of how your customs bro-ker can contribute value and help toallay these pressing corporate concerns?

Using a customs broker can helpyour firm minimize the rising cost ofcomplying with Canada-U.S. bordersecurity measures. These measures arecosting the Canadian trucking industryan estimated net $405 million (CDN)annually according to a TransportCanada Cost Impact Study published inMay 2005. Table 1 lists the elements ofthis estimate.

Brokers can help you comply with theCanada Border Services Agency’s Part-ners in Protection (PIP) program, whichwill likely become more closely alignedwith U.S. Customs and Border Protec-tions’ Customs-Trade Partnership againstTerrorism (C-TPAT) initiative in the nearfuture. This alignment means there willbe an even more extensive and rigorousapproach to supply chain security forCanadian traders, customs brokers, for-warders,carriers and shippers.

C-TPAT,and by extension PIP,is a part-nership program that requires importersto take responsibility for the security oftheir supply chain, both within theirown firm and on behalf of their supplychain partners outside of Canada.

Hiring a customs brokerCustoms brokers gather, organize,

and manage the commercial and tradedata required to submit goods forrelease to the Canada Border Services

Agency (CBSA) on behalf of theirclients. As well, they can handle thepayment of appropriate duties andtaxes on your goods to the CBSA.

Customs brokers provide a bevy ofskills and knowledge about tradeprocesses and procedures, includingclassification, valuation, admissibilityrequirements,duty rates and taxes.Theycan help your company avoid AMPSpenalties. The CBSA’s AdministrativeMonetary Penalty System, or AMPS,determines penalties for a wide variety

of non-compliant customs-relatedbehavior. Table 2 summarizes some ofthese non-compliant behaviors.

How do you go about choosing acustoms brokerage business partner?Here is a checklist of questions that canhelp you select the right broker.• Does the customs brokerage have aspecific area of expertise? How doesthis fit with my requirements?• How can we work together on a com-pliance plan to minimize our exposureto administrative monetary penalties,

By Carol West

EXECUTIVE STRATEGIES

Hiring a Customs BrokerCustoms brokers’ knowledge can save your company time, reduce costs, and heighten customer satisfaction. Here are a some tips on how to select the brightest for your business.


clarify our roles and responsibilities,and benefit from trade security andfacilitation programs?• How can you help me to comply withthe CBSA requirements for advanceelectronic data communication?• How do U.S. trade security programssuch as the Customs Trade PartnershipAgainst Terrorism (C-TPAT) affect mybusiness?• Can the customs broker provide mewith a regular report detailing myimport and export history?Is the broker a member of the CanadianSociety of Customs Brokers? Do theysubscribe to the CSCB e-mail service thatprovides daily up-to-date operationaland policy information from CBSA andother international trade resources?• What ongoing training and profession-al development does the broker sup-port?• Do the customs broker employeeshave the CCS (Certified CustomsSpecialist) designation?

It’s important that the broker under-stands your firm’s products and busi-ness. In addition to providing the brokerwith details regarding the goods yourfirm imports and exports, you shouldarm your broker with information toaddress the following questions:– Who manufactures the goods?– Where the goods are

manufactured?– What is the end-use and/or user

of the goods?– What is the value of the goods?The Canadian Society of CustomsBrokers (CSCB) represents Canada'scustoms brokers. CSCB seeks andachieves improvements in Canadiangovernment policies and procedures onbehalf of its members and their clients.It also provides advice and guidance toCanadian and international regulatorson new policy directions. The CSCB’smembership includes the majority ofcustoms brokerage firms in Canada. Acomprehensive list of CSCB’s membersis available at: http://www.cscb.ca.

The CSCB offers the CCS (CertifiedCustoms Specialist) program.Those indi-viduals who successfully complete theyear-long course gain the CCS (CertifiedCustoms Specialist) designation. TheCCS designation is now recognized in

the United States as well as Canada.The American CCS education pro-

gram was introduced at the beginningof 2006, and there are currently morethan 1,550 CCS designates in the UnitedStates. There are now more than 2,300CCS designates in Canada.

An integral element of the CCS desig-nation is ongoing professional develop-ment. Every year, the individual holdingthe designation must undertake agreedtraining and professional development

activities in order to fulfill the require-ments for maintaining the designation.

Members of the CSCB received infor-mation regarding advocacy activitiesand technical and operational updateson a daily basis.

In addition,the CSCB is uniquely posi-tioned to offer a range of professionaldevelopment and training tools, includ-ing a range of courses, such as an“Introduction to Customs”as well as pro-fessional development modules cover-ing Canadian Harmonized System ofTariff Classification, UnderstandingNAFTA, Valuation, Refunds, AMPS andExport Documentation and Regulations.

Why are knowledgeable customsbrokers vital to your business?

Traditionally, importers rely on cus-toms brokers to manage customsclearance. But customs brokers haveother roles to assist with your businessin addition to working with you onsecurity and compliance issues.Customs brokers are in the centre oftrade transactions. They can helpimporters leverage customs informa-tion into a strategic advantage by turn-

ing this data into essential businessintelligence. They can offer a growingrange of specialized services to assistyou in development of new businesslines, exploration of new markets andways to reduce costs.

Your customs broker can also pro-vide invaluable guidance aboutchanges in Customs regulations andprograms that directly affect your busi-ness. For instance, implementation ofAdvance Commercial Information inair mode this year requires significantchanges in the type of data your com-pany provides and how it is transmittedto Customs.

Customs brokers are at centre of the international trade.If your customs broker is a member of the Canadian Society of Customs

Brokers (CSCB), they have benefit of the Society’s longstanding involve-ment in issues concerning trade facilitation and security, as the CSCB actsas the Secretariat for the International Federation of Customs BrokersAssociations (IFCBA). The IFCBA is close to discussions at the WorldCustoms Organization about security and trade facilitation.

In June, 2005 the World Customs Organization introduced the SAFEFramework of Standards program. The Framework is an international initia-tive to secure and facilitate global trade. Based on co-operation betweeninternational customs authorities and international business, theFramework builds a structured platform to facilitate the movement of legit-imate goods, while securing the trade supply chain. Companies meetingthe WCO standards as secure traders are expected to have the advantageof expedited Customs processing and a minimum number of cargo securi-ty inspections,as well as numerous other benefits.

In March,2006 the World Customs Organization convened the first meet-ing of the Private Sector Consultative Group (PSCG). This group, a collec-tion of 30 companies and trade associations, have been chosen by theorganization representing the world’s customs administrations to providethem with advice on implementing the SAFE Framework of Standards.That Framework will form the basis for establishing national customs’ stan-dards for supply chain security around the world, and through the IFCBA,members of the CSCB are represented at the table.


THIS EDITORIAL IS a follow-up to mycomments in the last edition of LQ,which proposed criteria for defining asupply chain management profession-al (SCMP). This framework wasdeveloped based on experiencewithin IBM, interviews with othermajor supply chain operating andmanufacturing organizations,anddiscussions between members ofthe research team. The result is asuggestion that a true SCM profes-sional must demonstrate skills andcapabilities in the following five areas: 1)Functional; 2) Technical; 3) Leadership;4) Global management; and 5) Experi-ence and credibility. Last edition’s com-ments focused on the need for informa-tion technology experience as a criterionfor the supply chain professional. Thisedition focuses on the need for a globalexperience.

In today’s boundary-spanning supplychain environment, a SCM professionalmust also have global planning and oper-ations experience. This experience pro-vides the insight into the global supplychain environment and its challenges.Ideally, professionals will have had oneor two experiences working outside theirhome country or at least extensiveinvolvement in and responsibility forglobal planning and operations.

In the discussions leading up to defin-ing the supply chain professional,one ofthe more controversial topics focused onthe type of global experience requiredfor qualification as a supply chain profes-sional.While all the authors agreed thatsome type of international experienceshould be required, there was not totalconsistency regarding what a true inter-

national experience needed to be.Somebelieved that a true supply chain profes-sional needs to have experienced aninternational assignment including 1-2years internationally.Others believed thatit is not necessary to live in a foreigncountry,but that substantial internationalexperiences would be sufficient.

I was reminded of the internationalexperience discussion recently in review-ing the rankings of various supply chainacademic programs and in discussionswith business executives and academiccolleagues. A Wall Street Journal pro-gram review and the discussions stronglyreiterated the need for supply chain aca-demic programs to require substantialinternational experiences. Like mostNorth American born business facultytoday, I have not had the opportunity toactually live on another continent.However, I have traveled extensivelyinternationally through executive educa-tion, conferences, consulting, andresearch.While this hardly qualifies as liv-ing internationally, this experience hasprovided me with substantial perspective

regarding the importance ofglobal experience for supply

chain professionals.Based onmy travels and discussions, Ibelieve that there are fivespecific experiences that stu-dents and young supply

chain managers need todevelop their international

awareness and skills. Theseinclude: 1) Culture; 2) Politics; 3)

Distance; 4) Documentation; and 5)Economic rationalization. Each is dis-cussed below.

CultureThe first and most basic experience in

my view is to understand the cultural dif-ferences in other regions of the world.These differences include both thenature of demand and the guidelines forbusiness processes. Global operationstypically require much more diversity interms of product variations such as phys-ical and technical characteristics, featurerequirements, and unique market func-tionality. While most North Americanmanagers are now being trained to mini-mize complexity and variation in prod-ucts and services to achieve scaleeconomies, supply chain professionalsmust have the sensitivity to recognizewhen variation is important and be ableto design supply chain processes thatcan deliver it. While many supply chainmanagers can identify and understandthe difference in requirements, it takesthe global experience and sensitivity tobe able to effectively determine theappropriate trade-offs. To effectively makethe trade-offs,it is necessary to have spenttime in the local marketplace and supply

COMMENTARY

By David J. Closs

The Global Experience of the Supply Chain Management Professional One of the more controversial topics in defining a supply chain management professional focuses on the type of global experience required for this discipline. Here’s a perspective on the best ways to develop the global expertise required to qualify as a supply chain professional.

EXPERIEN

CE&

CREDIBIL

ITY

GLOBAL

MANAGEMENTLEA

DERSHIP

TECHNICA

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FUNCTIONAL


chain environment. From a supply chainperspective, it is particularly important tounderstand the relative role of infrastruc-ture, unions, service providers, and localoperating procedures.

PoliticsThe second experience is the need to

understand the political environment.This includes some understandingregarding the governmental processes,and how governmental policies influ-ence supply chain decisions. As I notedin my previous comments regardingglobalization, the regional governmentalpolicies can have a significant impact onsupply chain design but it may not bepermanent as the policy and the envi-ronment may change. For example, theelectronics and pharmaceutical indus-tries have recently (within the last 10years) established significant presencein Ireland due to government taxationpolicies. Similarly, while many peopleassume that the rationale for moving pro-duction to China is to reduce manufac-turing cost, in many cases the more sig-nificant reason is to enable product mar-keting in China. Another example is thefocus that the government of Singaporehas placed on developing an infrastruc-ture that takes advantage of its locationand role as a global supply chain cross-dock. While these government require-ments will not likely change, they my inthe near future,The global supply chainprofessional must be knowledgeableregarding these factors that typicallyoverwhelm specific supply chain consid-erations. This knowledge then needs tobe translated into supply chain designand operating decisions that allow thefirm to take advantage of the globalopportunities while minimizing supplychain risk and cost.

DistanceThe third experience concerns the

impact of distance,particularly over thewater. Supply chain experience, particu-larly in developed countries, results inlimited view regarding the impact of rel-ative distance and transportation varia-tion. This is particularly true, but notexclusively, when the movementinvolves water transportation. In itself,most water movements result in 2-4week transit times. The time is furtherextended with the addition of substan-

tial variation when the delays related toconsolidation, shipping schedule, portcongestion, labor incidents, and weath-er are included. It is not uncommon forthese delays to increase the total transittime by up to fifty percent with morethan a corresponding increase in transittime variance.

While extended water transit time isthe obvious distance factor supply chainprofessionals need to consider, the moresubtle factor is the impact of infrastruc-ture and congestion on motor and railtransport. It is more subtle because infra-structure and congestion can significant-ly increase transit time and variation inwhat we traditionally think of as devel-oped countries.The impact of these char-acteristics has become evident to me inmultiple visits to Ireland and Brazil where100 km does not mean a transit time of 1-2 hours.The lack of limited access high-ways and the significant congestion, par-ticularly near metropolitan areas, typical-ly result in transit and delivery times thatare double or triple what might typicallybe expected.A true supply chain profes-sional understand the magnitude andthe implications of global transactionsand transportation.

DocumentationThe fourth experience concerns the

requirements for documentation. With-out substantial international experi-ence, it is difficult to understand thenumber and breadth of legal and cus-tomary documentation and feesrequired to move goods in a global sup-ply chain. While it is not trivial movingproduct across the border between theCanada and the United States, it is sub-stantially more difficult to transit goodsacross a border when the laws, lan-guage, cultures, and customs are differ-ent. This is further complicated by theneed to comply with the policies of thefirm and the financial reporting require-ments in the “home” country. As anexample, a supply chain professionalmust be able to effectively differentiatebetween a bribe and a “facilitating pay-ment”, which is legal under U.S. law.Although there are substantial efforts toharmonize international documenta-tion and security requirements, the sup-ply chain professional must have abroad understanding regarding thetypes of documents and practices

required (or allowed) and access tospecific sources for relevant countries.

Economic RationalizationThe final experience is the ability to

develop a comprehensive economicrationalization for specific internationaloperations. As firms struggle with supplychain operations using low cost countrysourcing, long distance transport andsecurity uncertainty, increased pipelineinventory, and currency fluctuations,there is increased need to combine theuncertainty and economics into a singleintegrated model. The integrated modelcan then provide insight regarding thecomplex trade-offs the decision needs toconsider. The need for this capability isparticularly evident for firms attemptingto source in low cost countries withoutunderstanding the cost and reliabilityconsiderations of longer and moreuncertain lead times.A related consider-ation is the need to determine the trade-off between the incremental revenuefrom international markets vs. the incre-mental cost of serving them. The majorchallenge in this economic rationaliza-tion is the need to identify the combinedimpact of demand, supply, environmen-tal,and financial uncertainty.

ConclusionWhile the need for the combined

international experience to support pro-fessional status as a supply chain manag-er is not new, the major question con-cerns how to develop the expertise. Canthe depth of expertise required for any-one desiring to be a senior supply chainprofessional be developed through multi-ple trips to international markets or doesit require a temporary internationalassignment? It appears that firms that donot have their headquarters in NorthAmerica believe strongly that the interna-tional experience needs to be in the formof an international assignment. CanNorth American firms maintain theirglobal competitiveness with less interna-tional expertise for our supply chain pro-fessionals?

This commentary builds on previous articles published LQ (Volume 12, Issue 4) InformationTechnology and the Supply Chain ManagementProfessional, and an article co-authored byDavid Closs published in Supply ChainManagement Review (January/February 2006) A Supply Chain Professional.


ADVICE, unlike carrier capacity,seems never to be in short supply.Thecurrent advice for 3PLs is to establishdominance in a particular niche,whether that niche is a geographicregion,a vertical specialty, a service ora product.

Plenty of 3PLs are taking thatadvice. EyeforTransport reports that intoday’s fragmented 3PL marketplace,“… individual players have been focus-ing on their chosen segments to attaincritical niche and segmental leader-ship”.

There is much to be said in favor ofdefining your specialties and stickingwith them. A niche-dominant 3PL canprovide personal attention, accessiblemanagement and up-to-the-minuteexpertise that can’t be beat by the mega-logistics companies.

But if you’re too narrow in definingyour niche, you may be left out in thecold. Client companies will pay for spe-cialized logistics expertise only wherethey need it. They want to reduce, notincrease, the number of outside serviceproviders they use, so as to streamlineand standardize their own operations.When I got started in the logistics indus-try 35 years ago, it was not uncommonfor a business to deal with 300 to 400 car-riers and 30, 40 or even 50 warehouses.Today, it’s rare for even the largest corpo-ration to have that many suppliers.Companies nowadays are open to – infact,they demand – a comprehensive setof supply chain solutions from, and atrue partnership with,a 3PL.

That means that 3PLs need to provide

a complete solution for a particularniche. No niche is an island; it is “a partof the main”. The successful 3PL of the21st century will distinguish itself bybeing not only the best provider of aniche solution, but also by locating thatparticular solution within a broader uni-verse of solutions which it is equally wellequipped to provide.

How can that be accomplished? Myadvice is, first, to identify where you canprovide the greatest sustainable value foryour targeted customer base; next, toidentify the niches you are best suited toserve; and, finally, to offer a completesuite of valued-added services surround-ing your chosen niches,so as to becomea strategic partner to your clients.

When I recommend “a complete suiteof valued-added services”, I do not meanthat a 3PL should attempt to be all thingsto all people.Such a strategy might workfor the very largest third-party providers,but it is not a viable option for the rest ofus.What I mean is that a 3PL that estab-lishes itself as a leading provider of acore service should also provide anarray of closely related services that helpthe client achieve its strategic goals.

Reverse logistics is a case in point.

Suppose you operate a returns centerfor a client. You could simply handlereturns processing, and establish your-self as an efficient hired hand. Or, youcould oversee the entire reverse chan-nel, and establish yourself as a prob-lem-solving,profit-enhancing partner.

If you choose to be the latter, youmust think “outside the box” – outsidethe niche, if you will – and help identi-

fy and solve supply chain problems thatoriginate before, and linger after, yourclient’s goods enter the returns center.Here are five examples of value-addedsolutions that a 3PL can provide within areverse solutions “niche”:

1) Take damage out of the supplychain so as to prevent returns beforethey occur. Consider unsaleables,which cost the consumer-packagedgoods industry $2.6 billion last year.Companies usually focus on returns pro-cessing as the solution.But there is a bet-ter way: uncover the causes ofunsaleables in order to keep them fromhappening.For instance:• A leading soft drink maker, following a3PL’s advice, reconfigured pallets toeliminate a four-inch overhang thatsnagged passing forklifts. Annual sav-ings: $3 million.• A major consumer goods manufacturersaved $300,000 annually,with the help ofa 3PL,by tracing the source of thousandsof crushed boxes to a single shrink-wrapmachine at a West Coast facility.The lasttwo wraps of the pallet were too tight,bowing in the four corner boxes; then,pallets were stacked, resulting in fourcrushed boxes on every pallet.The solu-

COMMENTARY

By Herb Shear

No niche is an island:Do you want to perfect your company’s service offering? In this article, five examples of value-added solutions that a 3PL can provide within a reverse solutions “niche” shed light on how companies can outperform their competitors. Here’s a look at how a niche 3PL can establish itself as a leading provider of a core service.

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tion: a simple adjustment to the shrink-wrap machine.• MeadWestvaco Coated Board, the bigpaperboard supplier, and a 3PL trackedmore than 6,500 frozen food productsfrom the point of manufacture to thesupermarket shelf over a three-monthperiod. The two companies’ award-win-ning study showed that virtually all pack-age damage occurred after the productsreached the supermarket loading dock,and proved that use of a particular typeof folding cartonboard could reducefrozen food unsaleables by 25 percent.

2) Take transportation of returnedgoods off the client’s shoulders. A 3PLwith complete, efficient, timely trans-portation capability relieves clients of anonerous task, freeing them to concen-trate on their own operations.

Here is an example on the inboundside: Sears Holding stores – whichinclude more than 3,000 Sears andKmart locations across the U.S. – handlereturns through a website especiallydeveloped by their 3PL.They simply logon and enter a few bits of data.Pickup isautomatically arranged – that very day, ifthe order is placed before 11 a.m. – andboth a VICS standard bill of lading and apallet label are automatically generated.This process cuts a day or two out of thehistorical pickup time cycle and auto-mates load tendering. On average, thisweb-based system saves 15 to 20 minutesper shipment over hundreds of thou-sands of shipments.

3) Establish the “rules of engage-ment” for adjustable rate policies. The3PL is uniquely situated to mediateclashes between retailer and manufac-turer. It is a damage fact-finder, assessingthe condition of the returned items,theircauses and their rates of return. It setsforth that data as the factual basis fornegotiation of off-invoice allowances.

Such negotiations are traditionallythe source of much acrimony.But I havenever heard of either a retailer or manu-facturer refusing to be accountable forsomething as long as they understand itto be under their legitimate control.When the facts are clear,the talks go bet-ter.Most important, the working relation-ship between maker and seller improvesover the long term – a result that is noless valuable for being intangible.

4) Maximize the value of theclient’s assets. Far too many compa-nies still view returns as trash, to be dis-posed of as quickly and cheaply as pos-sible. A 3PL that thinks beyond theniche shows the client that reverselogistics is a strategic weapon that addsto the bottom line.

Disposition management is an exam-ple. Suppose a company’s products areselling in Maine but not in Florida.Its 3PLshould calculate and offer options:e.g.,itwould be more profitable to transportthe products from one state to the otherthan to sell them at markdown. Otherexamples:• The 3PL can introduce the client toasset recovery channels it might beunder utilizing, such as internet auc-tions or online fixed-price sales.• It can protect the value of a client’sbrand by avoiding channel conflict, sothat returns are not sold within, say,a 20mile radius of a client’s store.• It can factor in the customer’s uniqueneeds at a given moment. For instance,a retailer in an immediate liquiditycrunch might be served best by sellinga truckload of returns to a bulk buyerthat pays fast, though less.

5) Manage the best use of technol-ogy. Will a specific new technologydrive out costs? Will it drive up produc-tivity? The answers were “yes” and “yes”at the massive Sears returns center nearAtlanta, which processes more than3,400 pallets and 800,000 items eachmonth.In a recent pilot program,claimsby salvage dealers plunged by 83 per-cent after Sears’ 3PL replaced barcodeswith RFID tags on outgoing shipments.An independent study by CarnegieMellon University attributed the reduc-tion to two sources; improved efficiencyand the deterrent effect on false claims.RFID deployment has now beenexpanded to all outbound operations atthe Atlanta returns center.

That is an instance of how a 3PL canwiden its niche by serving as an objec-tive,knowledgeable technology adviser.By counseling clients either to make aworthwhile investment or avoid wastingtheir money, a 3PL adds value to theirbottom line.

The preceding five solutions – dam-age avoidance, transportation, adjustable

rate policy, maximizing asset value, andtechnology -- are just some of the waysthat a 3PL could reach out beyond a nar-rowly-defined “returned goods” niche. Abig part of the third-party expert’s job isto innovate, to ask clients,“Do you per-ceive this problem? Have you consid-ered this solution?”

What is more, a 3PL that establishesitself as an expert problem-solver in oneniche enjoys a competitive edge inother niches. Suppose, for instance, a3PL gains the trust of a client by imple-menting an effective damage avoid-ance program; that client surely willlend a respectful ear if the same 3PLproposes to operate a warehouse. Andthere the cycle will begin again, if the3PL goes on to offer a variety of directlogistics solutions that benefit theclient.A customer,after all,does not seesome arbitrary “bright line” drawnbetween different niches. It just wantsits supply chain to run efficiently, and ifone 3PL can make that happen at differ-ent points along the chain,all the better.

Third-party solutions are in demand.The U.S.Department of Commerce seesthe 3PL sector growing at 10-15 percenta year, while a study by Accenture andNortheastern University shows that 370of the 500 largest U.S. manufacturerswork with 3PLs, up from 185 a decadeago.

I attribute that rising demand to twocauses.First,more and more companiesare discovering the competitive advan-tages of a thoughtfully designed, tech-nologically-advanced supply chain.Second, and simultaneously, they arediscovering that they lack the internalexpertise to establish such a supplychain. It’s not their core competency.

No doubt some corporations willchoose to work with giant, soup-to-nutslogistics providers. Others will fill aspecific need with a small, specialized,boutique 3PL. But I believe that clientswill obtain the best value from 3PLsthat fill the in-between space: thosethat offer an array of creative, problem-solving, value-added services, relatedbut not limited to a given niche, that fillthe client’s strategic needs. Indeed, noniche is an island; a 3PL, for its ownand its clients’ sake,must explore widerterritory.

100 Business Park Circle, Suite 202Stoughton, WI 53589 USA(608) 873-8929www.3PLogistics.com

Current Guides and Research� Who’s Who in North American Logistics

and Supply Chain Management

� Who’s Who in International Logistics—Armstrong’s Guide to Global Supply ChainManagement

� An Overview of Warehousing in NorthAmerica—Market Size, Major 3PLs,Benchmarking Prices and Practices

� Is Bigger Better?—Third-Party Logistics Financial and Acquisition Results for 2005

� Trends in Third-Party Logistics ProviderSupply Chain Systems Purchasing,Deployment and Use

Consulting Services� Logistics Outsourcing Needs Analysis

and 3PL/4PL Selection

� 3PL Merger and Acquisition Advisory Services

� Supply Chain Systems/SoftwareEvaluation and Selection

� Transportation Practitioner andExpert Witness Services

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� Extended Information Service (E.I.S.)

Who’s Who in Logistics?Who’s Who in Logistics?In business since 1980, Armstrong & Associates, Inc. has become a recognized

leader in supply chain market research and consulting.

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