The use of 3PL services by Fortune 500 Manufacturers appears very likely to continue to grow over the next several years, as those companies give a steadily increasing percentage of their logistics operating budgets to 3PL providers. Much of the growth is going to occur outside the United States. Long-term 3PL service users have historically relied upon their existing providers to support their international expansion efforts. But as those manufacturers aggressively move into new geographies such as China, India, or Eastern and Southern Europe they might want to reassess those policies, particularly if their existing providers are new to those markets. Providers who have already established a significant market presence in those geographies may be better positioned to deliver value to clients in a much shorter time frame.

Large 3PL service providers are often pressured by their major accounts to move into new geographies. However, the financial, manpower, and managerial resources necessary to do so on a significant scale are formidable. Further, once committed to foreign markets, many providers find it quite difficult to develop the ‘local business which is necessary to make those ventures financially viable. ‘

Nevertheless, in view of the substantial growth prospects in China, India, and the expanded EU, large 3PL providers should be seriously considering alternative entry strategies for those markets, identifying potential alliance partners and acquisition targets in those geographies, and defining the service packages which might be offered if those markets are entered.

China and India will continue to grow in importance to large American manufacturers as centers for global manufacturing, sourcing, and sales. Similarly, the expansion of the EU provides real market opportunities for many of those companies. To date, the 3PL industry infrastructure in those geographies appears to be adequate. However, at substantially higher levels of volume, the 3PL industry infrastructure, and that of the transportation and warehousing networks of those areas will be challenged. Users and providers would be well advised to focus considerable attention upon contingency planning before such problems arise.

These are some of the findings of a survey conducted during 2004 of large American manufacturers that addressed their use of third party logistics (3PL) services. The survey data show that the percentage of those companies using such services is at a record high level, and that users are giving a steadily increasing percentage of their logistics operating budgets to 3PL service providers. Many 3PL relationships are long-term in nature, and the service providers continue to deliver value to their clients. The movement of large American manufacturers into other geographies for sourcing, manufacturing, and sales has led many of their 3PL service providers to expand into those areas to support those activities. During the next several years, the possible adoption of RFID technology by many of these manufacturers will pose significant challenges to their 3PL providers in attempting to meet the related needs of their clients.

UPS, the world’s biggest shipping carrier, is buying trucking company Overnite (OVNT) for about $1.25 billion in cash as it continues to expand its heavy freight delivery business. Overnite’s shares soared. Under the deal announced Monday, Overnite stockholders will receive $43.25 for each Overnite share, representing a 46% premium to Overnite’s closing price of $29.58 on Friday.

The deal marks UPS’ largest single acquisition ever, and follows the company’s decision last week to spend $24 million to build and equip five regional freight hubs at airports around the country. The new hubs will allow UPS to ship freight weighing more than 150 pounds using more of its own planes. Similarly, the Overnite purchase will allow UPS to deliver heavy freight in its own trucks rather than solely contracting out that service as it has done in the past. UPS will still use some third-party providers, chief financial officer Scott Davis said.

UPS said acquiring Overnite will enable it to offer a variety of “less-than-truckload” and “truckload” freight services in North America. The UPS package delivery network, known for its brown delivery trucks, now handles worldwide air and ground transport of packages weighing up to 150 pounds. Less-than-truckload service combines smaller shipments of heavier freight from several customers in one trailer. Overnite derives 88% of its sales from less-than-truckload jobs, with the rest from truckload.

Shipping heavy freight has been a small percentage of UPS’ overall business, but now the company is seeking to make it a bigger emphasis. Other shippers, like FedEx (FDX), carry freight. UPS believes there is growth opportunity in delivering heavy freight on a time-definite basis.

Spokesman Norm Black said heavy freight is where “we want to be able to offer every option to our customers whatever they need.”

In a conference call with reporters, Davis defended UPS’ purchase price and noted that the company’s decision to buy Overnite rather than one of its competitors followed a lengthy selection process. “UPS is a patient investor and we pay what we think is a fair price,” Davis said. He said the primary factor in choosing Overnite was its network. “We looked at a lot of candidates,” Davis said. “We certainly feel that Overnite is an optimal solution for us.”

Overnite, which serves more than 60,000 customers throughout North America, earned $63.3 million on revenue of $1.65 billion in 2004. UPS said Overnite’s management team will remain in place. Davis said Overnite will be run as an independent business, though UPS will look at joint selling options and certain bundled services.

Overnite is a non-union operation. Roughly 57% of UPS’ 384,000 employees are part of a union. Davis said it will be up to Overnite’s employees whether they want to become union members after the purchase by UPS closes. The deal has been approved by Overnite’s board and is expected to close during the third quarter, pending regulatory clearance and shareholder acceptance.

Previously, UPS’ largest purchase was Fritz Companies, a freight forwarder and logistics business that it bought for $437 million in stock in 2001.

======================

[u]About overnite[/u]

Founded: 1935 (as Overnite Transportation)

Headquarters: Richmond, Va.

Chairman, President and CEO: Leo Suggs

2004 revenue: $1.6 billion

2004 net income: $63.3 million

Description: Provider of less-than-truckload transportation services. Offers regional, inter-regional and long-haul trucking services. Provides direct service to 45,000 cities in the USA, Canada, Puerto Rico, Guam, the U.S. Virgin Islands and Mexico. Two subsidiaries: Overnite Transportation and Motor Cargo Industries.

Source: Overnite

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Supply Chain Management (SCM) is a process-oriented, integrated approach to procuring, producing, and delivering products and services to customers. SCM has a broad scope that includes sub-suppliers, suppliers, internal operations, trade customers, retail customers, and end users. SCM covers the management of material, information, and funds flows. Effective supply chain management enables you to make informed decisions along the entire supply chain, from acquiring raw materials to manufacturing products to distributing finished goods to the consumer.

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Lean supply chain management is a challenge for manufacturers, wholesalers, distributors and retailers. Being lean means removing waste from operations.

Time is the biggest result of waste and drives additional, unnecessary costs and inventory. Managing purchase orders, suppliers and logistics service providers who are thousands of miles away in major different time zones; speaking different languages; with long lead times and transit times; with time required for customs clearance, port delays, homeland security and logistics infrastructure problems; the many different companies that are involved in the an offshore supply chain and financial supply chain involvement put new meaning to supply chain management.

Lean is not just issuing purchase orders to offshore suppliers and telling them quantities, styles, colors, ship dates and what freight forwarder or steamship line to contact to make the shipment. That approach is a series of transactions with little management and control. Instead it is a handoff of tasks to different supply chain participants with no performance metrics. It creates a supply chain that is in expedite mode or does not know what is coming into them and when. That is not lean logistics, and that is not supply chain management.

There is much to become lean to assess and change practices and operations. Some points for importers include:

. Use technology to manage supplier performance and to integrate the movement of information among and between all parties.

? Design a process that is lean and includes all parties and that differentiates among different commodities and products and among different customers.

? Collaborate with key suppliers and logistics providers.

? Link demand and demand planning with replenishment and buying.

? Reduce the number of suppliers and logistics service providers to streamline the supply chain, without sacrificing results.

? Focus on supplier performance; control the supply chain at the international source. The offshore supply chain begins with the purchase order; transportation is a derivative of the purchase order and of supplier performance.

? Understand transport differences and options such as ocean carriers offering different transit times, different sailing schedules, different destination ports and different canals to the your destination.

? Align your financial supply chain with your trade supply chain. These two chains involve different sets of players with differing objectives and practices.

? Use a 4PL or 3PL to manage your offshore supply chain. Work with a supply chain service provider that understands the total supply chain complexity and operation. His interest should be your supply chain, including your suppliers and purchase orders, not just your freight. The firm should use process, technology and people to do this. The people should be located in the same country and locality as your suppliers.

Firms must be committed to lean. Being lean may require a logistics engineering and business process design for importers; it may require using outside supply chain firms. Lean is not a one-time change; it requires ongoing improvements to take out time from the import supply chain and to make it efficient.

This document describes the Sun Java? System RFID Software architecture for enabling the EPCglobal Network. The architecture is specifically designed to address large-scale implementations in enterprises that need to integrate real-time data flowing in from existing business processes and back-end enterprise systems using Radio Frequency Identification (RFID) tags. This architecture is a key component in Sun?s overall EPC efforts, which encompasses software, hardware, services, and best-of-breed partnerships to help create comprehensive solutions for the enterprise.

The European Union wants European ports to be better protected against terrorist attacks. The European Parliament, the Member States and the European Commission agreed on a European Directive laying down in particular that all ports must draw up integrated security plans for vessels, shipping companies and vulnerable facilities such as oil terminals.

The Directive (law) has been introduced under severe pressure from the United States, which has put improving security at its own ports high up on its list of priorities since the terrorist attacks on 11 September 2001. The US has demanded that Europe also take similar measures without delay. The American pressure has resulted in an exceptionally fast procedure in Brussels. The European Parliament, the Member States and the European Commission agreed on the content of the Directive on first reading. Normally it takes at least six months more to pass a legislative proposal.

?We rushed it through in order to avoid having the Americans coming here and inspecting our ports themselves?, says Jeanine Hennis-Plasschaert (Dutch Liberal MEP), the Rapporteur who played a major role in bringing about the compromise.

The Directive is to be signed by the European Transport Ministers in June and will come into effect in January 2007. Until then the ports will have to abide by the security regulations agreed by the International Maritime Organisation, which?unlike the new European Directive?are not legally binding.

It is not clear yet what additional costs the tightening-up of security at ports will entail. The European Commission is preparing a report on the matter which is to be published next year. Hennis-Plasschaert says there need to be clear-cut agreements on who should pay which additional costs, so as to avoid creating an unlevel playing field among the various European ports. ?If Germany contributes but the Dutch government does not, the Dutch ports will be less competitive, as they will have to pass on the extra cost to their customers in full.?

The Directive also stipulates that the European Commission is to monitor the implementation of the security regulations in the Member States. Hennis-Plasschaert: ?This will avoid situations where one port just makes do with an extra lock on a fence, as it were, whereas another one invests a lot of money in additional surveillance and CCTV systems.?

The Port of Rotterdam has already designated a number of facilities, including the Maasvlakte oil terminal, that need special protection against terrorist attacks. It expects to have the full security plan ready by next summer.

? Rotterdams Dagblad

The Port of Rotterdam and operator ECT have reached agreement in principle to construct a new container terminal at Maasvlakte. This ?Delta Barge Feeder Terminal? (DBF) is meant to handle inland and feeder vessels and in a more flexible way. Parallel the maximum capacity of the Delta Terminals expands with 880,000 TEU00 TEU. DFB will have a quay 800 meters long and almost 11 meters deep, with a surface of some 7 hectares. Total investments amount to some ? 145 million, of which a third for quay construction and other basic infrastructure. The new terminal could be in operation in the beginning of 2008.

The concept of DBF was already part of the ?Plan 2000-8? to construct large container terminals at Maasvlakte. Now volumes soar so much that the quays have to be used longer by deep sea vessels, the necessity has developed to construct the terminal, in an adapted form.

DBF brings inland and feeder vessels flexibility and the deep sea vessels more time along the deep sea quay. This results in a gain of capacity for the existing terminals of almost 900,000 TEU.

This rise is effectuated by integrating both the existing and new terminals into the automated system.

The DBF will be built at the eastern ( ?short?) side of the existing Delta peninsula. The ten waiting berths for inland vessels, presently at that sit, will be compensated elsewhere in the vicinity of the terminals.

P&O Nedlloyd has taken its cue from Admiral Horatio Nelson, who remarked that the first duty of any commander is to bring the enemy fleet to battle on terms most advantageous to itself, and then keep it there. Historically, the shipping business has been a terrible destroyer of shareholder wealth. But growing Chinese exports combined with a lack of spare capacity have pushed freight costs to new peaks - and with that, shipping firms’ share prices. So it makes sense that Nedlloyd should draw out a bid from Maersk, given that freight prices are widely expected to fall soon. Equally, it looks odd that Maersk should want to spend E2.3bn on Nedlloyd now.

Strategic positioning rather than numbers may be what Maersk is chasing on the high seas. The two companies are the number one and two shippers on the busy, growing and highly profitable European-Asian routes. Buying Nedlloyd now not only stops an Asian shipping rival from swooping on the Dutch firm - and so clogging up those valuable trade routes with a competitor. The merger, which debt free Maersk can easily afford, would also break-up what is known as the Grand Alliance, a kind of code-sharing arrangement between smaller shipping firms. Swooping now is therefore a defensive move that would leave Maersk the king of the seas for many years yet.

Maersk, which is controlled by charity and family trusts, may feel it can make the sums add-up anyway. Say best- of-class Maersk gets Nedlloyd’s margins up to its own current 10% level by injecting its superior technology and yield management systems. In time, those savings could be worth some E150m a year. Taxed and capitalised that would be tot up to E1bn - enough to cover the 40% premium offered for Nedlloyd’s equity, fill the Dutch firm’s pension deficit, and leave a big chunk of change. That alone is reason enough for Nedlloyd to have sidled up to Maersk. As Nelson said, no captain can do very wrong if he places his ships alongside those of the enemy.

Author: John Paul Rathbone / www.breakingviews.com

A far more immediate threat to the bar code?s warehouse presence comes from one of the fastest-growing technologies in logistics today: voice-based workflow systems. These systems use human-voice instructions to help workers do their job faster and more accurately.

While voice-based systems have helped improve accuracy in warehouse operations, RFID (radio frequency identification) technology, working with voice, may improve it still further.

In the foreseeable future, some sources said, computerized voice-directed systems will probably work in sync with RFID technology, helping to ensure that once a selector or a receiver gets to the right product and selects it in the right quantities, it gets taken to the right area for replenishment or

placed on the right truck for delivery to the right store.

?As RFID/EPC evolves, companies are coming to us and asking if RFID is compatible with voice,? said Larry Sweeney, vice president, product management Vocollect, Pittsburgh.

Vocollect thinks it is, said Sweeney. Like voice, ?RFID itself is handsfree/ eyes-free technology,? he observed. ?So if you can envision a talking tag on a pallet, wouldn?t it be interesting to have a worker walk up to that tag and, using voice, have that tag identify that pallet and tell the worker what to do with it??

Or perhaps, he said, a location could be tagged and, through voice, a worker could get instructions on what to do at that location. ?We see voice as a key enabler of RFID/EPC technology in the distribution world,? said Sweeney.

A far more immediate threat to the bar code?s warehouse presence comes from one of the fastest-growing technologies in logistics today: voice-based workflow systems. These systems use human-voice instructions to help workers do their job faster and more accurately.

In recognition of the increasing importance of globalization and the resulting need for greater, faster and more flexible communications, a framework is required to allow any company to establish itself in no time or make optimum use of their legacy applications and run efficiently with minimal cost input.

This paper presents such a framework called ELPIF for e-logistics processes integration based on Web Services via incorporating

(1) common alliance layer

(2) adaptation layer; and

(3) dynamic data binding mechanism.

This framework can be adopted as a new service delivery model which uses a design pattern and solution templates. The interaction between the e-logistics processes and business process manager that orchestrates e-logistics processes in an e-business solution will be described in this paper. A

transportation planning in the purchase order management process of a B2B solution is used as an example to illustrate the usage of ELPIF by encapsulating United Parcel Service (UPS) on-line

XML Tools as Web Services.