Global Logistics and Supply Chain Strategies - June 2008 - (Page 12) FedEx Freight Chief Lauds Advances in Technology, But Says Big Problems Remain Even in a down economy, transportation providers are working to improve service levels through new technology. Safety is one area where significant progress is being made, according to Douglas G. Duncan, president and chief executive officer of FedEx Freight Corp. Speaking in San Diego, Calif. at the annual meeting of the Transportation & Logistics Council Inc., he pointed to the use of collision-avoidance systems, utilizing Doppler radar, on every new tractor acquired by the company. Improved dock lighting and anti-rollover devices have further reduced accidents. But the biggest innovation in trucking, according to Duncan, might be the use of the so-called black box—an onboard recorder that monitors every aspect of operations, with the help of satellite communications and radio frequency identification (RFID) tags. “We believe it’s the wave of the future,” he said. In the area of “green” initiatives, FedEx Freight hopes to convert most of its spective. “We need to coordinate the approach of all modes and include the customer,” he said. Duncan also cited energy security and sustainability as issues that must be tackled. Since 1998, he noted, energy costs as a percentage of gross domestic product have doubled. He urged adoption of a national energy policy that would reduce the nation’s dependence on fossil fuels, especially oil. Visit www.fedexfreight.com. Watch for These Red Flags Warning of Supply Chain Fraud in Outsourcing Global expansion brings a host of benefits to companies looking to cut costs and broaden markets. But it also heightens risk. Chief among concerns is the possibility of supply chain fraud. A new report by Kroll Inc., a global risk consulting company, identifies some of the dangers to global business. Large companies have come to depend on a network of partners to create “extended enterprises,” the report notes. In the process, they become more vulnerable to fraud, ranging from simple theft to misstatement of inventory levels, counterfeiting, gray market diversion and piracy. “Fraud thrives on complexity and companies are facing fraud from the very beginning, on every single factor: raw materials, production and delivery,” says Richard Abbey, a managing director of Kroll in London. The pharmaceutical industry is especially vulnerable, with an increasingly complex network of production, distribution and sales. According to the U.S. Food and Drug Administration, the number of fraudulent drugs in the supply chain increased fivefold between 2001 and 2007. The World Health Organization estimates that some 10 percent of drugs on the market worldwide are counterfeit. As for cargo theft, it represents a $12bn problem in the U.S. alone, Kroll says. The firm recommends that companies trying to avoid fraud be on the lookout for the following red flags: abnormal selection of vendors, where a single individual might be picking key service providers; payments outside the normal accounts system, especially those that are handdelivered, approved manually or not accompanied by a proof of delivery; unusual payment patterns, with a surge in payments to one vendor or multiple invoices on the same day; rates paid out of line with the company’s standing in the market, which might indicate kickbacks or illicit payments; unexplained lifestyle improvements among buyers of services; and complaints or tips from workers, who might be excluded or marginalized by corrupt staff members. Visit www.kroll.com. pickup and delivery fleet to electricity through plug-in technology. Solar power will provide at least half of the energy needs at hub facilities in Whittier and Fontana, Calif. The Oakland, Calif., hub of FedEx Express already runs on solar, he noted. At the same time, said Duncan, the trucking industry faces some serious challenges. Spending on transportation infrastructure is not keeping pace with current needs, let alone projected growth in traffic. “We are not adding infrastructure capacity in any meaningful form and have not for 20 years.” By 2020, he added, there will be twice as many cars and trucks on the nation’s highways. The impact will be felt first in the supply chain, in the form of congestion, delayed shipments and higher costs for shippers. The worsening situation has already begun to offset many of the productivity gains achieved by logistics professionals over the last two decades, Duncan said. Yet legislators continue to view growing congestion as “an inconvenience, not a restraint of commerce.” He called for planners and lawmakers to approach the problem from a multimodal per- Marsh: Most Companies Unprepared for Rising Level of Risk in Their Supply Chains And it isn’t just about fraud. Says Marsh Inc.: “Most businesses are illprepared to handle the rising risk levels, caused by more global and 12 JUNE 2008 http://www.fedexfreight.com http://www.kroll.com
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