This Week in Logistics News (July 14-18, 2014)

By Adrian Gonzalez

I am going paddleboarding with my wife this afternoon, a rare break from work to enjoy the outdoors with my best friend. I’ve only gone paddleboarding once, on a calm lake in Maine a couple of years ago, and to my great surprise and joy, I didn’t fall off. Something deep in my gut tells me, however, that I should wear my bathing suit today, and keep my phone and wallet in the car. The law of averages always seems to catch up with me.

In this week’s news…

The “new” HighJump Software (after its announced merger with Accellos last week) didn’t waste any time making another move, this time acquiring Atlas Products International, “a United Kingdom-based provider of SaaS-based business-to-business (B2B) EDI integration, secure data transfer, and e-invoicing solutions.” Here are some details from the press release:

Atlas is a market leader in EDI and B2B integration with over 2,200 customers in the UK and Ireland. At the center of Atlas’ product line is Atlas Exchange, a secure document exchange providing a “connect-once, access-all” network, securely linking retailers, manufacturers, suppliers and logistics service providers. Atlas B2B integration tools provide transformation and translation of critical business documents on-premise or in the cloud. Atlas also provides a SaaS-based Supplier Portal that synchronizes the trading network’s product catalogues and streamlines the electronic invoice exchange and settlement between members of the network.

“More companies and solution providers will recognize the importance of B2B connectivity. It’s not new, it’s not sexy, but B2B connectivity is coming out of the shadows and becoming an important factor in creating an end-to-end supply chain solution.” I wrote those words in December 2010, one of my supply chain and logistics predictions for 2011. IBM’s acquisition of Sterling Commerce in 2010 was a big spark, followed by HighJump’s acquisition of TrueCommerce, SAP’s acquisition of Crossgate, and many other deals since. Why does this trend continue? Because as I wrote earlier this year, it’s at the intersection of Software, B2B Connectivity, and Social Networking where companies will find opportunities for supply chain innovation.

Moving on to 3PL news, FedEx was indicted by the Justice Department for shipping packages from illegal online pharmacies despite being warned from U.S. drug enforcement officials. According to a Wall Street Journal article:

In a 15-count indictment filed in San Francisco, federal prosecutors say that beginning in 2004 the company repeatedly ignored warnings from the government it was breaking the law by shipping drugs ordered from online pharmacies that dispensed them to anyone who filled out an online questionnaire. Among the charges included in the indictment are conspiracy to distribute controlled substances, conspiracy to distribute misbranded drugs, distribution of controlled substances and misbranding drugs.

If found guilty, FedEx faces a potential fine of at least $1.6 billion. The company has pleaded not guilty, and issued a statement; here’s an excerpt:

We want to be clear what’s at stake here: the government is suggesting that FedEx assume criminal responsibility for the legality of the contents of the millions of packages that we pick up and deliver every day. We are a transportation company – we are not law enforcement. We have no interest in violating the privacy of our customers. We continue to stand ready and willing to support and assist law enforcement. We cannot, however, do the job of law enforcement ourselves.

This case raises an interesting question, which FedEx brings up in its statement: What responsibility, if any, do transportation companies have in ensuring the legality of what’s inside the boxes it transports? There’s certainly more scrutiny on international and cross-border shipments, especially via ocean and air, due to the various trade security programs implemented after 9/11 (e.g., C-TPAT, Importer Security Filing). But in domestic trucking, there’s arguably less due diligence, especially in the spot market. In short, the outcome of this case could have broad implications for the transportation industry.

UPS, meanwhile, announced that it has developed “a healthcare-compliant network of Field Stocking Locations (FSLs) to reduce delivery time of medical device shipments and enhance inventory visibility.” According to the press release:

In the U.S., 36 healthcare-capable FSL sites will provide medical device manufacturers access to over 80 percent of U.S. hospital beds within four hours. These facilities will operate under the guidance of UPS’s industry-leading quality assurance and compliance program, feature temperature-controlled or monitored environments and offer same-day delivery services.

“Due to an increasingly complex regulatory environment and significant cost pressures, medical device manufacturers are looking to the supply chain to lower costs through inventory reduction and enhanced visibility,” said John Menna, UPS vice president, global healthcare strategy. “Based on our experience in healthcare distribution and utilizing UPS’s industry-leading global FSL network, we have created a tailored inventory management and distribution solution to meet the unique needs of medical device manufacturers.”

This announcement highlights several important trends in the 3PL industry. First, the ongoing push by 3PLs to develop and expand industry-specific solutions. Second, the growing focus on serving industries beyond the usual suspects of Retail, CPG, Food & Beverage, Automotive, and High Tech (for another example, see Transplace’s announcement this week related to the Oil & Gas industry). And third, how inventory management and enhanced supply chain visibility remain critical elements of a 3PL’s value proposition.

Another week, another report highlighting the importance of supply chain risk management and how many companies are falling short. This latest study, sponsored by UPS Capital® Corporation and conducted by the Global Supply Chain Institute at the University of Tennessee, found that “While many supply chain executives are well aware of the risks facing their supply chains and the undesirable consequences, many are still not developing and executing strategies to properly manage identified risks.”

We’re all starting to sound like a broken record here. How many more research studies and reports do companies need to start taking some action on enhancing their supply chain risk management capabilities?!

Finally, an article in yesterday’s Wall Street Journal underscored one of the many issues related to the Highway Trust Fund and our nation’s transportation infrastructure (emphasis mine):

States are allotting a growing share of the funds they raise from gas taxes to debt service and spending unrelated to roads and bridges, making them more reliant on federal assistance to pay for new infrastructure…Texas spends 25% of its fuel-tax revenue on education programs. Kansas has allocated some of its gas-tax revenue to pay for Medicaid and schools. Nationwide, making interest payments on debt used to fund existing infrastructure projects is one of the biggest state expenditures.

As I wrote back in February in Enough Talk: Time to Fix Transportation Infrastructure Funding, raising the federal gas tax (or whatever fundraising system is implemented) is not enough; we also have to change who controls the piggy bank and how investment decisions are made. The practice of taking money from the Highway Trust Fund to pay for other things has to end, and we need a smarter, more transparent process for making investment decisions, with greater involvement from all stakeholders, including the private sector.

And with that, have a happy weekend!

Song of the Week: “Take a Picture” by Filter