2011 has seen a significant rise in UK organisations managing their courier costs more effectively with the help of Expense Reduction Analysts. This is not a surprise with the choice of suppliers increasing over recent years, and each courier offering different levels of service and price.

The following are predictions for 2012, together with how organisations can take advantage now, in streamlining their courier costs without impacting on the quality of service.

1. Domestic and international couriers are experiencing greater demand for Express Delivery options, as a result of organisations placing greater emphasis on ‘just-in-time’ logistics planning, bringing with it additional costs.
2. With fuel prices continuing to increase, UK and International couriers will be looking at strategies to offset this cost. It is predicted that increased charges or innovative surcharges may be introduced early in 2012.
3. With online sales becoming a significant revenue stream for some organisations, it brings with it additional challenges ranging from failed deliveries, the impact on customer service, through to how to deliver to international addresses cost effectively. One expected change is the introduction of time slot deliveries and consolidated international mail solutions.
4. 2012 will begin to see an increase in the amount of couriers developing applications for smart phones. Text alerts are also expected to become more common, all with extra charges the customers will be expected to absorb.
5. Organisations exporting from the UK by air may be required to comply with enhanced security checks, with the possibility of additional security surcharges.

What to do now:

1. Check to see what you are already paying for your Express Delivery packages and whether this is necessary – can these items be sent earlier by a more economical service?
2. Check for fuel surcharges, increased prices and other ‘stealth surcharges’ which begin to make their way onto your invoices – have you noticed any discrepancies? Does your courier have any planned increases in 2012?
3. Have you ‘mystery shopped’ your courier service recently to see what happens with failed deliveries and how this affects your customers? How much of your online ordering is repeat business?
4. Always adopt post dispatch management systems that proactively notify you of potential service issues. Speak to your provider about their solutions.
5. Check with your courier to see if they are introducing any security checks or surcharges in 2012.

Welcome to the Winter 2011 edition of LOGISTICS TEAMtalk, the Newsletter and Digest of the Expense Reduction Analysts’ Logistics Team. As well as our usual selection of topical comment to help keep you informed of some of the underlying factors affecting the cost of moving and storing goods for British Industry, we are pleased to announce our new website:

www.eralogisticsteam.co.uk

Within the site, you will find more comment on the sector, case studies of the Logistics Team’s successes in driving down Client costs, a complete archive of blogs and other articles by the team, and a contact and comments form.

All of the topical articles below are available to be read in full on the website, as well as our monthly market reports on the logistics sector.

Get notifications of new articles and reports by following us on Twitter @eralogistics

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Fuel Consumption is getting worse !

That is one of the most surprising key findings from the Office of National Statistics latest report into the Road Haulage sector in the UK.

The Report also shows that there has been marked growth in goods movement across all sectors, which is rather opposite to general perceptions today. Admittedly, the statistical base is now nearly one year old. Read more at www.eralogisticsteam.co.uk or click here

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Export success is leading to increased costs.

Suddenly the traditional imbalance between imports and exports is changing. This is having a significant impact on exporters costs, just as they are beginning to see volume growth. Kevin Fryer reviews the situation at www.eralogisticsteam.co.uk – click here

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Large warehousing projects have high failure risk.

Fergus Smith has been reviewing the inauspicious track record of warehouse initiatives, and offers some tips on how to reduce the risk exposure when your business has to make changes.

There have been a number of high profile warehouse implementations that have seriuosly impeded the ability of some UK businesses to function. Read more at www.eralogisticsteam.co.uk or click here

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How do carriers plan networks in recessionary times?

Kevin O’Neill explains some of the strategic process of adapting depot networks to reducing volumes and a more competitive marketplace  – read the full story at www.eralogisticsteam.co.uk or  click here

For over 200 years, the term ‘supply chain’ has adequately reflected the nature and resilience of a linear process, from raw material to finished product. However, the supply chain process has evolved and is now a network of interconnected (non-linear) systems.

These changes mean:

• Production to delivery are now de-centralised and reliant on ‘just in time’ principles rather than ‘just in case’
• Relationships have become transactional and have eroded the levels of trust previously experienced.
• The supply chain can now be on a local, regional, national or international scale, without the need for the organisation to invest in large production facilities.

What does this mean for UK Business?

In effect, as the marketplace has evolved, there has become an increasing concern to measure the robustness of the supply chain; if left unchecked this can present a significant risk to your organisation. Examples of this are the Icelandic volcano in 2010 effectively shutting down Europe for two weeks, and the Japanese earthquake which resulted in major manufacturers being closed, the effects of which are still being felt.

Areas for concern:

• Supplier economic sustainability – how financially secure are your suppliers? Have their payment terms changed recently? Have you checked out their credit score?
• What serious disruption plans do you have in place? What would be the cost of disruption within your organisation?
• How well equipped is your supply chain to cope with adverse weather conditions, such as excess snow and flooding? What would be the contingency if an area was hit by adverse weather conditions? Would they be able to source from an alternative supplier without disruption?
• Who will you contact in the event of a supply chain failure? How will you address issues? What are your emergency plans should something happen?

For further advice on supply chain robustness, and to find out how Expense Reduction Analysts can support your business, please contact the logistics team.

Far East & Indian sub-cont westbound (import) rates/space/equipment – Carriers are now announcing winter schedules as demand slackens off towards Christmas and the  Grand Alliance has withdrawn its Loop D sailings until further notice on the Asia to Europe trade. Maersk have introduced a new daily sailing product with late cut-off times at origin ports aimed at improving transportation times at Europe’s main ports of Rotterdam, Bremerhaven and Felixstowe. Whilst this new daily service has slower transit times deliveries can be any day of the week. The service is supported with money-back guarantee of up to US$300 per container depending on the number of days late. This new daily service is being studied to assess the benefits to clients.

Flooding in Bangkok, Thailand has badly affected the Old Port. Clients are advised to deliver their cargo to Laem Chabang until the flood waters recede.

Supply still exceeds demand and this downward pressure is forcing further rate reductions in November that are adding to losses reported by the shipping lines in quarters 3 and 4, 2011.

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Ocean freight rates remain at an all-time low. Whilst there has been an increase in exports of scrap products (metals, plastics and paper) most containers are being returned empty.

UK Terminal Handling charges – generally £120 per container except Maersk and SafMarine (£131), Hanjin and MSC (£125) and K-Line (£122).

Heavyweight Container Surcharges - continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge is applied by all lines but only on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container. NB. This charge is not included in all-inclusive rates.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU) and CSAV ($50 per TEU). This charge is not included in all-inclusive rates.

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices reflecting the continuing high price of diesel.

Airfreight – fuel/security surcharges are expected to continue for the foreseeable future and means that we have reasonable airfreight rate stability. Fuel and security surcharge are:

Hong Kong     HK$8.40 (combined) per Kg

Shanghai       CNY9.20 (combined) per Kg.

Kevin Fryer 11^th November 2011.

See all Logistics Team Blog Posts

Far East & Indian sub-cont westbound (import) rates/space/equipment –

A provisional notice has been issued on a 14-day notice period of the plan to introduce a PSS of $200 to $300 per TEU in expectation of further increases in volumes ahead China closing down for the ‘Golden Week’ (1^st to 7^th October).

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Ocean freight rates remain at an all-time low and equipment re-positioning remains and issue.

UK Terminal Handling charges – generally remain at £120 except Maersk and SafMarine where THC is £131 per container. Hanjin and MSC have increased THC to £125 and K-Line to £122 per container.

Heavyweight Container Surcharges - continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge continues to be applied by all lines on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container only.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU) and CSAV ($50 per TEU).

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices reflecting the contuing high price of diesel.

Airfreight – fuel/security surcharges are expected to continue. Current rates:

Hong Kong     HK$9.20 (combined) per kg reduces to HK$8.40 on 15/9/11.

Shanghai remains at CNY9.20 (combined) per kg.

Kevin Fryer 9^th September 2011.

See all Logistics Team Blogs

Far East & Indian sub-cont westbound (import) rates/space/equipment

Half year losses declared by some carriers are causing concern and some ships have been withdrawn from service. Demand has increased over recent weeks and utilization has returned to more acceptable levels. It does appear as though some lines will apply Peak Season Surcharge from 1st September 2011.

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Ocean freight rates remain at an all-time low and there is a significant volume of empty containers being returned to the Far East.

UK Terminal Handling charges – generally remain at £120 except Maersk and SafMarine where THC is £131 per container and MSC where THC is £125 per container.

Heavyweight Container Surcharges – continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge continues to be applied by all lines on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container only.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU) and CSAV ($50 per TEU).

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

Equipment Inspection Fee – Hapag Lloyd has introduced a surcharge of £6.00 per container as the result of packaging being dumped inside ‘empty’, returned containers. No other carrier has yet applied this surcharge.

Port Congestion – Some carriers have announced this charge from several Far Eastern ports including Qingdao, Haiphong and Chittagong. General advice is that such charges should be pais by suppliers of goods and included in FOB charges.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices. An infrastructure charge of £3.00 per container continues at Southampton.

Airfreight – fuel/security surcharges are expected to continue. Current rates:

Hong Kong  8.80 to 9.20 HK$ (combined) per kg.

Shanghai     9.20 CNY (combined) per kg.

Kevin Fryer 8th August 2011.

See all Logistics Team Blogs – Click Here

Far East & Indian sub-cont westbound (import) rates/space/equipment – It is pleasing to report that carriers have postponed intended rate increases for July 2011. Whilst there are some equipment shortages in China and Malaysian ports slow steaming continues to affect equipment turnaround times. Supply still exceeds demand and thus it is very difficult for carriers to push through rate increases.

Whilst 2010 saw record profits for carriers 2011 to date is witnessing significant losses such that several carriers are considering emergency measures and the removal of vessels. It is clear however that present low rates are not sustainable and it is inevitable that significant increases will have to be made in the near future.

Far East & Indian sub-cont eastbound rates/space/equipment (exports) – Exports rates remain extremely low with many containers being returned to the Far East empty and this adds to carriers losses.

UK Terminal Handling charges – generally remain at £120 except Maersk and SafMarine where THC is £131 per container and MSC where THC is £125 per container.

Heavyweight Container Surcharges – continue for westbound traffic only with each carrier having slightly different weight break points. It should be noted that this surcharge is not part of any ‘all-inclusive’ rate.

North China 20ft Equipment Premium (westbound only) – This charge continues to be applied by all lines on 20ft containers ex Dalian, Qingdao, Tianjin, Xingang, Yantai and Lianyungang at $250 per 20ft container only.

Suez Canal Surcharge – remains at $25 per TEU except Evergreen ($47 per TEU).

Gulf of Aden Emergency Risk Surcharge – this surcharge is now $55 per TEU.

Equipment Inspection Fee – Hapag Lloyd has introduced a surcharge of £6.00 per container as the result of packaging being dumped inside ‘empty’, returned containers. No other carrier has yet applied this surcharge.

UK Landside Charges/Haulage/Fuel/Port Congestion – Fuel Surcharge remains at 25.5% (against a base price of £0.90 ppl) on most published indices.

An infrastructure charge of £3.00 per container continues at Southampton.

Proposed ‘No-show’ fee – over booking and inaccurate booking and lateness in arrival of containers at port are likely to face cancellation fees of around $100 per container. It is not expected that this cancellation charge will introduced until the capacity issue is addressed.

Airfreight – fuel/security surcharges are expected to continue. Current rates:

Hong Kong  8.80 HK$ (combined) per kg.

Shanghai     9.20 CNY (combined) per kg.

Kevin Fryer 16th July 2011.

See all Logistics Team Blogs – Click Here

Warmly welcomed by the FTA, which has been concerned about the length of time to clear incidents on the road network and the resultant cost to the economy, the review sets out the Government’s recommendations and action plan to improve the situation and reduce costs.

The cost impact of such closures is estimated to be in excess of £1 billion per annum. The report states that one closure of a three lane motorway can cost up to £500,000 and that there were approximately 18,000 such incidents last year on the motorway network alone, an average of 50 per day. As well as the high cost, which directly affects profit margins, there is also the general disruption of the supply chain and the environmental effect to be considered.

The report highlights that there are significant differences in the length of time to clear incidents in different parts of the country, managed by 38 separate police forces, indicating that operational practice can have a significant effect on the closure time.

The report has ten recommendations in total. However, before we get too optimistic about the effect of the findings, it should be noted that four of these are for further analysis, of which only two have specified completion dates of the end of this year. Of the other six recommendations covering procedures, best practice models and training, technology and performance monitoring, only one has a specified completion date. There is still debate whether the focus should be on the shorter, more frequent closures or the less frequent longer closures.

The target date for implementation of the recommendations is end 2012, but the report acknowledges that this will need high level oversight and appointment of individuals with responsibility for delivering each recommendation on schedule. With the involvement and co-operation of all the emergency services, the Highways Agency and the Home Office, the bureaucratic complexity is all too obvious. We should also not lose sight of the fact that it is a complex and potentially emotional matter involving the safety of both the public and the emergency services.

So, whilst the report is to be welcomed, there is some way to go before we are likely to see any material effect.

See all Logistics Team Blogs - Click Here

http://www.blmforum.net/en/blm/headline/1237/Neill-saves-Royal-Academy-of-Dance-over-%C2%A31m–Home-rest.htm

I’m sure that every reader of this will be aware that the cost of fuel oil products continues to rise. However, there may be some surprise at the differential rates of increase for various products supplied to the UK marketplace and the underlying reasons for these variations.

The table below shows the 12 month change in prices at the wholesale level for the four most widely supplied products (and based on the commonly supplied specs of product).

The most significant trend is the pace of increase of non-road fuels. This is having a major impact on costs for any businesses that use these fuels for plant, ambient heating, and other industrial processes. Not only are these fuels more affected by the underlying world market increases (because duty rates are a smaller proportion of costs c.f. road fuels), but Gasoil in particular has also been impacted by EC regulation requiring the use of Ultra low-sulphur Gasoil for mobile plant and equipment, and in order to avoid confusion, most UK fuel distributors now supply this specification as their standard Gasoil product. Unfortunately, this product is more expensive than the specification that it has replaced. However, there are still sources available for the older specification, and it continues to be refined for ongoing supply.

Additionally, a range of new blends and specifications are available for boiler fuel applications, where the cost consideration is complicated by differing calorific values. Considering change can be a bit of a minefield, but there are cost-savings available if pursued objectively.

Of concern to fleet operators, particularly of cars and vans, is the growing differential between Diesel and Petrol. The trend in recent years has been very much in favour of diesel fleets, but with Petrol now beginning to look more of a “bargain”, some fleet procurement strategies may need to be reviewed, especially for lower mileage vehicles.

At Expense Reduction Analysts we are always available to review your fuel-oil procurement, including the prices paid, and appropriateness of fuel types and specifications.

See all Logistics Team Blogs