SCM in Healthcare

3PLAmericas
THEMAGAZINEOFIWLAINNORTHAMERICADECEMBER2012
Supply Chain
Management in the
Health-Care Sector
A First Look at
the 2013 IWLA
Convention & Expo
w w w.IWL A .com
STORAGE SYSTEMS
Phone: 847-364-2400
Pallet Rack
Push Back Rack
Drive-In Rack
Structural and Roll Formed
Furniture Rack
Pallet Flow Rack
Pick Modules
Mezzanines
Innovative Solutions
for Storage and
Material Handling
Systems
Toll Free: 1-888-566-7826
www.konstant.com
Integrated Systems
Carton & Pallet Flow Rack
Pick Towers
Shelving Systems
Structural & Roll-Formed
Mezzanines
Selective Rack & VNA
Pallet Runner
Double Deep Rack

Push Back Rack
Drive-In Rack
Supply Chain
Solutions
1-866-473-3472
www.redirack.com
Puzzled over
Workstation Productivity
and Efficiency?
Let Dehnco Help You Evaluate and Integrate Workstations,
Supply Storage and Equipment Needs with Your Automation,
Technology and Material Handling Systems . . . AT A PRICE YOU CAN AFFORD
W.
I.
S. E.
Workstation Integration System Evaluation

Dehnco offers a simple 4 step evaluation process that:
Promotes Ergonomics Creates Efficiency Increases Productivity
STEP : 1
STEP : 2
Identifying the
Process
Evaluating Flow
Defined as the
movement of
materials/
products
into and out of
the work area.
Detailing the
Step-by-Step
Sequence of tasks
required to
complete
the specific work
being done in
the area.
NEW
STEP : 3
Integrating the
Supplies and
Equipment
Required to
Complete a
Task into the
work area.
STEP : 4
Integrate the
Work Area Design
with the Process
to Maximize the
Efficiency of the
Operation.
Your Workstation Solution Partner
Product Literature
Storage Ideas
IMPROVED
WORKSTATION
DESIGN
Components
Easier to
Expanded Website
Assemble
Products
New Color
Pallet
SCAN TO SEE
NEW COMPONENTS
Contact Us:
Call: 8473821579
www.dehnco.com
Let
Us HEL
P
SPACE
STORAG You Define and Res
olve These Iss
E HAN
ue s
DLING / D
300 Lageschulte St
ESIGN ERG
ONOMICS WORKFLOW SPACE
P.O. Box 866
Barrington, IL 60010
Ph: 8473821579 Fax: 8473821615
Regionally Based;
Globally Capable.
Sonwil, your strategic partner providing
solutions to protect your economic future.
Take Advantage of the Power of Four.
Sonwil offers four highly focused, independently managed operations collaborating
with you to tap your economic strengths locally, regionally and globally.
Logistics to power your distribution
Warehousing and Distribution; Cold and Ambient, Food Grade, Rail Served,
FTZ Certified supported by a dynamic Technology Driven WMS
Value Added Services; Cross Dock, Pick and Pack, Re-Casing / Re-Packing and Display Builds
Returns Processing and Refurbishment: Sorting, Inspecting, Re-Manufacturing,
Parts Distribution all driven by Scalable Technology Solutions
Technology to increase your competitive edge
RF Inventory Management Technology

Real Time Tracking, Traceability and Transparency for optimal
inventory management and quality control
Resident IT Resources to address your current and changing Supply Chain needs
Transportation services to move your goods
Asset Based Shuttle Services; heavy permitted equipment to reduce your transportation
costs and your carbon footprint
Refrigerated and Ambient Load capabilities

Local, Regional and International Brokerage Services
Commercial Space to grow your business
Clean Modern flex space build to suit

Superior amenities from free / well lit on - site parking to close proximity main thoroughfares
Immediate access to; local, regional, national and international transportation routes
NYS Thruway, Buffalo-Niagara International Airport and US /Canada crossings
A Total Solution
for getting it from
here to there
TRACKING
The most sophisticated technology at your fingertips to get

precise tracking information of
your goods.
TRACEABILITY
We use the latest software

providing a global, multi-carrier
shipping solution. Scalable from
a single location to a global
enterprise solution, its
accessible online for tracing
and confirming delivery.
TRANSPARENCY
Get the peace of mind of being

able to virtually see the shipping
process from start to finish.
No surprises.
Move your fixed expenses to variable by selecting just the services you need when
you need them, reducing your costs and significantly improving your bottom line.
Were in the center of it all.

A Responsive Strategic Partner, Working with You.
Contact Dave Harper: 716.206.1842 dharper@sonwil.com
www.sonwil.com
PUBLISHED FOR:
International Warehouse Logistics
Association
Joel Anderson, president & CEO
2800 River Road, Suite 260
Des Plaines, IL 60018 USA
Tel: (847) 813-4699
Email: janderson@IWLA.com
Managing editor
John Levi, IWLA Canada
3PLAmericas
T H EM AG A Z I N EO FI W L AI NN O R T H A M E R I CAD E C E M B E R2 012
6 The Success of Your Company Starts at the Core:

YourPeople
By Joel D. Anderson
Copyright 2012, International

Warehouse Logistics Association
(IWLA). All rights reserved. No part
of this publication may be reproduced
by any mechanical, photographic or
electronic process, nor may it be stored
in a retrieval system, transmitted
or otherwise copied (except that
members of IWLA may copy all or
part of this publication exclusively for
personal use or use in the operation
of that members business, but
excluding any publication) without
prior written permission from IWLA.
Forpermission, contact the publisher,
J.M. Levi & Associates Ltd.
7 IWLA: Your Resource inChanging Times
Consulting editor
David Long
21 Grow Your Own Way In Orlando
Associate editors
Kim Biggar, David Sparkman
Editorial coordinator
Marian McGuire
IWLA liaison
Camille Golden
Sales representative
Cheryl Ezinicki
Design and layout
Pagecraft Computer Services
Publisher
J.M. Levi & Associates Ltd.
PO Box 30039
RPO New Westminster
Thornhill, ON, Canada L4J 0C6
Tel: (877) 305-6587
Fax: (905) 756-1115
Email: jlevi@primus.ca
Canada Post
Agreement Number: 42128520
3PL Americas
A First Look at
the 2013 IWLA
Convention & Expo
w w w.IWL A .com
9 Accuristix: Thriving in the Highly Regulated

HealthCare Sector
By Kim Biggar
12 Pain in the (Supply) Chain Survey:
Caution Remains in Health-Care Industry
By UPS Communications
17 Provincial Health-Care Supply Chain Creates

BenefitsBeyond Savings
By Jim Eckler and Jennifer Simpson
An interview with Paul Verst
23 Realizing the Economic Potential of Logistics Clusters

By Yossi Sheffi
25 Maximizing Productivity in E-commerce 3PLs

By Jeffrey B. Graves
26 IWLA Events Calendar

28 Five Things Supply ChainProfessionals Needto Know
By Paul Dittmann
30 Transportation in the Litigation Limelight

By Marc Blubaugh and Ann Christopher
32 Financial Benchmarking: How It Works and WhyDo It?

By Ken Ackerman and Arthur Barrett
33 Advertiser Index
34 Radical Times Call for Visionary Leadership
By Chip Scholz
THE MAGAZINE OF IWLA IN NORTH AMERICA DECEMBER 2012
Supply Chain
Management in the
Health-Care Sector
By Arthur Barrett
Cover photo:
iStockPhoto.com
36 Editorial Calendar
Presidents message
The Success of Your

Company Starts at the
Core: Your People
B
Joel D. Anderson
President & CEO
International Warehouse
LogisticsAssociation
We must rely on the people

andknowledge-base around us
tohiteach goal.
3PL Americas December 2012
uilding and maintaining a successful business requires

balancing many priorities. No single person can succeed without the
support of a well-organized team. How well your business runs depends on
many variables, but at the center of it all are people.
Your companys health depends on the people who work for you, those
that work with you and the relationships youve built with others around
you. As professionals in the logistics business, we understand the complexities of running large-scale projects containing a multitude of moving parts,
but admittedly we must rely on the people and knowledge-base around us to
hit each goal.
IWLA offers several resources to help you educate, encourage, grow and
strengthen the overall health of your company starting with your people.
Each issue of 3PL Americas highlights topics that affect your business, written by industry experts who provide relevant tips and tools you can use to
elevate the education level of your team. When youve read through this edition, pass it along to your team and use it as a tool to show them how their
contributions to your company are part of a much bigger picture.
One of the key reasons IWLA exists is to help you improve the overall
health of your organization, thereby helping you succeed with your companys goals. Theres a saying that, slow is smooth and smooth is fast, which
implies that quick speed is the result of efficient use of resources and, when
used well, gives you the ability to meet the needs of a specific obstacle in a
direct manner so you can move quickly to the next obstacle.
The more intelligent you and your staff are about industry-relevant issues,
the more efficiently you can work. IWLA is here to help improve your intellectual capacity and, by extension, your business health.
IWLAs educational courses, webinars and conventions are a few ways
your team members can broaden their knowledge and improve your company. On a higher-reaching level, IWLA committees and councils focus on
specific segments of the industry that affect your business. If your company
deals with food, chemicals or rail, or if you are interested in government affairs and policy that will impact your business and the industry, theres a seat
at the table for you. Feel free to contact us directly to learn more about these
councils and opportunities.
Heres to good business health!
Chairmans message
IWLA: Your Resource

inChanging Times
A
Arthur Barrett
Chairman
International Warehouse
Logistics Association
Paul Verst and his committee are

planning a terrific event that strikes
the right balance between structured
and unstructured time.
t the most recent meeting of the IWLA Board of

Directors, we asked each board member to write down the top three to
five reasons they remain members of our association. The previous day, I had
posed the same question to our great staff: What are the reasons they think
warehouse operators join or remain members of our association? It was reassuring that both groups arrived at the same top-five responses. I regard these
as the Five Pillars of IWLA membership:
30% Networking and sharing of best practices
25% Education programs and management development
20% Government affairs and advocacy
12% Retained legal counsel
12% Insurance programs and risk-mitigation strategies
On our membership renewal invoices, we now include a value statement
so you can see the programs that your company is utilizing. I encourage you
to take a close look at your renewal to see if you are taking full advantage of
your membership. I hope you will call me or another board member if we can
answer a question about any of our programs.
In addition to our programs and events, IWLA is in a unique position to
champion initiatives that are specific to our industry. We have a special focus
on these prime areas, among others:
Monetizing your own sustainability initiatives
Defending our position on demurrage before the Surface Transportation
Board (STB)
Promoting adherence to our Standard Terms and Conditions
Growing the IWLA Insurance Captive
Developing a chemical-handling protocol
Working with our supply chain partners to develop a federal policy
proposal that enhances the security and integrity of the domestic pharmaceutical-distribution system
Forging a relationship with the retail sector to create a more accurate
picture of labor practices in the supply chain.
Every one of these special-interest topics will have representation at
the 2013 IWLA Convention & Expo in March (Loews Portofino Bay Hotel,
March 10-12, 2013). Paul Verst and his committee are planning a terrific
event that strikes the right balance between structured and unstructured time.
In my experience, it is in the informal networking and sharing of innovative
ideas that the richest learning takes place.
I have never failed to earn a significant return on the time I spend at our
convention. I hope you will join me in Orlando. Come network with many of
the best 3PL warehouse operators in North America. Share business strategies, best practices, perhaps a beverage or two, and experience first hand the
five pillars of IWLA.
SOLAR: THE NEW BUZZ WORD

IN BUDGETS AND BOTTOM LINES
A solar system can save tens to hundreds of thousands of dollars
in energy costs each year. For warehouses, that means increased
profits in industries with razor-thin margins.
For businesses around the world, solar is making a huge impact on budgets
and bottom lines. This is the surprising power of solar. Not only is it smart
for the planet, its brilliant for business. Which is why so many companies,
including warehouse all over the world, are going solar. What can it do for
your organization? Talk to SolarWorld about the benefits of an investment
in solar. Learn more at solarworld.com/business
Were SolarWorld Americas Authority on Solar
Avidan Management Edison, NJ 4.26 MW

Largest rooftop solar installation in the U.S.
Company Profile
Accuristix: Thriving in
the Highly Regulated
Health-Care Sector
By Kim Biggar
A
The companys handling
ofpharmaceutical products, many
of them critical to peoples health,
contributes to employees sense
ofresponsibility in their work.
ccuristix is a third-party-logistics provider exclusively to clients in the health-care sector. That fact influences the company and
its staff at all levels, in all that they do. It not only creates specific technology
and facility needs; it also affects staffing requirements and shapes employee
thinking.
Tanis Gardner, Executive VP at Accuristix, believes that the companys
handling of pharmaceutical products, many of them critical to peoples
health, contributes to employees sense of responsibility in their work. She
tells of one supervisor, as an example, who delivered an urgently needed lifesaving product to a rural hospital during a major ice storm when no carrier
could be found to make the trip. The decision was his own; senior managers
learned of it only after he had safely returned.
While making perilous journeys to save lives is not part of everyday life
at Accuristix, the sense of ownership that prompted this particular drive is.
Management actively promotes the sense of ownership in employees for a
couple of important reasons: It encourages good work and instills pride,
which likely has the further benefit of keeping employees engaged and on the
payroll.
To develop employees pride in their work, says Tanis, Accuristix often
brings its clients into the warehouse to talk to staff about the real-life impacts
of the products theyre moving. The clients, she notes, are keen to make such
presentations, and employees

gain an increased appreciation of the significance of their
work. Their sense of ownership is furthered by the companys practice of dedicating
pickers to clients, building the
employees familiarity with
the products they handle.
Company Overview
and Facilities
Accuristix was formed in

2009, when the partners in
joint venture McKesson Logistics Solutions chose to part
ways. Cameron Joyce a
member of IWLAs Canadian
Council whose Associated
Logistics was one of the JV partners,
bought McKesson Outsource Logistics 50-percent share, and renamed
the company Accuristix in March
2010.
With its focus on health care
unchanged, the company has seen
dramatic growth, says Tanis, since
2009. Based in the Greater Toronto
Area, Accuristix has approximately
800,000 square feet of GMP-compliant space in nine facilities across
Canada: five in the Toronto area,
and one in each of Calgary, Vancouver, Montreal and Winnipeg. (Good
Manufacturing Practices (GMP)
are in place to ensure that drugs
are consistently controlled to meet
the quality standards appropriate
to their intended use. In Canada,
Health Canada conducts inspections
to verify compliance with GMP.)
Three hundred and fifty permanent,
full-time employees provide services
including warehousing and distribution, order-to-cash, customer
care, invoicing and receivables for
120 clients.
For 3PLs that deal with pharmaceuticals, every breath you take
is regulated, remarks Tanis. Strict
temperature and security requirements add challenges to those related to information-sharing and
HR management that all 3PL providers face. So, on top of the sophisticated IT systems needed to manage
and share information about every
10
product for which it is responsible,

Accuristix invests regularly in new,
multimillion-dollar technologies designed to help it meet regulatory
requirements.
Solutions Customized
to Meet Product
Requirements
To maintain their efficacy, pharmaceutical products have specific

temperature requirements. Health
Canada, in its Guidelines for Temperature Control of Drug Products
during Storage and Transportation (GUI-0069), stipulates that all
companies in a drug-product supply chain have responsibility for
ensuring that appropriate storage
and transportation conditions are
maintained from the point of manufacturing up to the delivery of the
drug products to the final distribution point.
For each product, therefore, handled by Accuristix, the temperature
is closely monitored both during
transportation and within the warehouse; if the temperature should fall
outside of predetermined temperature conditions, an instant alarm
will alert QA staff to respond.
At its new facility near Toronto,
Ont., Accuristix has a 1,000-pallet
cooler for drug products that require
a temperature setting in the range
of 2C to 8C. Delivered on cooler
trucks, or Envirotainers, the products
enter and leave the warehouse

through temperature-controlled cooler docks; they are
never out of the temperature
range they need. Tanis notes
that, because of the growing
prevalence of drugs such as
biotech products, vaccines and
insulins that demand cooler
storage, facilities like this are
increasingly called for.
For temperature-controlled
(2C to 8C) products that are
shipped by courier, Accuristix
now makes use of Credo, a
breakthrough reusable container made by Minnesota
Thermal Science that, according to Tanis, keeps cold-chain
products within their required temperature range for twice as long
(minimum 96 hours) as gel packs
in polystyrene-foam boxes can. In
addition, unlike the old foam boxes,
which become garbage after a single
use, the Credo containers are managed through a return program that
tracks use and refurbishment, enabling them to be recovered, cleaned
and reused, a fact that has pleased
clients, says Tanis, in these sustainability-conscious times.
Narcotic drugs stored in Accuristix facilities require tremendous security, which includes, notes Tanis,
vaults with motion-detection alarms
and alerts, and the use of employee
swipe ID cards.
Before any drug is released from
an Accuristix warehouse, samples
are sent to a lab for testing. Until
they are approved, the products are
held in a quarantine status within
the companys validated warehousemanagement system. Picking is impossible while the products are in
virtual quarantine, making it an effectively foolproof holding system.
Employee Training and
Retention Strategies
Three days of training are mandatory for new employees in Accuristix warehouses. Because of the
highly regulated nature of the pharmaceuticals industry, employees
Continued on page 19
Global Supply Chain Perspective
Pain in the (Supply) Chain

Survey: Caution Remains
in Health-Care Industry
By UPS Communications
W
Worldwide, increasing regulations
and compliance comprise most
health-care decision-makers
topconcerns.
ith much change in the health-care industry, from legislative and regulatory hurdles to rapid globalization and changing
consumption patterns, UPS launched its annual Pain in the (Supply) Chain
survey five years ago to measure the impacts of industry changes over time on
the health-care supply chain and to gain insights into future drivers of growth
and change. First launched in the U.S., the survey has expanded over time to
include global health-care supply chain decision-makers from pharmaceutical, biotech and medical-device companies based in the U.S., Western Europe,
Asia and Latin America.
Pain in the (Supply) Chain explores health-care decision-makers top business and supply chain concerns, and probes priorities and plans around supply chain investments over the next three to five years. The 2012 study was
conducted by TNS in March and April 2012.
Health-care decision-makers were beginning, at the time of the survey,
to see glimmers of improvement, suggesting hope for economic recovery in
Western Europe. At the same time, U.S. health-care executives expressed caution about the state of the industry. Their uncertainty about the future centers
on the economy and on complex dynamics emerging within the health-care
landscape. Executives are recognizing upcoming challenges and seeing a need
to develop strategies in response. (See Figure 1.)
Worldwide, increasing regulations and compliance comprise most healthcare decision-makers top concerns. With slight regional variations, the
Figure 1
How is the recent economic downturn still impacting your company in terms
of tightened spending, and other reductions and cutbacks?
12
pressure of regulatory compliance

is driving a need for increased product protection, while the costs of
complex global supply chains still
must be managed. Executives must
look to balance these two key areas,
finding more cost-effective ways to
ensure product security and prevent
spoilage.
Major Concerns and
Issues
1. Regulations, Reform and Legislation. Regulations, reform and

legislation have topped the list of
business issues for several years,
particularly with the passing of the
Patient Protection and Affordable
Health Care Act in the U.S. in 2010.
Increasing government involvement
in health care continues to fuel
tighter regulation in both developed
and emerging markets. As the bar is
raised on product safety, executives
increasingly are seeking solutions
from third-party providers to help
them maintain competitiveness and
profitability in the face of increasingly complex supply chain challenges.
2. Product Security and Product
Spoilage. Protection of high-value,
sensitive products is a major concern
in the industry, as global expansion
continues at a rapid pace. As globalization creates longer supply chains,
opportunities for product spoilage
increase. Consequently, the need for
solutions, such as temperature-sensitive shipping, to address product
spoilage is growing rapidly. Executives are realizing that they cannot
manage such logistical complexity
without outside expertise.
3. Cost Management. Managing
supply chain costs has been a leading issue for health-care decisionmakers for the past five years. Each
year, however, fewer than half the
companies surveyed report success
in addressing this concern. Though
executives in Asia have had more
success than most, the challenge is
underscored by the large proportion
of health-care executives still struggling with costs. Their concerns are
driving the development of creative,
new supply chain models and fresh
perspectives on value creation.

4. Global Market Expansion.
Tapping into new global markets
ties with technology investment as
the top strategy that U.S. companies plan to employ over the next
three to five years, cited by 83 percent of respondents. At the same
time, barriers to global expansion
remain, including intellectual-property protection, a key concern of
almost half the respondents. Effective and profitable expansion
demands expertise in complex areas, such as country regulations.
Third-party-logistics providers can
provide value in areas such as this,
where constantly elongating supply
chains meet with constantly evolving regulatory demands.
5. Technology Investment. Investing in new technologies ties with
tapping into new global markets
as the top strategy that health-care
decision-makers will employ in the
next three to five years to increase
their competitiveness and efficiency.
Technology investment is also the
number-one strategy they have employed over the past 18 months. Better technology provides improved
visibility, which enables superior
supply chain planning, measurement and control. Executives can
find it advantageous to align their
operations with logistics providers
that invest heavily in technology,
eliminating the need for health-care
companies to invest themselves.
6. Channel Strategies. Innovation in health-care products is
driving innovation in how those
products are brought to market. As
health-care products evolve, companies are turning to new distribution and transportation solutions.
Consequently, the organization and
management of supply chains must
become flexible and agile enough to
handle everything from new products to end-of-life-cycle products.
Five-Year Trends
The five-year anniversary of the

survey provides an opportunity to
look back at data from some of the
most pivotal years in the industry
to determine what factors have had

the largest impact on health-care
supply chains. It also enables a look
forward to see what lies ahead on
the global health-care supply chain
horizon.
Surveys were conducted by Harris
Interactive in 2008, 2009 and 2010,
and TNS in 2011 and 2012.
The Importance of
Health-Care Logistics
Health-care companies are under

pressure to serve more customers in
more locations while complying with
a growing number of regulatory requirements all while keeping costs
down and demonstrating efficiencies
across their business. The common
denominator between all of these
areas is companies logistics operations, which enable everything from
flexibility around the globe to speedto-market to customer service to
operational efficiencies. Whether or
not health-care companies succeed
in logistics can determine whether or
not they will remain competitive in
the global marketplace. The healthcare supply chain impacts much
more than health-care manufacturers themselves. It affects health-care
retailers, distributors, providers and
consumers around the world. The
state of health-care logistics, therefore, has a substantial impact on the
state of health-care delivery.
Changes
The health-care logistics landscape looks very different today than

it did just five years ago. One of the
most significant impacts on the industry has been the drive for global
growth and expansion amid increasing pressure to reduce costs and
satisfy increased regulatory oversight. Many companies have found
themselves caught in a balancing
act between the two goals, which
appear to be competing forces. Also
as a result of these industry changes,
health-care companies today face a
more highly competitive global environment, where intellectual-property protection and product security
have become critical to success.
13
More than ever before, healthcare companies are seeking transformative change in their supply chains
to drive additional value.
Global Health-Care Growth
Explodes: 2008 to 2012. Global
growth has been a focus area for
supply chain decision-makers since
2008. In that year, executives ranked
access to global markets as their second-highest supply chain concern.
By 2011, 70 percent of respondents
reported that they had successfully accessed new global markets. In
2012, this number grew to 77 percent of industry decision-makers.
Even more, 83 percent report they
intend to tap into global markets to
improve their competitiveness in the
next five years.
Health-Care Reform Continues
to Change the Industry. Health-care
decision-makers continue to grapple
with the impacts of reform on their
organizations and the industry in
general. UPS began asking healthcare logistics decision-makers about
reform in 2010. Then, more than
half (55 percent) ranked it as their
number-two business concern. After
concern peaked in 2011 (60 percent), reform remains the secondmost-important business concern
in 2012, underscoring how pivotal
issues and concerns around reform
have been impacting the industry.
Product Protection Emerges as
a Top Supply Chain Issue and Concern. In 2008, only 13 percent of
health-care decision-makers named
security as a supply chain issue.
In 2012, 57 percent reported being highly concerned about product security. Innovative technology
and supply chain solutions, and best
practices have shown that meaningful progress in this area can be
achieved.
Concerns about IntellectualProperty Protection Rise Year Over
Year. As health-care companies continue international expansion at a
rapid pace, intellectual-propertyprotection concerns have grown
every year since 2010. Geographically, concerns were highest in Asia
in 2011 (cited by 50 percent as a
14
concern); however, by 2012, U.S.

decision-makers were the most concerned about intellectual-property
protection (cited by 57 percent)
compared with decision-makers in
other regions.
Constants
Amid much change and activity in

the health-care industry, two issues
have remained a top-priority focus
and a top concern for health-care
decision-makers over the past five
years: expensive regulatory compliance and cost management. Both top
the list of business and supply chain
concerns, and mastery of both is essential for supply chain and business
success. Integrated supply chains
can help provide this balance.
Regulations a Top Business and
Supply Chain Issue. Not only are
companies concerned about increasing regulations each year, regulatory hurdles have also proved an
obstacle to global growth. In 2011,
country regulations were cited as
the top barrier to global expansion.
In both 2011 and 2012, increasing
regulations beat cost management
as the top supply chain issue. (See
Table 1.)
Table 1:
Rank increasing
regulations as a top
general-business issue
2008.....................48%
2009.....................56%
2010.....................58%
2011.....................48%
2012.....................52%
Cost Management a Constant

Challenge for Health-Care Companies. While health-care decisionmakers have reported high levels of
concern about managing and containing supply chain costs since
2008, companies do not appear to
be making progress when it comes
to addressing the issue, with only
42 percent and 41 percent reporting
success around cost management in
2011 and 2012 respectively. Transformative change is required.
Conclusions
Logistics has become an increasingly essential part of health-care

companies overall strategy, enabling a high degree of operational
efficiency. This efficiency will remain
a critical factor going forward in
whether health-care companies can
succeed in areas such as operating
amid reform changes, expanding
into new global markets and achieving cost efficiencies. Following are
five logistics indicators that healthcare companies can focus on to ensure that their supply chains are set
up to drive future business.
1. New ways of doing business
call for new supply chain models.
Many health-care companies have
evolved their business models over
the past few years to go direct to
providers, including retailers, pharmacies, physicians and even patients. These new business models
have led to the development of new
distribution channels, which impose
unique demands on health-care supply chains. Companies need to ensure that their supply chains have
the flexibility to encompass different distribution models both now
and in the future according to
individual product needs. Increasingly, health-care executives need to
segment their markets by product
to ensure the correct supply chain
strategy for each group. Collaboration with a logistics provider may
be a necessary part of the overall
strategy; many companies cant go
it alone.
2. Increased focus on operational
flexibility requiresa global logistics
balancing act. Health-care companies need a new level of flexibility
in their supply chains and logistics
operations today. Effective supply
chain infrastructure should enable
companies to quickly turn up or
turn down logistics operations
based on fluctuating demand. Companies cannot afford to get caught
with too little or too much inventory
at any given time or location, especially when considering the critical
nature of health-care products. Flexibility also applies to infrastructure
and assets, such as warehouses and

distribution centers. Many companies are moving to a variable cost
structure in which they outsource
core logistics functions and take
advantage of existing third-party
infrastructure, labor and technology
to avoid or lessen fixed costs. This
approach allows companies to enter
new markets and expand globally
while keeping costs down.
3. Complex products require new
levels of supply chain protection.
With an influx of biologics in the
marketplace, the transportation of
health-care products has become
increasingly complex over the last
several years. Many of these products are temperature-sensitive, requiring vigilance throughout the
supply chain to ensure that they
remain within their required temperature range to avoid costly product damage or loss. According to
the Biopharma Cold Chain 2012
Sourcebook, by 2016, world sales of
cold-chain drugs and biologics, such
as vaccines and blood-plasma products, will near $240 billion. With
continued growth in this area, companies must ensure that their supply
chains are equipped to handle the
influx. They also must ensure that
these high-value products are protected in the supply chain.
4. Accessing technology investment and partnership is essential for
growth. Investing in new technologies is a top strategy for health-care
companies looking to gain greater
operational efficiencies and improve
their competitive market positions.
As health-care products have become more complex, so have supply
chain technology solutions. Companies must be able to monitor not
only the location of their products,
but also the condition of their products to ensure that they are stored
and kept in optimal temperature
ranges and that they have not been
tampered with. Technology also can
give critical visibility into inventory
levels and enable strong customer
service. It is a key enabler for strategic success.
REGION SPOTLIGHT: ASIA

IN ASIA, the top business concern is increasing competition, and
close to half of the respondents cite access to global markets or
new customer bases as a concern.
Investment and Expansion. Decision-makers in Asia expect
to be heavily focused on global expansion in the next three to
five years (88 percent), while other top investment strategies include increasing usage of new distribution channels (77 percent)
and new technologies (71 percent). There is a significant jump
in planned technology investments in Asia around web ordering
systems, with 66 percent now planning to invest in the next three
to six years, and e-pedigree/serialization technologies, with 59
percent planning to invest in the next three to five years.
Spoilage and Security. Product damage and spoilage is a much
higher concern in Asia versus other regions. Product security is
also a higher concern in Asia versus other regions. Executives in
Asia looking to markets in North America and Europe need durable supply chains, together with the technology and visibility
to manage them. A strong supply chain infrastructure is the best
defense against the top Asian concerns centered around product
protection.
REGION SPOTLIGHT: WESTERN EUROPE

IN CONTRAST TO ASIA, European health-care executives top
strategies are investment in new technologies, global expansion and use of new distribution channels. Uncertain economic
prospects in Europe are driving companies to find new ways to
preserve and increase revenues. A key to success will be the selection of logistics partners with the capability and creativity to
enable such transformative change.
Compliance and Security. Regulatory compliance is the top
supply chain concern in Western Europe; the top barrier to global
expansion is country regulations. Decision-makers in Western Europe will increase their investment in security-specific technologies, with 44% expecting to invest in the next three to five years.
REGION SPOTLIGHT: LATIN AMERICA

IN LATIN AMERICA, most health-care decision-makers (57 percent) think that economic impacts have lessened, but many (43
percent) are still feeling economic pressures.
Distribution and Technology. The number-one investment
strategy in Latin America is to increase use of new distribution
channels (66 percent). In addition, there is likely to be a significant
jump in technology strategies: 63 percent plan to invest in new
technologies over the next three to five years, followed by tapping
into new global markets (57 percent). These strategies, which can
be driven by logistics partners with existing investment in new
distribution channels and technologies, will drive not only efficiencies, but also product differentiation in the health-care market.
Concerns and Barriers. Product security is the top supply
chain concern in Latin America. Country regulations and product
security are the top barriers to global expansion.
15
Regional Perspective
Provincial Health-Care
Supply Chain Creates
Benefits Beyond Savings
By Jim Eckler and Jennifer Simpson
he concept of a shared-services model a form of outsourcing

where a related organization assumes responsibility for the delivery of a
defined service for multiple constituents is not new in health care. However,
when Health Shared Services BC (HSSBC) was established in 2009, it was a
revolutionary idea for the province, one that set a new course for the delivery
of health-care support services in British Columbia, Canada and has since
delivered benefits beyond just cost savings.
Shared Services in BC Health Care: Uncharted Territory
Jim Eckler
Jennifer Simpson
HSSBC was created to help the six

distinct health authorities of B.C.
achieve more collectively than
theycould independently.
The creation of a shared-services organization within the British Columbia

health-care system was uncharted territory, but an initiative that made sense.
As operators of a publicly funded system, Canadian health-care providers
need to constantly search for new ways to get the most value out of every
health-care dollar.
Historically, each health authority managed its own support services and
had its own infrastructure. HSSBC was created to help the six distinct health
authorities of B.C. achieve more collectively than they could independently.
Through standardization, process efficiencies and greater economies of
scale, HSSBC delivers non-clinical support services that create significant
savings, says Jim Eckler, HSSBCs Chief Operating Officer. As a not-forprofit organization, all savings that HSSBC realizes are returned to the health
authorities for direct reinvestment in patient care. Every dollar that we save
is a dollar that can be redistributed to care of British Columbians, and it is a
responsibility we take seriously. Nowhere are the benefits of this model more
apparent than in the accomplishments of HSSBC Supply Chain.
HSSBC Supply Chain
Supply Chain Management Services was launched in 2009 as HSSBCs

first service offering. Modeled after industry-standard outsourcing-services
businesses and providing the full range of supply chain services, HSSBC Supply Chain manages the equivalent of $1.9 billion in spending annually. The
range of products is wide from items as small as bandages and syringes, to
large and expensive equipment like CT scanners and ultrasound machines.
Supply Chain is responsible for identifying client requirements, consulting
with health-care professionals, requesting vendor proposals and negotiating
contracts to ensure that care providers have the equipment they need, when
they need it, at the best-possible price.
By combining the purchasing power of the health authorities, HSSBC
Supply Chain uses a variety of strategies, such as strategic sourcing, price
stabilization, price normalization or national contracts, to negotiate a lower
cost per item for products the health authorities would have purchased on
their own.
17
Reducing Costs,
Increasing Capacity
At a high level, the results of Supply Chains efforts are impressive.

When the business stream began
operating, the procurement saving
for five years (from February 2009
to March 2014) was projected at
$150 million. By February 2012,
Supply Chain had already exceeded
that estimate by millions of dollars,
having achieved more than $200
million in savings.
At a more detailed view, we can
see how HSSBCs efforts through
shared services are not only reducing
costs, but also positively influencing
the health authorities capacity to
provide care. Prior to HSSBC Supply Chain assuming accountability
for provincial contract management,
the annual spend on medical/surgical supplies was increasing exponentially, without a significant increase
in surgical activity. Between the fiscal years of 2007/8 and 2009/10,
the spend on medical/surgical supplies increased by $33 million provincially as a result of only 26,000
additional surgical interventions. In
2011/12, the total number of surgical
interventions grew to 495,000, with
a $12-million reduction in spending from the previous year. Total
spend was reduced to near-2009/10
amounts, despite an additional

17,000 surgeries being performed.
Every dollar saved by the health authorities means fewer people waiting
for care. (See Figure 1.)
Our success demonstrates the
potential for an entrepreneurial
shared-services model within the
public sector, says Doug Kent, Vice
President of HSSBC Supply Chain.
However, I think a key to our success is that we keep the patient front
and center, remembering that the
materials we purchase and deliver
are used to treat a patient a person. Beyond the savings we are able
to produce for the health system,
keeping the patient in mind motivates us to provide the best-possible
service.
Delivering Value Beyond
Savings
Although the cost savings and

efficiencies that Supply Chain has
achieved since 2009 have been nothing short of astounding, a demonstration of HSSBCs impact on
the health system of B.C. came in
early 2012, when a drug manufacturers decision to cancel production of some products and reduce
the availability of others created an
unprecedented situation for Canadas health-care system, and put the
Figure 1: Total Number of Surgical Interventions and Total

Med/Surg Supplies Spend, by Fiscal Year, Province
Provincial Health Services Authority, one of six health authorities in B.C., is not
included due to differences in OR cost-center structure.
18
value of a provincial supply chain

provider to the test.
Although the manufacturer indicated it would do its best to supply medically necessary drugs to
the Canadian market, the potential
for temporary shortages of certain
drugs was high. This risk was compounded when a fire at the plant led
to a further reduction in production.
The risk of drug shortages was no
longer just a possibility; it was a
reality.
At this point, you may be wondering why the reduced production
of one manufacturer created such
turmoil. The answer is simple: The
manufacturer was the sole Canadian
supplier for 113 products, including
injectable narcotics such as morphine. The potential was high that
patient care would be impacted if
the shortage was not handled effectively.
Enabling a Coordinated
Approach
As soon as they were made aware

of the potential shortage by Supply Chain, HSSBC and the health
authorities took immediate action
to assess the situation in order to
minimize the impact to patients.
The structure of our Management
Board, which includes participation by all of the health authorities
and the Ministry of Health, and
HSSBC Supply Chains provincial
role enabled B.C. to be one of the
first provinces taking a coordinated
and comprehensive approach to this
shortage, says Eckler. Through
effective communications processes
and fast access to supply chain information, we were able to move
quickly and come together as a province to face this challenge.
HSSBC Supply Chain assumed the
role of central coordinating resource
for the province, and the HSSBC
Management Board immediately
began functioning as the provincial
Emergency Operations Committee
(EOC). A provincial working group,
comprising pharmacists, medical
leads, Ministry representatives, and
HSSBC Supply Chain and Stake-
holder Relations representatives,

was also struck.
After working with health-authority pharmacists to determine current
stock levels of all products provided
by the manufacturer, HSSBC Supply
Chain leadership assessed the situation, then created a province-wide
plan and worked with the Ministry
of Health and B.C. health authorities to implement it. Components
included:
Frequent Communication: The
importance of coordinated communication cannot be overestimated
in a rapidly evolving situation such
as this. Daily meetings were held for
the provincial working group and
provincial EOC so that current stock
levels of impacted products could be
reported and issues could be raised.
Regular communication with external stakeholders, such as the BC
Medical Association, the College of
Pharmacists of BC, the College of
Physicians & Surgeons of BC and
the BC Pharmacy Association, was
also scheduled, and HSSBC Stakeholder Relations coordinated internal and external communications,
including proactive news releases
and interviews with local and national media.
Provincial Management of Available Stock: It was quickly determined that the current stock of
drugs available within the health
authorities would be most efficiently
managed on a province-wide basis
to ensure a consistent approach and
facilitate redistribution of products
to address priority patient needs.
Due to its broad provincial role, and
familiarity with each health authority, HSSBC Supply Chain was wellpositioned to take on this central
coordinating function.
Interprovincial Collaboration: In
addition to working provincially
to manage the crisis, HSSBC Supply Chain represented B.C. in discussions with its counterparts in
other jurisdictions across Canada
and with Health Canada to share
management strategies and develop
solutions to common issues.
Reporting and Decision-Making
Tools: Effective management of a

supply crisis is greatly assisted by
accurate information and guidelines
that can be used to quickly and efficiently evaluate and determine courses of action. Two such tools created
for this crisis were the Medication
Supply Forecasting Dashboard and
the Criteria for Allocating Injectable
Opioids during a Period of Undersupply framework.
The Medication Supply Forecasting Dashboard was created by the
provincial working group to enable
each health authority to track its
available supplies of drugs. On a
daily basis, health-authority pharmacists would assemble the product-availability information for their
respective health authorities, and
use colours to visually represent the
status of each impacted drug:
Green: Pharmacy has > 14 days
supply
Amber: Pharmacy has 7 to 14
days supply; supplies being depleted
Red: Pharmacy has < 7 days supply; supplies being depleted
For drugs reported as amber,
Supply Chain developed and implemented action plans to address the
supply levels. Supply-level reports
were also rolled into a daily, province-wide report that was provided
to the HSSBC Management Board.
Knowing that supplies may become low enough to require decisions related to allocation of existing
drug stock, health-authority ethicists,
supported by the provincial working
group, proactively developed the
Criteria for Allocating Injectable
Opioids during a Period of Undersupply framework as a last resort
to guide clinical decision-making
to deal with the drug shortage if all
other options had been exhausted.
The framework was approved by the
HSSBC Management Board, but was
not needed during this shortage.
B.C.s coordinated response, enabled through HSSBCs structure
and Supply Chains provincial management of the issue, played a crucial role in ensuring minimal impact
to patient care, and maintained pub-
lic confidence that the situation was

managed effectively.
Making an Impact
In its short period of operation,

HSSBC has made a big impact on
the health-care landscape of B.C.
Through Supply Chain operations in
particular, HSSBC has demonstrated
the value that a shared-service provider can bring to its clients beyond
cost savings. Having an organization
singularly focused on the delivery of
support services not only enables
the health authorities to focus on
their core health-care functions, but
also allows for provincial, rather
than regional, oversight of issues
and opportunities that will make
the health-care system more efficient
into the future.
Jim Eckler is Chief Operating Officer of HSSBC. Jennifer Simpson is
the Provincial Manager, Stakeholder
Relations at HSSBC.
ACCURISTIX from page 10
must learn 180 standard operating
procedures, as well as procedures
specific to the products they will
handle. (Even temporary employees
must have GMP training and learn
the procedures relevant to the limited tasks they are given.)
Because of both its investment
in its employees and the knowledge
they acquire, the company is eager to
retain its people. Employees are compensated, says Tanis, at a competitive rate. In addition, a profit-sharing
program rewards employees each
quarter for accomplishing their personal objectives, which are reviewed
and updated as part of the process.
While money is always a factor
to some degree in a persons decision
to stay in a job or look elsewhere,
pride and passion are also important.
Those sentiments are perhaps easy to
foster in a workplace where employees deal with lifesaving products on
a daily basis, but Accuristix doesnt
leave it to chance. Management
makes sure that employees hear regularly about the value of their work.
Thats a great retention strategy.
19
s
Nse
e
p
x
re
s
s
u
e
o
N
BY
ers
r
usi
M
u
B
o
c
to
ust
New
s
c
e
p
r
c
elo
c ti
Yo u
a
r
M
Dev
p
Fro
est
N
B
r
D
etu
FiN
r
e
Miz
i
x
Ma
GRO
WY
OU
RO
WN
WA
Y
The 2013 IWLA Convention + Expo

Loews Portofino Bay Hotel at Universal Orlando
Orlando, Florida
March 10-12, 2013
The 2013 International Warehouse Logistics Association Convention & Expo, March 10-12, 2013, in
Orlando, Florida, will focus on how third-party logistics companies can create a path to profitability
that is uniquely right for them.
Register today to reserve your place for the event that will bring speakers who understand how to drive
profits and to discover tips and best practices from your 3PL-leader peers. Then join us in March at the
Loews Portofino Hotel at Universal Orlando.
Convention registration is open at www.IWLA.com or by calling (847) 813-4699.
2013 IWLA Convention & Expo
Grow Your Own Way

inOrlando
An interview with Paul Verst
aul, can you tell us a little about the theme for next years conference
and why you selected it?
The theme for our conference next year is Grow Your Own Way. As I
was thinking of a theme to pay tribute to our outgoing Chairman, Arthur Barrett, I was reminded that, as professionals and leaders of our great warehouse
trade association, we are all faced with the challenge of growing our business.
Our conference will present and invoke conversation to help our members
grow, through top-line growth strategies, cost-reduction ideas, value-added
services, the addition of family members, acquisitions, geographic expansion,
and many other ways put forward in thought-provoking sessions.
Where will the 2013 IWLA Convention & Expo take place, and when?
The IWLA conference will be at the fabulous Loews Portofino Bay Hotel
in Orlando, Florida, from March 10 to 12, 2013. You can register now at
www.iwla.com.
Who is involved in planning the conference to ensure that it will be a
success?
Paul Verst
One of my goals was to involve

asmany members and partner
members as possible in planning
the event, so I set up a committee
structure for the conference.
I am actually taking a different approach to managing the conference this

year. I saw how much time Arthur spent on the conference last year doing it
mostly on his own until Jay arrived, and Arthur did an incredible job in San
Francisco. One of my goals was to involve as many members and partner
members as possible in planning the event, so I set up a committee structure
for the conference. I am so proud of how our committees have all come together to make next years event an unforgettable one. I want to recognize the
following for their contributions:
Education/Speakers Cliff Otto of Saddle Creek Logistics and Tom Herche of United Warehouses.
Golf Classic Chip Scholz of Scholz & Associates and Mark DeFabis of
Integrated Warehouse Company.
Social Opportunities Leslie Greer of Team Logistics and Errol Gonzales
of Maves International.
Sponsorship Development Rob Doyle of Commercial Warehousing and
Gary Mayfield, retired entrepreneur.
Volunteer Opportunities Hans Bauer of North American Warehousing
Company and Anthony Allwood of Systems Logic.
Keny Hatley is assisting in an ex officio capacity, and we are all aided
by some incredible staff members, including Jay Strother, Liz Whitney, Scott
Brewster, Barb Anderson and Joe De Guzman.
Who should attend the conference in Orlando, and why?
Anyone involved in the warehouse-based logistics industry is highly encouraged to attend the conference. It is THE premier annual event for our
members, prospective members and partner members. Our attendees will
21
comprise CEOs, senior managers, sales associates, those

companies that sell to our industry, and many former and
now-retired members who enjoy getting together with
their friends to renew old acquaintances.
Speaking of partner members, why should they attend and what benefits will they receive?
We consistently hear from our partner members that
the annual IWLA conference is the most cost-effective
way to meet their customers and prospective customers
in a secure, relaxed setting in a resort that is first class.
Many of our partner members exhibit and sponsor at
the conference and, in return, we highly encourage our
members to visit and share time with them. Our partner
members will have access to the decision-makers of our
member companies for over 16 hours during the conference, including during the golf classic, opening reception,
meals, networking reception, Chairmans Dinner, breaks
and exhibit-hall time.
Can you share with us who some of the speakers will
be and the relative topics?
On Monday, we will energize the membership with
the nationally renowned Pat Williams of the Orlando
Magic, who will talk about leadership, motivation and
increasing sales. Pat will be followed on Monday by
Mary K. Hutchins, who will also be sharing her pearls
of wisdom on team work and growing your business. On
Tuesday, we are blessed to have Dan Barnett do a double

session on making or breaking your business through
flawless execution. Along with these incredible keynote
and general session speakers, we will have Pat OConnor
provide us updates on government affairs, and breakout
sessions dealing with legal issues, emerging issues, and
social media. Finally, two of the breakout sessions will
be in the panel format with IWLA CEOs discussing issues dealing with family business and different ways
they have grown their businesses. The panel discussions
are some of the highest-rated sessions each year, as our
members share personal experiences of their businesses.
We have also planned a Tuesday track for our Canadian
members, eh.
The conference sounds like it is heavy in education.
What kind of social and fun activities do you have
planned?
I believe our committees have done an excellent job
balancing education with social activities. On Sunday, we
will have our Annual Golf Classic at the Grand Cypress
Resort. Monday afternoon will provide our members
with free time to socialize with other members, enjoy
family time together at Universal Studios or poolside, or
join in informal group outings. We will be having all of
our evening activities, such as the Networking Reception and annual Chairmans Dinner, outdoors as long as
the weather cooperates, and March is normally perfect
weather and temperatures.
Are there any surprises planned that will entice
people to attend?
Yes, but youll have to travel to Orlando to find out.
WADDELL INSURANCE BROKERS LIMITED

SPECIALIZES IN :
Transportation: fleet and non-fleet
Warehouse and logistics insurance, including
loss of profits and facility replacement coverages
Motor truck cargo, Rail, Air, Ocean freight
coverages
Freight forwarders and Load brokers legal
liability
Carrier and warehouse bonds in Canada
and United States.
We offer a common sense approach with cost
effective risk management alternatives, including
captive insurance solutions.
Waddell Insurance Brokers Limited
110 Matheson Blvd. West Suite 202 Mississauga, Ont. L5R 4G7
Tele: 905-712-8400 Fax: 905-712-9400 www.waddellinsurance.com
22
Paul Verst is President & CEO of Verst Group Logistics,

Vice Chair of IWLA and Chair of the 2013 IWLA Convention & Expo. Watch for more conference information
from Paul in the next issue of 3PL Americas.
SURVEY from page 15
5. Logistics can be a competitive advantage for healthcare companies. Health-care challenges, such as increasing and evolving regulations and cost management, are
not going away anytime soon. In fact, these challenges
continue to grow. Health-care supply chains must be
built to navigate and overcome these challenges, but
an effective supply chain can do much more than solve
problems. Smart companies are investing in their supply
chains to turn logistics into a competitive advantage to
deliver on business priorities, such as expanding into new
markets, serving new customer segments, speeding time
to market and achieving operational flexibility.
This article was provided by United Parcel Service of
America, Inc. The original survey was conducted by TNS
Consulting with the resultant book and executive summary created from data provided by the UPS Communications team a team effort.
Book Review
Realizing the Economic

Potential of Logistics
Clusters
By Yossi Sheffi
As the book explains, the broader

economic impact of logistics clusters
is generally underestimated.
ogistics clusters communities of enterprises that share

logistics resources and know-how have become important building
blocks of global supply chains. But they also create jobs and catalyze economic growth roles that have not been explored in detail, until now.
A new book, Logistics Clusters: Delivering Value and Driving Growth
(MIT Press, October 2012), provides a detailed account of how logistics
clusters have evolved, their critical role in supporting the growth of global supply chains, and the
economic benefits they bring.
These groupings of logistics-related business
activities have proliferated across the globe. They
tend to thrive in places that are near major markets
or in strategic locations, such as ports and airports.
In most cases, they offer easy access to multi-modal
freight networks.
Third-party-logistics providers (3PLs) are prime
users of these facilities. Many 3PLs have located
in clusters, and/or use them to distribute goods on
behalf of their shipper clients. Other organizations
commonly found in these communities are transportation and warehousing
companies, the logistics operations of industrial firms, and enterprises that
derive most of their business from logistics-related activities.
The resource-sharing concept that underpins logistics clusters is not new.
For instance, in 14th century Florence, Italy, a colony of artists leveraged their
collective expertise to create works of art. More-recent examples include
the cluster of high-tech firms in Silicon Valley, California, and Hollywoods
world-famous movie industry.
In general, however, logistics clusters have attracted less attention than
their counterparts in other industries, particularly in high-profile sectors such
as bioengineering. As the book explains, the broader economic impact of logistics clusters is generally underestimated, even though certain governments
worldwide, notably the Chinese and Germans, have invested in them.
One reason for the success of the logistics-cluster model is its self-reinforcing nature. As clusters develop, they offer more incentives for companies on
a number of levels.
For example, logistics clusters achieve economies of both scale and scope
by virtue of the large volumes of freight traffic they generate. Carriers and
shippers use these economies to reduce the number of empty backhauls by
identifying opportunities to pick up follow-on loads. And they exploit the
scale of cluster-related freight activities by deploying larger conveyances to
move freight and achieve higher vehicle utilization. Moreover, as the freight
volumes in and out of logistics clusters grow, transportation service levels
23
improve due to higher frequencies

and more direct operations.
As a result of these efficiencies,
logistics clusters are able to lower
transportation costs and improve
customer service, advantages that
attract more companies. And as the
member base expands, so costs diminish even further and service levels continue to improve, luring more
companies to the community.
Logistics clusters also offer advantages based on the interchangeability
of transportation and logistics assets.
Rail cars, containers, trailers and
airplanes come in standard sizes and
shapes regardless of what company
owns and/or operates them. These
assets can be shared by enterprises in
the cluster. Warehousing and cargohandling equipment can be pooled in
the same way. Similarly, it is possible
to share best practices and knowledge in the logistics space.
Benefits like these enable companies to compete more effectively.
Markets have different demand patterns; while some companies may
be scaling down, others are looking
to add capacity. The ability to share
assets and provide operational flexibility helps buffer the community
against these variations in demand.
Another key role played by logistics clusters and one that is often
underestimated is that of job creator.
NEW_TransAd 7 x 3_c.qxd 8/19/12
The port of Rotterdam, for exam-
ple, employs 55,000 people directly

and 90,000 indirectly. The Memphis
International Airport in the U.S.
supports 220,000 jobs in the local
economy, 95 percent of which are
tied to cargo operations. In fact,
more than one in three jobs in the
Memphis area is linked to the airport. There are many more examples
of this remarkable capacity for generating employment opportunities.
Moreover, the jobs are varied and
not beholden to the fortunes of any
one industry, because logistics clusters attract multiple types of businesses. The employment profile of
a typical cluster includes blue-collar
jobs in sectors such as warehousing, white-collar positions in various managerial and IT roles, and a
mix of skilled jobs associated with
a range of value-add services. These
value-added jobs come from the
various activities that are attracted
naturally to logistics clusters, such as
returns management, repairs, retaildisplay preparations, and many others. These activities are performed
either by logistics service providers
(such as UPSs fixing Toshiba laptops
in its Louisville hub) or specialized
providers that settle in the clusters
(such as Flextronics performing repair operations in Memphis). Such
activities provide technical jobs in
the logistics cluster, adding to the
employment opportunities.
4:39 PM Page 1
Of particular importance in the
current economic and political climate is that these jobs are sustainable; it is not easy to outsource local
distribution work to offshore contractors. Cluster-based postponement operations, for example, delay
the final assembly of products as
late as possible in the production
cycle, in order to take advantage
of demand forecasts that are more
timely and accurate. It follows that
these operations must be completed
in close proximity to end markets.
Since these jobs remain in the
host country, employers need skilled
workers to fill the positions, and
many companies devote resources
to building the educational facilities needed to meet the demand for
talent. The availability of top-notch
training and education programs
helps to attract individuals and
employers to the locale, another
feedback loop that fuels the growth
of these clusters.
An area of expertise that is gaining in importance is environmental
sustainability, and logistics clusters
are becoming innovators in this
field. This is driven, in part, by the
volume of traffic that flows in and
out of clusters. Loads can be consolidated, for example, a strategy
that reduces the number of vehicle
movements in distribution networks
and shrinks the carbon footprint of
supply chains. In addition, many of
100 FREIGHT INTERMEDIARIES CANT BE WRONG

Over the years, Benesch has provided legal consultation and pragmatic business
advice to well over 100 Transportation Brokers, Surface Freight Forwarders, Ocean
Freight Forwarders, NVOCCs, Air Freight Forwarders, Warehousemen, 3PLs, 4PLs,
and other Freight Intermediaries of all kinds. They know that when it comes to
corporate structuring, mergers and acquisitions, transportation and logistics contracts,
best practices, regulatory challenges, insurance and risk management, freight loss
and damage or freight charge disputes, catastrophic personal injuries, and
independent contractor relationships Benesch knows Intermediaries.
Counsel for the Road Ahead
MEMBER
SM
MEMBER
MEMBER
Cleveland | Columbus | Indianapolis | Philadelphia | Shanghai | White Plains | Wilmington | www.beneschlaw.com
24
Supply Chain Productivity
Maximizing Productivity
in E-commerce 3PLs
By Jeffrey B. Graves
s e-commerce continues its rapid growth into virtually every market sector, retailers are anxious to expand their presence
online to capture this market share. Between 2006 and 2010, global online
retail sales grew by 16.3 percent annually, according to Global Online Retail
2011, published by Datamonitor. Online retail sales for 2010 alone showed
an annual growth rate of 17.8 percent on total revenues of US$434.6 billion.
This level of expansion of Internet sales is fundamentally changing the nature
of the retail supply chain.
E-commerce Challenges
Continuous e-commerce growth

hasprompted an increasing number
of retailers to use third-partylogistics providers for handling their
direct-to-consumer fulfillment.
But for retail logistics executives,
assessing 3PL capabilities that best
fit their companys requirements
can be a challenge, yet critical
foroptimum ROI.
For decades, consumer products have been distributed to retail stores in

bulk, via pallet loads and cases. Now, online ordering is pushing brick-andmortar retailers beyond this traditional supply chain infrastructure. Traditional brick-and-mortar fulfillment encompassing receiving, put away/
storage, picking, transport through the DC, sortation, VAS, packing and shipping is a poor option for handling the needs of e-commerce. To compete in
this virtual arena, pick, pack and ship of single items and small-volume orders
to consumers is the name of the game. Orders require delivery to customers,
not weekly or bi-weekly as with retail stores, but with increasing frequency
within 24 to 48 hours.
Add to this continual SKU proliferation. Internet retailers need to support
an ever-increasing selection of merchandise that typically includes fast-moving items and many very-slow-moving items. How these SKUs are picked and
handled can present two very different operations.
From the moment the online order is placed to when it is picked, packed
and shipped, every step in the process must be handled efficiently, consistently
and cost-effectively. In e-commerce, it is the distribution center that provides
much of the customer experience. Simply delivering the goods is no longer an
adequate mission for the fulfillment center. Customer satisfaction has to be a
critical priority. The typical e-commerce consumer expects a wide selection of
SKU offerings, a mobile-site ordering capability, order accuracy, fast and free
delivery, and free returns.
Understanding how online consumers shop and purchase across channels
is critical to the success of online fulfillment. More and more consumers are
browsing the Internet for features and selection, testing products at brickand-mortar stores, acquiring discounts through social media, then purchasing
the product online through the convenience of their mobile device.
Some retailers, however including those that also sell through catalogs
have been in the direct-to-consumer marketplace for some time. These companies have fulfillment facilities established and information technologies in
place to manage orders with speed and efficiency, doing it well and profitably.
But to many distribution executives, online fulfillment poses a significant
challenge to their existing knowledge, experience and resources.
25
Smarter 3PLs Improve

E-commerce Fulfillment
As an alternative to in-house fulfillment, a large number of retailers have turned over processing of
their Internet orders to third-partylogistics providers (3PLs) that are
equipped and experienced to handle
these online needs. Retailers whose
online orders are growing at an accelerated rate often prefer the flexibility of working with a 3PL that can
help them continue to expand. 3PL
usage is experiencing rapid growth,
expanding at the rate of 12 to 15
percent annually, clearly influenced
by the corresponding growth in online purchases.
But 3PLs are also continuing to
gain acceptance by online retailers
because of the sophisticated software engines they have put in place
to capture orders on the front end,
and process these orders through
their warehouse management systems (WMS). On the front end, this

includes managing the web portal
and the website, and updating website content, as well as supplying
telephone call centers with live operators who take orders, dispense
product information, provide tech
support and process return orders.
Efficient processing speed of return
orders becomes a major benefit in
e-commerce, considering the much
higher number of returns of purchased items compared with brickand-mortar sales.
Because of the digital nature of ecommerce, its infrastructure permits
integration of systems that help unify information across multi-channel
inventory, order management, promotions, merchandising and distribution systems. The most-advanced
3PLs operating within e-commerce
provide this capability.
IWLA Events Calendar

IWLA Canadian Council: Holiday Get-Together
December 12, 2012 Woodbridge, Ontario

www.IWLA.ca/docs/holiday_party_2012.pdf
Creating Value-added Services for Your Customers
December 20, 2012 Webinar

IWLA Insurance Captive Committee: Winter
Meeting
January 23 to 25, 2013 Princeville, Kauai, Hawaii

Growing Your Warehouse Business
January 24, 2013 Webinar

Why Choose Warehousing as a Career
February 28, 2013 Webinar

2013 IWLA Convention & Expo:
Grow Your Own Way
March 10 to 12, 2013 Orlando, Florida

The 2013 IWLA Convention & Expo will focus on driving members
success, even though their businesses may differ. Sessions are designed to
help members develop new business, maximize return from their existing
customers, and learn best practices to curb expenses.
www.IWLA.com/events/CalDetails.aspx?id=382
Maximizing Your Margin
March 28, 2013 Webinar

Go to www.IWLA.com/industryevents/eventslist.aspx to access detailed information on these and other events, including industry events.
26
These systems allow 3PLs to record the relevant details of each item
and parcel being shipped. Parcel
shipments can be tracked and proof
of delivery quickly confirmed. A
customers transportation costs and
performance can be analyzed, thus
helping the 3PL to negotiate rates
and improve service.
Integrated ordering and parcel
tracking is made possible through
the 3PLs WMS, which is an ideal
system for the precise and efficient
tracking of products. The WMS,
communicating with the ERP, along
with PLCs and sensors in the pickand-pack systems, and conveying
equipment are capable of monitoring
individual SKUs as they are stored
and moved through the facility.
3PLs now also have the opportunity to record every customer transaction, and track consumer behavior
and sentiment. Forwarded to their
clients, this data makes it possible
for retailers to analyze millions of
pieces of data, resulting in a real understanding of what its consumers
are purchasing, how to get into their
online carts, and how to become
part of their repeat purchase cycle.
This level of supply chain analytics allows 3PLs to maintain precise
control of their products through every stage of supply chain handling,
from receipt of products to storage
and picking, through shipping.
Pick, Pack and Ship
E-commerce fulfillment is basically a piece-pick operation, which

is historically a hands-on procedure.
The right automation facilitates
the minimization of manual touch,
resulting in more-accurate orders,
improved ergonomics, lower labor
costs and worker travel time, and
fewer returns, and saves space by
operating in a smaller footprint.
Much of the recent investment in
automation by e-commerce 3PLs has
been driven by a desire to improve
order picking, packing and shipping
processes, with a focus on picking.
And the most basic form of automation for e-commerce in 3PLs is the
augmentation of manual order pick-
ing with IT support, such as pick-tolight, hands-free voice systems, zone

routing or dynamic slotting.
In most distribution centers,
picking is the most labor-intensive
function of the DC, and usually can
provide the most cost savings when
automated. IT-based picking options
exist that have significantly lowered
capitalization costs and can exert
a sizable positive impact on a DCs
throughput efficiency while reducing operating costs. For many distribution centers, and especially for
e-commerce 3PLs, IT-based picking
options can provide the ideal automation solution to streamline their
throughput cost-effectively, while
realizing a short-term ROI.
E-commerce 3PLs are finding that
their clients are progressively requiring shorter-term contracts; where
once five-year and ten-year contracts
were typical, now three-year to
five-year contracts have become the
standard. 3PLs need to factor their
automation investment for a muchshorter ROI, which makes heavily
capitalized equipment a poor option.
For dynamic e-commerce picking, highly automated robotic and
shuttle-based systems provide accurate and rapid goods-to-person
solutions. These systems can achieve
performance levels of many hundreds of order lines per hour with
precision accuracy. However, for
e-commerce fulfillment within 3PLs,
it is difficult for these organizations
to factor the capital-equipment ROI
over a short three-to-five-year span.
Equally important is the scalability of the automation, as a 3PLs client needs increase or decrease, and
the flexibility to move the automation for use in a new location, when
and if the contract does terminate.
This is further pointed up by the
fact that e-commerce retailers can
fluctuate in their use of 3PLs. Having retained a 3PL to handle their
e-commerce fulfillment for several
years, a retailer can pull the fulfillment back in-house, then several
years later put the fulfillment back
out for bid consideration by 3PLs.
From the perspective of the 3PL op-
erator, the more flexible and scalable

the pick, pack and ship equipment
is, the better is the possibility of
achieving a good return on investment on that equipment.
The focus on automation for any
e-commerce 3PL should be to easily
increase fulfillment throughput and
SKU density over time. Such a system should enable e-commerce 3PLs
to pick, pack and ship orders and
handle returns fast and accurately,
while reducing labor costs and shipping errors, and realize equipment
ROI over the life of the contract.
Assessing 3PL
Capabilities for
E-commerce
Within e-commerce, unpredictability is a constant factor. Flexibility in the 3PL supply chain, therefore,
becomes critical. This can be derived from implementing the right
software and automated systems
that can support the fluidity that ecommerce requires.
3PLs under consideration for
handling a retailers e-commerce fulfillment should be assessed against
the following criteria as to their performance capability. These points
represent potential troublesome areas frequented in e-commerce fulfillment:
(a) Large SKU counts, with a high
percentage of slow movers;
(b) Small number of pieces per order;
(c) Extreme peak-season volumes;
(d) Under-stocking, due to unpredictable changes in market demand;
(e) Front-end order processing;
(f) Fast, 24-to-48-hour delivery;
(g) High volume of returns from end
consumers;
(h) High potential for brand damage from poor fulfillment performance; and,
(i) Real-time and accurate inventory
and order visibility.
These points can best be addressed in concert with an independent logistics consultant, who can
provide considerable value to logistics executives at both the retailer
and 3PL.
The methodology of independent
logistics consultants permits an objective examination of all e-commerce options, helping both parties
to determine underlying costs and
design for facilities, automation and
labor within the 3PL. Consultants
size the facility based upon the retailers requirements, the anticipated
level of operator cost, and what the
3PL plans to invest, factoring in the
optimum level of automation.
Independent consultants draw on
solutions from many e-commerce
3PL options used in different applications, thus providing a broad perspective on potential solutions that
might otherwise not be considered.
This depth of experience can make
the critical difference in selecting the
right 3PL and the right equipment
that will meet retailers requirements
for throughput and efficiency, and
the 3PLs need for minimized capital
outlay that will deliver the expected
return on investment.
Jeffrey Graves has held the position of President of Sedlak Management Consultants since 1989. He
can be contacted at (216) 206-4700
or jgraves@jasedlak.com.
CLUSTERS from page 24
these clusters have become environmental-innovation hubs, supporting
the development of alternative-energy transportation.
These benefits, coupled with the
increasing complexity of global supply chains, point to a bright future
for logistics clusters. They can help
both the private and public sectors
to meet the demands of globalization, to deliver operational flexibility, and to create new ways to
stimulate economic growth. One
of the main aims of the book is to
highlight these possibilities, and to
help build a consensus for more investment in logistics clusters.
Yossi Sheffi, an international expert in supply chain management, is
Professor of Engineering Systems at
MIT and Director of the MIT Center
for Transportation and Logistics.
27
Supply Chain Management
Five Things Supply

ChainProfessionals
Needto Know
By Paul Dittmann
We identified five core competencies

that supply chain professionals
needto master.
28
he supply chain arena consists of a maze of challenges.

The complexity of the global supply chain demands that supply chain
professionals develop new skills and enhance existing ones.
Earlier this year, the University of Tennessee, Knoxville, Global Supply
Chain Institute hosted a group of senior supply chain executives from its
advisory board to talk about what supply chain professionals really need to
know. Our advisory board consists of VPs of supply chain to CEOs from
40 companies, such as Amazon, Disney, Dell, Procter & Gamble, KimberlyClark, Colgate, Johnson & Johnson, Lockheed Martin, Honeywell, Boeing,
Caterpillar, Nissan, Lowes, and Walgreens. This industry input is valuable
in helping UT better design our executive-level MBA and non-degree educational programs, such as our new Global Supply Chain Executive MBA.
From those discussions we identified five core competencies that supply
chain professionals need to master.
1. Global Business Leadership and Acumen
No surprise here. If your supply chain isnt global now, it almost surely
will be. Supply chain professionals need to be able to effectively operate in
the increasingly fast-moving international environment. They need to be
comfortable and adaptable in dealing with disparate cultures. They need to
fully comprehend how global risk plays out for their business and be adept
at dealing with the long lead times inherent in the international marketplace.
They must also know the basic supply chain fundamentals associated with
global logistics, such as how to optimize import and export flows, how to
source globally, and how to deal with global labor issues.
2. Transformational Capabilities
Supply chain professionals reside in an incredibly dynamic environment,
where they are constantly driving transformational initiatives. They have to
get things done on time and on budget, while at the same time delivering
breakthrough results. As the bar constantly rises, skills in change management, project management, communication, negotiation, and talent management become paramount.
3. Integrated Business Planning
Supply chain professionals deal with more cross-functional and crossenterprise issues than anyone else in the company. They must find a way
to integrate the operations side of the company with its demand side, and
embrace demand and supply integration concepts, such as sales and operations planning. In addition, they are at the tip of the spear in designing collaboration initiatives with suppliers and customers, and they must master the
considerable challenge of planning the end-to-end supply chain.
4. Mastery of the Integrated Value Chain
Supply chain professionals have to find a way to exceed customer expectations if they are to be seen as core to the success of the enterprise. To do
that, they must become integral to

delivering outstanding value to customers. Customers often dont know
what they want until your firm or
your competitor exceeds their expectations and delivers a capability that amazes and delights them.
How is that done? By implementing
an end-to-end value chain design,
including customer segmentation,
product design, supply chain design
and optimization.
5. Linking Supply Chain Performance to Organizational Success
Supply chain professionals need
expertise far beyond the management of basic material flow. To be
world-class, they must combine
that with outstanding knowledge
of information flow and financial
flow. Mastering these three flows is
crucial to generating supply chain
performance and financial results
that resonate in the executive suite
and the boardroom. And to sustain
that performance, they must design
a metrics framework that drives the
right behavior and processes that deliver world-class results in product
availability at the lowest possible
cost and working capital levels.
The skill sets required by supply
chain professionals certainly have
changed dramatically from a decade
ago. Then, the supply chain leader
in most companies held a title such
as vice president of logistics. It
was a largely functional role that
relied on technical proficiency in discrete areas: knowledge of shipping
routes, familiarity with warehousing
equipment and distribution-center
locations and footprints, and a solid
grasp of freight rates and fuel costs.
That individual reported to the chief
operating officer or chief financial
officer, had few prospects of advancing further, and had no exposure to
the executive committee. The skill
set needed by the modern supply
chain executive has changed dramatically.
J. Paul Dittmann, PhD is executive
director of the Global Supply Chain
Institute at the University of Tennessee, Knoxville.
29
Legal Issues
Transportation in the
Litigation Limelight
By Marc Blubaugh and Ann Christopher
Marc Blubaugh
Ann Christopher
The 3PL industry must recognize

and respond to the growing trend
ofextreme transportation verdicts.
30
ne key area where liability exposure has significantly increased for 3PLs in recent years is in the area of transportation. More
specifically, aggressive plaintiffs attorneys have successfully imposed liability
on 3PLs in personal-injury cases arising from catastrophic truck accidents
where the 3PL merely arranged for the transportation of certain goods but
did not actually operate as the carrier. The 3PL industry must recognize and
respond to the growing trend of extreme transportation verdicts as plaintiffs
attorneys will continue to capitalize on this trend. Several recent cases vividly
illustrate this point.
For instance, on February 12, 2012, a jury in Cook County, Illinois, entered
a $27.7-million verdict against a transportation broker in the case of Hoffman v. Crane. In that case, a transportation broker arranged for the transportation of steel coils to Iowa. The truck driver was involved in a catastrophic
accident on the way home and severely injured another driver, a 50-year-old
mother who became a paraplegic. The plaintiff alleged that the truck driver,
the transportation broker and the shipper acted together as a joint venture
due to the nature of their relationships. In essence, the plaintiff argued that
the 3PL had the ability to control the motor carrier and should, therefore, be
jointly and severally liable. The jury agreed.
Similarly, on March 1, 2012, a federal-court jury in Oregon entered a
$5.2-million verdict against a transportation broker in the case of Linhart
v. Heyl. In that case, Nestl hired Heyl Logistics, a transportation broker, to
arrange for the transportation of goods. Heyl Logistics hired a motor carrier
whose driver ended up causing a serious truck accident while high on crystal
methamphetamine, killing another driver who was standing outside of his
truck inspecting his brakes.
It turned out that the motor carrier had had its operating authority revoked for failing to drug test its drivers. As a result, and in light of other operational red flags at the motor carriers operations, the estate of the deceased
claimed that the transportation broker negligently selected this particular
motor carrier. Once again, the jury agreed, to the tune of a multimilliondollar judgment.
Unfortunately, these cases are not outliers. For instance, another fairly
recent case of significance in this area is the case of Sperl v. C.H. Robinson,
which signaled a further expansion of transportation-broker liability. In
Sperl, C.H. Robinson (Robinson), the transportation broker, was subjected
to a $23.8-million jury verdict arising out of the deaths of two people and
serious injury of another, following a motor-vehicle accident involving the
carrier hired by Robinson.
The jury found that Robinson controlled the driver, which made the
driver Robinsons agent, and made Robinson vicariously liable. Robinson and
the carrier, Dragonfly Express (Dragonfly), had a standard broker/carrier
agreement in place, which included an independent contractor clause that
confirmed that the carriers drivers were not employees or agents of Rob-
inson or its customers. The agreement further stated

that all drivers of motor vehicles and persons employed
in connection with the transportation of commodities
under this contract are subject to the direction, control
and supervision of the carrier and not of Robinson or
its customers. Unfortunately for Robinson, the appeals
court did not believe that this language superseded the
factual indicia of control exercised by Robinson over
Dragonfly.
In examining traditional control factors, as well as
the nature of the carriers role in relation to Robinsons
business, Robinsons right to discharge, the method of
payment, provision of necessary equipment, deduction
of taxes and skill level required, the appeals court upheld the jurys verdict. The court found that Robinson
required Dragonfly to have a specific refrigerated trailer,
and, importantly, issued load-confirmation sheets dictating special instructions concerning the load, including:
particular times to pick up the load;
requirements to make daily calls to Robinson;
requirements to maintain constant communication
with Robinson;
requirements to notify Robinson if an accident occurs;
and
requirements to monitor trailer temperature.
Perhaps most importantly, Robinson also had a system of fines that were imposed on drivers, which, according to the court, created pressure on drivers to get to
a destination, even if it meant violating hours-of-service
regulations. The court also stated that the fact that Robinsons general business services were closely aligned
with Dragonflys was of great significance. The court
further considered that Robinson controlled the method
of payment, paid the driver directly, and actually provided (and owned) the goods being carried. The Illinois
Supreme Court declined to consider an appeal, leaving
the jury verdict in place.
It should be noted that the recent emphasis on transportation litigation is not limited to transportation brokers. An Arizona jury recently returned a verdict of $13.2
million in Bachrach v. Covenant Transportation, against
Covenant Transportation, a motor carrier. Interestingly,
this case did not involve a carrier hitting another vehicle.
Rather, the Covenant tractor trailer overturned in the
middle of the night and was hit by a passenger vehicle.
The parents of the deceased driver of the passenger
vehicle filed suit against Covenant for destroying the
relationship they had had with their son, the deceased.
Although the father had an unstable relationship with the
deceased with acknowledged peaks and valleys, and
despite the fact that the two had not seen each other for
over nine months, the jury award was based in part on
the premise that the father could never have an opportunity to reconnect and strengthen the father/son relationship. Notably, this award was separate from that brought
by the deceaseds spouse and children, which had been
settled several years earlier.
While the legal soundness of these jury verdicts and

court decisions can be critiqued on a variety of levels,
the fact of the matter is that rightly or wrongly 3PLs
of all kinds face expanded liability exposure in catastrophic personal-injury cases. Therefore, when acting
in its capacity as a transportation broker, the warehouseman must undertake due diligence in the selection
of actual transportation providers, must not exercise
undue control over those transportation providers,
must consider how they have structured their business
to protect assets, should verify the carriers motor carrier safety rating, operating authority and insurance,
and must examine the potential need for contingent
automobile insurance or similar products in order to
protect against any substantial risk that may materialize. In addition to evaluating the need for contingent
auto liability coverage (which is highly recommended),
a 3PL should also require certificates of insurance or
the underlying policies themselves from the motor
carriers that they contract with. This allows the 3PL
the opportunity to confirm that adequate coverage is in
place and with a reputable insurance company. It is also
recommended that the motor carrier add the 3PL as an
additional insured on such policies.
Likewise, for 3PLs that are providing actual motor
carriage, recent case law emphasizes the need to properly
screen drivers, which should include a review of the driver record, accident history, license verification, road test,
DOT pre-employment drug screening, and a DOT physical. Carriers must ensure drivers are properly trained
and that hours of service are adhered to and monitored.
Of course, when contracting with temporary-driverplacement agencies, it is also critical that a transportation carrier specify driver criteria for driver-qualification
purposes.
In summary, when considering your transportationrelated services, an ounce of prevention is most definitely
worth a pound of cure.
Marc S. Blubaugh is Partner and Co-Chair, Transportation & Logistics Practice Group with Benesch, Friedlander, Coplan & Aronoff LLP Columbus, Ohio. Ann
Christopher is Vice President & Legal Counsel at Kenco
in Chattanooga, Tennessee.
TORONTO
VANCOUVER
www.mckennalogistics.ca
1-800-561-4997
31
Strategic Company Analysis
Financial Benchmarking:
How It Works and
WhyDo It?
By Ken Ackerman and Arthur Barrett
any trade associations offer financial benchmarking as a service to their members, including IWLA the last time
in 2005. This article will focus on the many benefits of benchmarking, and
present our members an opportunity to benchmark their own financial performance against those of their peers.
How It Works
Ken Ackerman
Arthur Barrett
IWLA is considering forming an

adhoc committee to spearhead
thisinitiative.
Companies participating in the program send their year-end financials to

a benchmarking service. All of the submissions are tabulated, and then two
reports are issued to each company. The first is an industry benchmarking
report that provides an overview of financial results for all participating members. The second report, a profit analysis, is specific to each company.
The benchmarking report will include some critical profit variables, such as:
Revenue per employee
Operating expense percentage
Average collection period
An overview of financial results will provide total revenue for the typical
company, operating profit, and profit before taxes. It will also report the
return on assets. Supplemental reports may provide information about asset
turnover, pretax return on assets, and pretax return on net worth. Productivity ratio information will include revenue per customer, revenue per square
foot, revenue per cubic foot, and revenue per employee.
How You Can Use the Report Data
Here is how the data from a performance-analysis report (PAR) can be

used to help you in your warehouse operations:
If you are planning to buy another company, or if you are thinking about
selling your company, these benchmarks could be invaluable to you.
You will be able to compare your financial performance with those of
other companies in the same industry. Furthermore, when your company
participates in such services over several years, you will be able to benchmark your own trends against industry trends. PAR information can be
used to justify an acquisition multiple.
Comparing your companys results against those of all participants will
highlight opportunities for improvement.
If you are considering the liquidation of one or more branches of your
business, the PAR data can support or modify your decision.
If you are planning an employee stock-ownership plan (ESOP), PAR data
can help with the valuation.
If you need one or more key performance indicators (KPIs) to support an
incentive compensation program, the PAR data can provide a baseline.
32
If one or more of your clients

wants KPIs in a warehouse
agreement, you can use PAR
data to construct or modify
these.
Who Provides
ThisService?
One of the largest providers is

Profit Planning Group (www.profitplanninggroup.com), a firm that
handles between 100 and 130 projects per year for a wide variety of
trade associations and franchising
firms. This is the group that formerly
served IWLA. A competitive alternative is Dynamic Benchmarking
(www.dynamicbenchmarking.com),
which offers a very similar service.
The International Association of
Refrigerated Warehouses handles its
benchmarking project with a professor in Texas and a CPA firm in
Maryland.
The trade association for wholesale florists procures three different
reports from Profit Planning Group.
It receives a biennial compensation
report that allows its members to
compare salaries with others in the
same industry. A quarterly sales report gives it some benchmarks on
sales activity. The annual profit report is the associations most important project. About 30 percent of
members participate a very high
participation rate for this type of
initiative. Even the members who
do not participate express interest
in the results. The florist-association
staff feels that having a good crosssection of the industry is every bit as
important as having a high rate of
participation.
The Users View
We spoke with a wholesaler trade

group that has used financial benchmarking for about 30 years. The
group conducts a survey every year,
and 30 percent to 40 percent of its
members participate. Those participants feel that the benchmarking
service is one of the most important
reasons to join the trade association.
Some users participate in the survey
only every other year.
What Are the

Negatives?
There is always a trust factor when

sharing confidential information,
so it is important to work with a
reputable benchmarking consultant.
Some work is required on the part of
the member in order to develop the
information for the survey. Finally,
it is important to create interest in
the initiative, as higher participation
drives the relevance of the results.
Why Do It Now?
The warehouse-based thirdparty-logistics industry remains

highly fragmented, and merger and
acquisition activity is as prevalent
as ever. Independent benchmarking
is particularly relevant with a large
number of family-owned corporations that tend to be more focused
on operational performance than
financial performance. At the same
time, some companies plan to grow
through the process of buying others in the same industry. Even those
who dont wish to buy or sell can
gain valuable information about the
best opportunities to improve profit
performance, simply because the
reports tend to highlight key performance indicators and compare the
results of your company with those
of the whole industry.
Next Steps
IWLA is considering forming an

ad hoc committee to spearhead this
initiative, and select a benchmarking
consulting firm to define the metrics
and collect the data. If you would
like to have input into this process,
contact Ken Ackerman, president of
K.B. Ackerman Company, at (614)
488-3165 or ken@warehousingforum.com.
Kenneth Ackerman is president of
K.B. Ackerman Company in Colum
bus, Ohio. Arthur Barrett is president of Barrett Distribution Centers
and chairman of IWLA.
For those interested in seeing a full
performance-analysis report (PAR),
visit www.IWLA.com/events/3PL.
aspx.
ADVERTISER INDEX
Ancra International LLC................. 11
Benesch, Friedlander, Coplan
& Aronoff LLP............................... 24
Dehnco........................................... 3
Elite Storage Solutions............... OBC
IWLA Convention & Expo............. 20
Konstant Storage Systems.......... IFC
McKenna Logistics Centres.......... 31
MercuryGate................................IBC
Rack Armour Ltd........................... 16
Redirack Storage Systems........... IFC
Sackett Systems Inc..................... 29
SolarWorld...................................... 8
Sonwil Distribution Center.............. 4
Waddell Insurance Brokers Ltd...... 22
Editorial and Advertising

Disclaimers
The editorial contents of this publication are educational and informational in nature, and not intended as
minimum standards, or legal or other
professional advice.
The International Warehouse Logistics Association has endeavored to
include appropriate and accurate
statements, but disclaims any and
all warranties and/or responsibility
for the statements or their application. Users should confer with their
professional advisers for specific input and assistance concerning their
respective projects.
Any expressions of opinion or perspective by authors of articles included in this publication are not
necessarily those of the IWLA.
The inclusion of commercial advertisements in this publication constitutes neither a recommendation nor
an endorsement of the product or
service advertised. Although the International Warehouse Logistics Association will not knowingly publish a
false or misleading advertisement, no
attempt has been made to verify the
contents of advertisements included
in this publication unless other than
as set forth in writing by IWLA.
33
Leadership and Management
Radical Times Call for

Visionary Leadership
By Chip Scholz
Motivating is difficult because

itinvolves the messy work of
igniting peoples passions so theyll
carry out your vision.
34
ike it or not, we are in the midst of great social, economic and

political upheaval. The way we live and work has changed tremendously
in the last 10 years, and its likely to be radically different in another decade.
Perhaps we need to take another look at whats needed in leadership style
during this period of uncertainty and transition. Is it time to call on intensely
visionary leaders?
Theres a case to be made for narcissistic CEOs who can lead companies
to greatness, inspire followers and achieve game-changing solutions in our
rapidly changing world. In the words of Michael Maccoby, author of Narcissistic Leaders: Who Succeeds and Who Fails: It is narcissistic leaders who
take us to places weve never been before, who innovate, who build empires
out of nothing.
Unfortunately, with the banking meltdown and the recession that followed
in 2008, capital has been shifted away from risky investments, spurring more
conservative, by-the-numbers leadership personalities to take charge.
This doesnt change the fact that were still living in an era of continuous
invention and experimentation. It takes strong, visionary leaders to unleash
the power of emerging technologies, turn ideas into practical tools everyone
can use, and change the way we live and do business.
Conservative leadership, focusing on what works now, can negatively
impact the technological and social advances required over the next 20 years
particularly in emerging fields like nanotechnology, genomics and gene
therapy, robotics, artificial intelligence, biomedicine, bioengineered food,
environment, energy and health care.
Given the huge social and economic stakes, theres an urgent need to understand leaders personality types particularly, the promise and peril of
radical, visionary leadership. When does visionary leadership veer off into
unproductive narcissism?
Narcissists can be honest or crooked, brilliant or ordinary, wise or foolish.
The label is often misused and misunderstood, and its usually applied in a
negative context. Consider this: Narcissists can be passionately bold visionaries, highly capable of persuading others to embrace the value of their ideas.
In the last 20 years, weve enjoyed radical advances from companies led
by productive narcissists like Bill Gates, Steve Jobs, Andy Grove, Howard
Schultz, Richard Branson and Oprah Winfrey.
While some thought leaders claim that sustained business success depends
on bold innovators and productive narcissists, many caution against celebrity
CEOs who lead Enron-and-Tyco-type scams.
Obsessive business leaders excel at cutting costs, culling nonperformers
from the pack, and implementing the right processes and systems. On the
other hand, productive narcissists want to create new games, changing the
way we live and work. Which approach is better for leading your company?
The answer depends on the context.
At this time in history, we need creative energy and passion more than ever
before. What differentiates the moresuccessful visionary leaders from the

failures is strategic intelligence.
Strategic Intelligence
Think of Jack Welch, Bill Gates

and Herb Kelleher, the flamboyant
self-promoter who built Southwest
Airlines. These leaders developed disciplined management styles by partnering with operational managers
who implemented their strategies.
These visionary leaders (and others who succeed as productive narcissists) are strategically intelligent.
Its not enough to be a creative genius with media-worthy new ideas.
Building an innovative organization requires leaders who know
how to motivate talented and ethical
people within a socioeconomic system that creates value for customers,
employees and owners.
Many companies, even those
known for innovation, dont want
to hire narcissists. No matter how
much their leaders boast of encouraging independent thinking and creativity, many businesses have little
tolerance for true originals or mavericks. They prefer the obsessive
type who is driven to please and
enforces company rules.
Too often, promotions are in short
supply for high-performing, creative
visionaries who arent team players. Indeed, most narcissists dont
play well with others unless,
that is, they have strategic intelligence and pay close attention to the
crucial requirements for leading a
company to sustainable success.
Five Elements of
Strategic Intelligence
According to Maccoby, visionary

leaders succeed because they have
mastered five elements of strategic
intelligence:
1. Foresight
2. Systems thinking
3. Visioning
4. Motivating
5. Partnering
Foresight
Any coherent view of strategy
involves thinking about the future.
Aspiring entrepreneurs came

up withways to make it big
ontheInternet. They asked,
How do I capitalize onwhat
alreadyexists?
Leaders anticipate how current
movements, ideas and forces will
play out in the short and long terms.
They can identify evolving products,
services, technology systems, global
gaps, competitors, and customer
needs and values.
Foresight is more complex than
extrapolating todays market into
the future. The dot-com bust between 1995 and 2000 is a perfect
example of the difference between
foresight and extrapolation. Aspiring entrepreneurs came up with
ways to make it big on the Internet.
They asked, How do I capitalize on
what already exists?
Foresight would have required
them to ask, How do we capitalize
on what doesnt exist now but will
in the future? Its not about linear
thinking. Leaders must connect the
dots among many interdependent
forces and determine how they will
coalesce. Foresight requires systems
thinking.
Systems Thinking
Visionary leaders understand how
disparate parts influence the whole.
They synthesize and integrate various elements to build and maintain
healthy systems.
Those who want to lead companies in new directions must have
competency in systems thinking, as
well as the other interdependent elements of strategic intelligence.
Visioning
Foresight and systems thinking
are pure intelligence skills. The other
components of strategic intelligence
visioning, motivating and partnering are real-world skills, sometimes referred to as street smarts.
Unforeseen events, peoples quirks
and qualities, messy interactions
with other companies and a vola-
tile economic climate make business

success a complex affair.
Visioning combines foresight and
systems thinking into a realistic view
of business goals. In some companies (IBM, GE), visionary leaders
have had the foresight to shift from
selling products to selling solutions
in a knowledge/service economy.
A focus on learning ensures that
visioning evolves with the times. Yet,
even the clearest vision can fail if a
leader lacks the skills to motivate.
Motivating
Motivating is the most misunderstood and elusive element of strategic intelligence. Its one thing to talk
up a storm about how a corporate
initiative designed to improve sales
and profits will help you crush the
competition. Its quite another to
grasp the importance of soft skills
like influencing others to act as you
see fit.
Motivating is difficult because it
involves the messy work of igniting
peoples passions so theyll carry out
your vision. A business model that
neglects human motivations wont
get the buy-in needed to make your
vision a reality.
Consider appealing to the four
Rs:
Reasons
Rewards
Relationships
Responsibilities
You must reward positive behaviors to further your vision. By
building genuine relationships, you
convince people to take ownership
of the responsibilities youve entrusted to them.
Many leaders motivate only their
immediate teams, often ignoring
front-line workers and lower-level
employees. A CEO with strategic
intelligence recognizes the need to
motivate the entire hierarchy.
Partnering
Partnering is the ability to forge
key strategic alliances. Its different
than making friends; a leader with
strategic intelligence makes allies.
You need to understand how each alliance fits into your corporate vision.
Partnering is the opposite of ac3PL Americas December 2012
35
quiring companies to bolster overall

financial holdings. Leaders who operate in this fashion are merely serial
acquirers. You must learn how to
partner internally (with advisers who
complement your personality) and
externally (with companies that add
value, rather than size). This requires
an understanding of how companies
work together to motivate a social
system that achieves ones vision.
Self-Assessment
There is no established measure-
3PL Americas
T H E M AG A Z I N E O F I W L A I N N O R T H A M E R I C A FA L L 2 012
ment tool for strategic intelligence.

In Narcissistic Leaders, Maccoby
offers several questions that can help
you self-assess your abilities.
The real test of a leaders strategic
intelligence is in the workplace:
Foresight: How well do you stay
abreast of marketplace trends?
Do you excel at imagining new
products, services and paradigms
for the future?
Systems Thinking: Do you think
in terms of systems, synthesizing and integrating feedback and
3PL Americas
THEMAGA ZINEOFIWL AINNORTHAMERICASPRiNG2012
Complexities of Latin
American Supply Chains
w w w.IWL A .com
w w w.IWL A .com
Allied Logistics: Capitalizing on New Opportunities
T H E M AG A Z I N E O F I W L A I N N O R T H A M E R I CA W I N T E R 2 012
IWLA Demonstrates
Sustainability Leadership
Freight Forwarding
to Alaska:
Dreaming Up
Solutions to Logistics
Challenges
Emerging Markets
and the Global
Supply Chain
3PL Americas
Warehouse Liens: More Critical Than Ever in Tough Economy
w w w.IWL A .com
2012 IWL A Convention & Expo San Francisco
Future Issues of 3PL Americas

3PL Americas is the magazine of IWLA and provides
members and non-members with news and information on concepts and best practices in warehouse and
logistics management. The lead articles for upcoming
issues are set well in advance. We welcome reader
input on themes and articles for future issues.
The lead article themes (and editorial deadlines) for
upcoming issues are:
Winter 2013 Grow Your Own Way I
(January18, 2013)
A pre-conference issue
Spring 2013 Grow Your Own Way II
(April 12, 2013)
A post-conference issue
Summer 2013 Security in the supply chain
(July12, 2013)
Fall 2013 Logistics & warehousing challenges
forthe military (October 18, 2013)
Suggestions for authors, articles and themes can be
submitted to 3PL@jmla.biz.
36
hard-to-imagine possibilities?
Visioning: How well can you take
an idea and translate it into a
workable vision with measurable
goals?
Motivating: Do you inspire others to buy into your vision and
execute your ideas?
Partnering: How well do you forge
strategic alliances, both internally
and externally? Do you recognize
that alliances are two-way streets,
and encourage collaboration?
Summary
There is a strong need for bold,

visionary, productive narcissists who
can lead companies through 21stcentury periods of uncertainty and
transition. The best way to avoid
leadership derailment is to steer
narcissistic leaders onto stabilizing
paths by developing their strategic
intelligence.
Maccoby makes a strong case
against obsessive, by-the-numbers
personality types as leaders because
their conservative approach to running companies doesnt allow for
sufficient risk-taking or innovation.
Much depends, however, on the specific business environment.
If youve ever wondered how
someone like Steve Jobs could succeed, in spite of his lack of emotional intelligence, the answer may
lie in his strengths as a productive
narcissist, coupled with his strategic
intelligence. The same can be said
for many stellar leaders over the last
20 years: Jack Welch, Bill Gates,
Andy Grove, Larry Ellison, Richard
Branson and Herb Kelleher. Each is
a strong personality with narcissistic
tendencies of the productive kind.
Given the huge social and economic stakes, theres a critical need
to understand leadership personalities, including the value of the narcissistic leader.
Chip Scholz is head coach of Scholz
and Associates, Inc. and serves on
the IWLA board of directors. This
article is republished with permission from the September 2012 issue
of The Scholz Report.

Membership Application
Select Your Membership Option

Associate (Vendor)
$2,450
$500
International (Outside US and Canada)
$250
Professional (Retirees)
$45
Student
See Reverse
Warehouse (Own or Control Warehouse)
International Warehouse Logistics Association (IWLA) is a trade association that promotes growth and success of third-party
warehousing, distribution and logistics outsourcing companies.
Date
/
/20
Please type or print clearly.
Have you previously been a member of IWLA? No Yes
If yes, under what name?
Referred by?
Company Name
Main Phone
Address 1
Address 2
City
Website
State/Province
Zip/Postal Code
Country
Main Email
Contact Information
Primary Contact Name
Primary Contact Title
Primary Contact Email Address
Primary Contact Phone
Billing Contact Name
Billing Contact Title
Billing Contact Email Address
Billing Contact Phone
Additional Contact Name
Additional Contact Title
Additional Contact Email Address
Additional Contact Phone
Primary Contact Fax
Billing Contact Fax
Additional Contact Fax
Payment Information
I hereby apply for membership in the International Warehouse Logistics Association

(IWLA). I approve and agree to the purpose of the organization and its by-laws, Dues Amount
which govern its affairs. I certify that I am an officer of the above company; that all
the information reported in this application is accurate; and that all space, both public Total U.S. Funds Enclosed
and contract, has been reported and will be operated in the most ethical manner. I
understand that if false or misleading information has been reported, my application In accordance with the Omnibus Budget Reconciliation Act of 1993,
IWLA estimates that approximately 5% of your dues payment to us
may be denied. Furthermore, I certify that our company subscribes to the following
is non-deductible as a "lobbying expense". The remainder (95%) is
IWLA Statement of Principles to which every member of IWLA subscribes: 1. Our deductible only as a business expense; it is not a charitable
company recognizes that the business of warehouse logistics and its services, which is contribution.
entrusted with the property of others, demands a high sense of responsibility and
Payment Method: Check Visa
ethical conduct to meet the needs of its customers and the public. 2. Our company
recognizes the legal responsibilities imposed upon it as a warehouse logistics provider Master Card Amex Discover
and will care for the merchandise in its custody in the manner that a reasonable,
careful individual would exercise under similar circumstance.
CC#
Signature of Officer or Owner
Name As It Appears On Card
Exp Date
CV Code #
2800 S. River Road, Suite 260 Des Plaines, IL 60018 tel: (847) 813-4699 fax: (847) 813-0115 www.IWLA.com mail@IWLA.com
Additional Information
(Required for Warehouse Members)
Dues Rates for Warehouse

Members
Total Square Feet*

0 to 49,999 sq. ft.
Rate
$1,500
50,000 to 139,999 sq. ft.
$1,900
140,000 to 199,999 sq. ft.
$2,300
200,000 to 399,999 sq. ft. $3,000
400,000 to 999,999 sq. ft. $3,800
1,000,000 to 1,999,999 sq. ft. $4,500
2,000,000 to 2,999,999 sq. ft. $5,500
3,000,000 to 3,999,999 sq. ft. $7,000
4,000,000 to 5,999,999 sq. ft. $9,000
6,000,000 or more sq. ft.
$11,000
*Dues based on total public/contract space owned, operated, or controlled
Information about any affiliated

companies
Customers Bonded SqFt

Temperature-Controlled SqFt
Estimated # of Truck Doors
Estimated # of Rail Doors
Estimated # of Drive-In Doors
Estimated # of Dock Levelors
Estimated # of Dock Seals
Light Fixture Type:
Fluorescent Halogen T5/T8 Bulbs
Estimated # of Whse Light Fixtures
Estimated # of RF Access Points
Estimated # of Trailers
Estimated # of Tractors
Estimated # of Trucks
Company Name
Estimated # of Forklifts
Estimated # of Lift Attachments
Estimated # Rack Pallet Positions
Primary Contact Email

Company Name
Primary Contact Email
Estimated # of Computers
Packing Equipment:
Carton sealer
L-bar sealer
Case/poly wrap Palletizer

Conveyor
Shrink wrap
Heat Tunnel
Stretch wrap
2800 S. River Road, Suite 260 Des Plaines, IL 60018 tel: (847) 813-4699 fax: (847) 813-0115 www.IWLA.com mail@IWLA.com
HIT IT OUT
OF THE PARK
Home Run The right TMS makes the difference

Your team needs the right equipment to manage transportation effectively. MercuryGates TMS
gives you everything you need manage any mode, in any country, playing by your rules. Plan,
optimize, execute, rate, track, and settle shipments with
our on-demand delivery model thats ready when you are.
Whether youre in the majors or just starting out, youll
have the tools you need to hit a home run every time.
sales@mercurygate.com
TMS that delivers.
www.mercurygate.com
w w w. m e r c u r y g a t e . c o m
SELECTIVE, ROLL FORMED,

STRUCTURAL, PUSH-BACK, PALLET FLOW,
CARTON FLOW, DRIVE-IN,
CANTILEVER
RACKS
DESIGN
ENGINEERING
Atlanta, GA TEL: 770-207-0002

Los Angeles, CA TEL: 949-757-1377
MANUFACTURING
TURN-KEY INSTALLATION
CONTACT INFO:
www.elitestoragesolutions.com

SCM in Healthcare

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

SCM in Healthcare

Uploaded by

Copyright:

Available Formats

3PLAmericas

Toll Free: 1-888-566-7826

Carton & Pallet Flow Rack

Structural & Roll-Formed

Selective Rack & VNA

Double Deep Rack

Workstation Integration System Evaluation

Promotes Ergonomics Creates Efficiency Increases Productivity

Your Workstation Solution Partner

Ph: 8473821579 Fax: 8473821615

Logistics to power your distribution

Technology to increase your competitive edge

RF Inventory Management Technology

Refrigerated and Ambient Load capabilities

Clean Modern flex space build to suit

The most sophisticated technology at your fingertips to get

We use the latest software

Get the peace of mind of being

Were in the center of it all.

Contact Dave Harper: 716.206.1842 dharper@sonwil.com

6 The Success of Your Company Starts at the Core:

Copyright 2012, International

7 IWLA: Your Resource inChanging Times

21 Grow Your Own Way In Orlando

9 Accuristix: Thriving in the Highly Regulated

12 Pain in the (Supply) Chain Survey:

Caution Remains in Health-Care Industry

17 Provincial Health-Care Supply Chain Creates

By Jim Eckler and Jennifer Simpson

An interview with Paul Verst

23 Realizing the Economic Potential of Logistics Clusters

25 Maximizing Productivity in E-commerce 3PLs

26 IWLA Events Calendar

30 Transportation in the Litigation Limelight

32 Financial Benchmarking: How It Works and WhyDo It?

THE MAGAZINE OF IWLA IN NORTH AMERICA DECEMBER 2012

The Success of Your

We must rely on the people

3PL Americas December 2012

uilding and maintaining a successful business requires

IWLA: Your Resource

Paul Verst and his committee are

t the most recent meeting of the IWLA Board of

3PL Americas December 2012

SOLAR: THE NEW BUZZ WORD

Were SolarWorld Americas Authority on Solar

Avidan Management Edison, NJ 4.26 MW

3PL Americas December 2012

presentations, and employees

Accuristix was formed in

3PL Americas December 2012

product for which it is responsible,

To maintain their efficacy, pharmaceutical products have specific

enter and leave the warehouse

Global Supply Chain Perspective

Pain in the (Supply) Chain

3PL Americas December 2012

pressure of regulatory compliance

1. Regulations, Reform and Legislation. Regulations, reform and

perspectives on value creation.

The five-year anniversary of the

to determine what factors have had

Health-care companies are under