September 2006 Newsletter
Five Years After 9/11;
Where Do We Stand As A Nation?
 The month of September marks the 5th anniversary of one of the few
genuine dates in our nation “that will live in infamy.” For the
annihilation of the World Trade Towers in lower Manhattan was far more
than physical destruction of two buildings. It changed the way America
thought, acted, looked at the world and ourselves. Have we advanced in
securing the goals of life, liberty and the pursuit of happiness since
that time?
I wonder. As a recent citizen of the United States, I love this
nation. But I also am well aware that many of the goals set down by
the Founding Fathers are not being met. During the past five years, we
have seen greed on Wall Street and Main Street run amok. A vast
distribution of wealth is taking place with the tiny few in the top
one percent of our citizenry grabbing most of the economic gains while
the middle class, America’s backbone, is going nowhere on the economic
treadmill. Corruption and incompetence continue in response to
disasters like Katrina with almost an entire city remaining prostrate
one year later.
Indifference to the environment when the CEO of Exxon-Mobil and other
corporate executives insist there is no global warming when evidence
to the contrary now is overwhelming. Finally, an erosion of the basic
rights guaranteed in the U.S. Constitution is occurring when an
Administration is insistent on allowing wiretapping without a warrant.
In our own world, there has been nothing but confusion and delays in
assessing and meeting the dangers of terrorism in moving freight by
air. Happily, no terrorist incident has occurred either in the bellies
of passenger aircraft or main decks of cargo planes during the past
five years. But a program where shipments are not delayed, yet full
security is established, still not has been formulated five years
after 9/11. The head of homeland security, Michael Chertoff,
reflecting the Bush Administration’s predilection for viewing the
world through a corporate lens, talks about “risk aversion
investments” and “high returns on investments” in fighting terrorism
as if the actions of worldwide fanatics would be influenced in the
slightest by sales & marketing strategies that are more appropriate to
selling soap. Combating terrorism is not an investment opportunity but
a tough, messy business that will take years of dedicated, consistent
efforts to overcome.
In remembering September 11th, let us recall the qualities that have
made America great; our tolerance, openness, entrepreneurial spirit,
and a determination to transfer to our children and grandchildren a
better nation than we inherited.
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TNT Sells Logistics Unit
 Apparently, one cargo organization agrees with my assessment of
third party logistics providers. TNT, the big Dutch mail and
express group, finally found a buyer to takes its logistics unit
off its hands. A U.S. private company, Apollo Management, has
agreed to purchase TNT Logistics for almost $2 billion. Quite a
hefty sum for a division which generates only about 3 percent
profit on its volume.
TNT believes that by concentrating on its far more profitable
postal and package delivery business, it is following a lot more
money. TNT’s express delivery business is generating more than 10
percent profit while its mail unit has a 21 percent profit ratio.
The decision by TNT was a smart one. Its management did not allow
themselves to be hypnotized by all the hype about 3PLs taking over
the cargo business and got out when the going was good.
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Another Important But Less Remembered Anniversary In September
 This month marks the anniversary of a far less remembered event, but
one which has had an economic effect almost as important as 9/11 did
in our social, cultural and political life. September is the 35th
anniversary of the U.S. going off the gold standard. Three and a half
decades ago, President Nixon announced that the last link between gold
and the dollar would be severed. Prior to Nixon’s announcement,
international monetary authorities like central banks could redeem
their own currencies or dollars for gold at $35 per ounce.
Unfortunately, central banks and other government institutions took
the U.S. promise at its word and expanded the conversion of their
dollars for gold at a prodigious rate. They were emptying Ft. Knox at
a horrific pace.
Fast forward thirty five years later. Agreements that link dollars, or
any other currency, to gold are seen to be, like sexual habits, as
relics from the Victorian Age. Instead of a fixed store of value,
dollars now fluctuate against other currencies. Today, what’s holding
up the U.S. dollar is huge inflows of capital from abroad to cover our
deficits. Since President Nixon’s decision to allow the dollar to
float unconstrained by its anchor to gold, the value of our currency
depends on the attractiveness of U.S. investments. Interestingly, much
of the money now flowing into the U.S. is coming from the City of
London and the Cayman Islands, where many hedge funds are located. The
financial buzz is that the U..S. dollar is being propped up primarily
by hedge funds. How the mighty dollar has fallen; from a currency “as
good as gold” to being at the mercy of some hot hedge fund managers.
"Today, what’s holding up the U.S. dollar is huge inflows of
capital from abroad to cover our deficits."
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What Page Of The Newspaper Do You Read?
 For many years, the New Yorker Magazine featured a column called,
“what page of the newspaper do you read?” The column pointed out
stories in the same issue of the newspaper that had different
facts, points of view and perspective often just a few pages
apart. One of our leading trade magazines in a recent issue, fell
into this trap. It had two stories offering two wildly different
points of view re supply chain “consultants” who are breeding like
rabbits.
One article was the usual boastful, self promotional story on how
consultants supposedly navigate successfully the minefield of
supply chain risks. Of course, almost everyone interviewed in the
article was a supply chain consultant who insisted that his “third
party” approach would provide vitally needed skills to shippers
“who are stretched thin.”
But an article ten pages later in the same issue told a very
different story. The article discussed third party consultants
from the shipper’s perspective and not consultant’s. Shippers,
whose money is on the line, tells it like it is. They say supply
chain management aren’t delivering the goods and often provide
services customers needn’t want nor need. The article further
states that while consultants and their breed gives themselves
high marks for their services, shippers score their providers
pretty low on supposed benefits. A few but potent statistics in
the article show the wide gap between the fantasy of the logistics
providers and the reality of their customers. Among the
consultants, 97 percent claimed they’d delivered synergy benefits
and 83 percent said they’d shown operational cost reductions.
Among customers, however, the figures in answering the same
questions were almost reversed. Some 24 per cent and 28 percent
were the figures. It indicates quite plainly that just about 75
percent of shippers are unhappy with their 3PL consultants.
I always have been convinced that outsourced logistics suppliers
like the famous naked emperor, wear no clothes. After reading
these two articles, I am more convinced than ever before that
shippers could save hundreds of millions of dollars by using their
own experience, common sense and the utilization of the
traditional, knowledgeable and flexible forwarder.
"[Shippers] say supply chain management aren’t delivering
the goods and often provide services customers needn’t want nor
need."
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Ever Compare Texas Hold ‘Em To The Cargo Business?
Every so often when I surf the TV dial, I come across a bunch of
scruffy men and occasionally women, sitting around a felt covered
table and staring at each other through sunglasses although the sun
never shines in these Las Vegas gambling rooms. It’s television poker,
which has become a hot commodity on cable TV.
Watching those guys and girls often bluffing their way to win hundreds
of thousands of dollars reminds me of forwarders, shippers and
airlines negotiating rates and service. There’s more bluffing in our
business than a marathon game of Texas Hold ‘Em.
Occasionally, the airline’s hand is so strong, no matter how poorly
they play their cards, they still win. Shippers and their agents, the
forwarders will accept increases so they can ensure space when demand
is high. More often, however, only the slightest hint of excess
capacity and the carriers will start cutting deals.
Shippers and forwarders are very adept to play airlines off each other
to secure lower rates. Despite a minor trend toward big shipper or
forwarder partnerships and collaboration, price still remains king.
Unfortunately, air cargo has become a commodity and the lowest price
gets the business. Airlines can only blame themselves; poor customer
service puts everyone in the same box. Why pay more for lousy service?
The Wal-Marts, Targets and Cosco's of the world now rely for
profitability almost exclusively on low production costs and cheap
labor in overseas markets. Airlines and forwarders have such
inferiority complexes, they don’t realize they have a trump card.
Without good international transportation service, shippers would have
to go back to buying goods from manufacturers in the U.S. On second
thought, perhaps that’s not such a bad idea for our nation.
"Unfortunately, air cargo has become a commodity and the lowest
price gets the business. Airlines can only blame themselves; poor
customer service puts everyone in the same box. Why pay more for lousy
service?"
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New Freight Forwarder “Goes Back To The Future” In Its Emphasis:
 I usually don’t comment on the formation of a new forwarder as
there are so many in our business—10,000 at last count. The
creation of one new company, however, deserves a closer look
because of the people involved and the approach they are taking in
running day to day operations.
The company is called IJS Global, but it might as well be named
Air Express International II because all its senior executives
come from the old AEI. As we all remember, AEI was sold to
Deutsche Post about seven years ago. Heading the new company is
Hendrik Hartung who was involved in the purchase of Burlington
Northern Air Freight from the railroad some twenty five years ago
and more recently was a principal in the Deutsche Post purchase of
AEI. What makes the company interesting is; these former
executives of a very large forwarding organization now subscribe
to the adage, “small is beautiful.” While making the obligatory
bow to the importance of information technology and the Internet,
their principal selling point is “personal service and more
personal service.” Taking a swipe at big forwarders from which he
came, Hartung pointed out that “one stop shopping (which AEI
emphasized) had problems in that the personalized service the
customer demands gets lost.”
Glad to see that others in our business have seen the light.
Hartung and his crew are relying on personal service and that “old
fashioned” primary instrument of such service, the telephone.
“When for whatever reason a shipment gets delayed, most shippers
like to receive a telephone call to explain what is happening,”
says Hartung. Big forwarders have become so tangled up in their
systems’ red tape and are basically so inefficient, they can’t
follow individual lane segments anymore if errors occur. Ring up
another victory for the smaller, more personalized freight;
forwarder.
"Big forwarders have become so tangled up in their systems’
red tape and are basically so inefficient,
they can’t follow individual lane segments anymore if errors
occur."
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Julian
Keeling
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