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Are we thinking inside or outside the box? By David Bennett Vice President, Global Logistics Sales, Schneider Logistics International I recently read the book Leadership and Self Deception Getting Out of the Box by the Arbinger Institute. The book was one of the most thought provoking reads I’ve had in many years. After reading the book a few times and applying some of the principals they discuss in terms of dealing with the challenges of managing people and a business, I came to the conclusion that our industry has been stuck “in the box” for many years! The question is, how do we step out of that box and meet the enormous challenges our industry is facing? Inside the box What exactly does “inside the box” mean to the freight movement industry? From an ocean carrier perspective, and as a service provider that operates as an NVO, we may have inadvertently worked ourselves into a “box.” In the third and fourth quarters of 2008, we watched global economic conditions erode at a pace unforeseen in our lifetimes. This has impacted each of us in many ways. Our colleagues on the ocean carriage side of the business have reported staggering losses over the last nine months and we have seen rate levels continue to drop to levels we have not seen since 1990. These low rate levels cannot be sustained for much longer without suffering consequences, and I can assure you that the margins with which the NVOs are operating under are at record lows as well. When capacity exceeds demand the result is obvious, lower rates flow to the markets with the intention of generating more demand. When rates drop and demand also drops, do you believe that lowering the rates further will have the desired impact? I am suggesting this approach of constantly driving rate levels to the floor to generate demand is the “in the box” approach that eventually drives companies out of business. We are seeing this approach across multiple lines of the transportation business and the results are the same; lower revenue, lower margins and in some cases companies simply folding under the pressure. Have we allowed our industry to become a mere commodity without providing our customers value? Outside the box We know the answers to my questions above. Lowering rates to generate demand does not necessarily work under all circumstances, and unless you provide an added value to your customers for your service, you are a mere commodity that can be easily replaced. What would happen if we stepped back and thought about creative solutions that would lower costs while improving the flow of goods through the supply chain? What would happen if we stepped outside the box and instead of driving rates to the floor with our service providers, we worked with them to lower operating costs? Have you ever toured one of the terminals where your cargo discharges and noticed all the empty chassis that are staged throughout that facility? Compare a terminal operating within our region of the world to other terminals in Asia. It’s unlikely you will find an idle chassis at a terminal in China. Ocean carriers operating in North America have a tremendous cost burden associated with supplying the chassis. Several terminals have taken an out of the box approach by establishing a chassis co-op where the cost of maintaining the fleet is spread and shared among the users. The Port of Virginia took a leadership role a few years back and established the first co-op at the Hampton Roads facilities that has been very successful. Others such as the leadership at Georgia Port Authority have followed and are constantly looking for creative solutions to lower operating costs (while improving service levels). The key is finding solutions while lowering operating costs. Throughout the Schneider Enterprise we are constantly seeking ways to think outside the box and improve our service offering to our valued customers. I would encourage colleagues throughout the industry to take a similar approach and thought process. This is especially important for our colleagues on the ocean carrier side of the business, because the concept of simply lowering rates to generate demand is not the solution. Other than lower shipping costs, the only result of this inside the box approach will eventually be fewer service options because you cannot justify staying in business when you are losing hundreds of millions of dollars.	In This Issue Up Front News, Trends & Analysis New Items The Growth Paradox Supply Chain Industries to watch Trade compliance in the workplace Logistics costs dropped in 2008 Overseas trade experts have some tips for you Five things you should know about U.S. trade policy Supply Chain product review Inventory container management Features Gateway at a glance U.S. Northeast Bulk Up Ports & infrastructure Port of Seattle nets new container business Clean trucks at your ports: How to pay for them? Port Product Review Project cargo equipment Commentary Are we thinking inside or outside the box? On the horizon: Wave Energy - A future power source for your port Casualties
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Are we thinking inside or outside the box?