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Newsletter |
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Volume 3, Issue 5 |
Spring 1998 |
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Inside This Issue |
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From the President | |
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Convention Program | |
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Supply Chain Ethics | |
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Strikes, Riots and Civil Commotions | |
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New Members | |
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Demographics of IRTA Members - 1998 | |
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ON-DOCK REFRIGERATED CAPABILITIES IN U.S. PORTS | |
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Reefer Warehouses at U.S. Ports | |
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News Briefs |
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From the President By Robert C. Mirone Dear Fellow Members: The time draws near for our Annual Convention. As you are well aware, this is the first of what we expect to be many conventions to be held outside the United States. As pointed out by Roeland Golterman, we have lived up to the "International" part of our name. Our Annual Convention is the only time
that our widespread membership can meet in one place to
share friendship and mutual interests. It is heartening to
have heard of the number of friendships that have been
formed at these conventions, as well as the business started
or conducted. This year, we expect the largest number of
European delegates that we have ever had. From the listing
of attendees, there will be wide range of shippers,
carriers, ports, claims agents, ships agents and stevedores,
among others present. Inevitably, when that many business
people are in one place, attorneys are also present. Because many of the delegates are traveling with guests, we have expanded the social program to include various tours, in addition to the annual golf outing. Not to be labeled a front runner, before the start of the Convention, I extend the Board of Directors’ thanks to our Vice President, Marcia Holland, who has more than borne the brunt of the organizational efforts. Congratulations, Marcia. If you have not already received the proxies for the election of Directors, they are to arrive shortly. For those not attending the General Meeting on May 17th, we ask that you get your proxies in as soon as possible. Each vote is an important one. The Board of Directors represents the members and their interests, and it has been a credo of IRTA that the organization exists for the purpose of serving its members. Thus, your choice of directors is of the utmost importance. I and the entire Board look forward to renewing our friendships with the Members in Rotterdam. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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SUNDAY, MAY 17
MONDAY, MAY 18
TUESDAY, MAY 19
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By Michael Pregmon Jr. So much has been discussed and published on the issues of ethics, values, and morality in the country of late. Our most recent presidential campaign rise to a substantial emphasis on this topic. Nevertheless, there has been significant dialogue, even before that time, of declining national ethics and morality. And, it continues to surface continually in the news media. For those participants in the food logistics supply chain, the ethics of channel players has been recognizably getting worse for a long time. Unfortunately here, this topic gets hushed because each participant in the chain is afraid their "whistle blowing" will ultimately cause loss of business for them. The net effect has been a worsening condition of epidemic proportions. It is often evident that channel participants from shippers through carriers to receivers are seemingly no longer interested in doing their part to maximize efficiency of the total distribution system. More commonly, the trend word of the day is sub-optimization. Yet if these same participants took the attitude of becoming a partner in improving our distribution system, all players would benefit to an even greater extent. Now having stated that, here are the specifics. The concern for distribution channel ethics is more of a problem in certain regions of the country. It is a wonder that certain warehouses are able to get any service at all. Some of the most difficult delivery points are located in south Florida, New Orleans, Oakland, California, western North Carolina, Birmingham, Alabama, Newark and Elizabeth, New Jersey to name the worst. There are also certain specific delivery points in New York City, Chicago and in the Los Angeles basin which rival the above locations. And, we’re not referring to traffic snarls or roadway congestion either! Those are specific areas where threats at knifepoint and/or gunpoint, monetary bribery and extortion are commonplace. Further I must clarify, the instances highlighted in this presentation were not initiated by any organized labor union groups. Supply chain ethics is an issue which stems from the very top level of an organization. One may even expect this starts with the corporate culture of a firm. Top management establishes the behavior example and sets the stage in its dealings both internally as well as externally on how the company is run. Associates at lower levels of the organization watch and mimic that lead. If the company’s managers, at any level, are allowed or are willing to compromise their ethics or morality in their daily activities, this message quickly permeates the organization. Oftentimes, business ethics and personal ethics of an individual clash on certain issues. For some unexplained reason, individuals often operate their businesses and individually conduct themselves differently. Oddly enough some individuals consider whatever happens in business to be fair play. This seems unrealistic but is reality. Further, some individuals display questionable ethics at times, but on different occasions take a firm stand in the reverse. Following is an example of what happens on a daily basis throughout the supply chain. A particular wholesale grocery firm has had a consistently bad reputation for its dealings at the receiving warehouse level. This firm truly has a problem of epidemic proportion. Suppliers, truck drivers, carrier dispatchers each regret having to do business with this company. In fact, drivers turn down loads when asked to make a delivery at the facility. This is because of the continual harassment, extortion, and bodily harm threats often encountered. At this facility, a driver typically has to compensate dock personnel from $50 to $100 to get unloaded. If the driver refuses to pay the required fee and this money goes directly into the pockets of certain individuals – he will sit waiting for hours for a door assignment. It is quite obvious company management is either not aware, doesn’t care, or is simply oblivious to what’s happening in their company. People involved in the buying function of grocery chains are typically judged and rewarded for their performance as a result of good purchasing economics, acumen, and techniques. They are specifically responsible for maintaining stock levels to avoid stock-outs, yet insuring that inventory levels and carrying costs are not disproportionately high. Because of the activities on the company’s back dock, shipment delays and inconsistent service are commonplace. Two buyers in this organization became very disenchanted when they learned that more often merchandise they ordered was being held up from delivery – sometimes for days – because drivers were leaving the premises. Further, the performance of these buyers was being significantly affected by the unethical practices in the warehouse. The buyers were able to obtain specific documentation from their suppliers when they requested the information and the suppliers recognized their business relationship was not in jeopardy by providing this information. The delivering carriers were able to produce specific information about individuals, social security numbers, dates, times and actual amounts of cash provided to the warehousemen. As a result, both buyers were able to carry information to top management for corrective action. This is not an isolated case! LEVELS OF UNETHICAL PRACTICES There are three degrees of unethical practices commonly experienced at grocery distribution warehouses. These are: Performance Deterring Activities These are certainly the least severe of the three unethical practices encountered at the warehouse level. Grocery supply chain intermediaries, such as motor carriers, public warehouses, distributors, brokers etc. are well aware of the impact delivery delays, missed deliveries, and shipment shortages have on grocery chain merchandising programs. Distribution channel innovative programs such as JIT (just in time) inventory practices make on-time deliveries critically important in maintaining the proper shelf stocks at the retail level. Yet receiving warehouses, in an attempt to capitalize on the supplier – customer relationship, push costs up the supply chain. They often unduly delay carrier deliveries recognizing that the carriers and suppliers are sensitive to such delays. Further if the carrier is attempting to make a small drop-off whereby other deliveries from that truck is planned for the same day to other warehouses, any single delay will most likely delay all other deliveries. One of the biggest causes of these delays is the insistence by receivers for the carrier to perform sorting and segregation of products on the receiving dock. During the days of surface transportation regulation, there was some control over such practices. This service is rarely requested by the shipper, who usually pays the freight charges to the customer. It would increase the freight cost. Most of these manufacturers who ship LTL size shipments, sell their products on a FOB destination, freight prepaid basis. Multiple products (sku’s) deliveries are particularly concerning here. It is not unusual for a warehouse to require a driver to breakdown the load onto various other pallets by specific product code for the receiver. Not unusually, the driver may be required to sort, segregate and repalletize these products from five pallets on his truck onto sixty different pallets on the dock. Unfortunately, suppliers or shippers are not willing to bear these costs brought about by their customers at the receiving dock. The reason suppliers give to justify this position is that they have no control over the activities at their customer’s dock. Further, they often even hesitate to get involved in delivery problems involving their products because of a concern for customer relations. But if the driver does not pay the warehouse for this service, he rarely will be able to make the delivery in a reasonable period of time. And in these cases, he will most certainly miss the delivery appointment schedule for other drop-offs from his truck that day. In many instances if the driver insists on completing the delivery himself, two other obstacles may occur. Firstly, he may be delayed unnecessarily before a door is assigned because it is recognized that the delivery will be time-consuming and door space is often critically in demand. Secondly, many warehouses restrict the use of materials handling equipment to drivers. This is especially the case with the use of powered equipment as there may be a concern for insurance coverage or liability protection from non-employees. As a result if warehouse personnel will not cooperate to move palletized units out of the truck, the driver will have to manually handle each pallet or worse. Unload the cases individually out of the truck and onto the warehouse’s pallets. In these instances the sorting and segregating of the products on the dock is typically required of the driver. The Payoff – An Underground Economy The second level of unethical practices at many grocery distribution warehouses is the so called "payola" or "payoff" dilemma. This is more serious but less blatant than the situation described above. It is less blatant only because it is often completed on the sly. We are not including in this category instances whereby a driver may voluntarily engage a "helper" or "lumper" to assist in the unloading of his trailer. There are warehouses who absolutely require their "sanctioned" helper service be used. It may be good practice for the warehouse to control the quality of such providers of services in instances where the driver prefers to enlist the assistance of a helper for expediency. But, there are many warehouses that unethically use this ploy as a guise to extort cash which ultimately provides warehousemen with "kickbacks" from these outside dock helpers. Here we have company warehousemen "on the take!" This unfortunately may be occurring in your warehouse. Special favors are quickly provided to drivers who perpetuate these practices. Sometimes cash payments may not be involved. Sometimes, extra products or so called overages may be given to the warehousemen for some special handling provided to the driver. Where do these products come from? Often the products are not damages or outdated. Such transactions are clearly unethical. These "special services" provided to drivers by warehouse personnel for this extra cash compensation are many, varied and some involve infractions of the law. For example, the truck may be worked ahead of others in the queue; undocumented extra cargo may change hands or poor pallets may be exchanged for good ones. Threat of Injury This is the most extreme of cases encountered in this area of our food supply chain. It is not restricted to food distribution center deliveries. Certainly these instances extend much beyond the question of ethics. Typically at this stage, it is not the distribution center’s employees that are the aggressors. Most generally such threats are made by lumpers or helpers or casual laborers who are allowed to work the receiving and/or shipping docks of food distribution centers. This also happens more frequently at warehouse sites where the company allows a so called "unloading service" organization or group to provide this dock assistance. And, in most cases it occurs because the driver prefers to complete the work without help. What Can We Do? There are a number of things that can be initiated within the warehouse operation and throughout the company that will end such unethical and immoral practices in our food logistics supply chain. These are: The Buck Stops here Attitude It is imperative that top management get involved and not operate in an aura of complacency. To restate what has been stated above, if you think you don’t have a problem, you had better think again. In operations where it appears all is proceeding so very smoothly, a maelstrom of unethical activity is usually abound. Managers and supervisors must take responsibility and initiative to keep a close watch on activities on the dock. There can be no better application for the MBWA (management by walking around) technique. Employ Organizational Checks And Balances Our forefathers in devising the best governing document and system in the world – our constitution- astutely recognized the value of this concept by establishing the various branches of the government to keep each other in balance. So too your company’s organizational structure should entail this concept for loading/unloading trucks, handling, checking, and documenting warehouse activities. A warehouse is not unlike a bank or depository. Instead of currency, that value is still there and must be verified if any movement into or out of or even within the warehouse has taken place. Inventory Accuracy Check There can be no better control mechanism installed in any warehouse operation than cycle counting your inventory. This is nothing more than a periodic checkup on the "health" of your operation. Specific cycle counting methods have been developed to insure accuracy. The American Production and Inventory Control Society for one has designed an excellent program which provides a control process for insuring inventory accuracy. Supervisory Span Of Control For some reason in warehouse operations, this is the single most violated management control principle. We have become imbued with the concern for overstaffing our operations. Yet, we allow ourselves to be robbed blindly. We give very little thought or concern for the management challenge of the individual who supervises scores of people on the warehouse floor. We are then surprised to learn that our organization has at least one or more levels of unethical practices detailed above. Cross Train And Utilize This is one of the most powerful techniques for improved supervisory and management control. Unfortunately, many of us often fail to install this concept. What typically occurs in most of our operations is that we almost always get the feeling we don’t have enough people or time or that our activity "pulse" is always too high for us to invest in this technique. What a waste! This provides an outstanding opportunity to enhance morale by allowing our associates to do different things. By injecting some different people into another activity at times, the chance for the age old adage that "too much familiarity breathes contempt" is significantly reduced. This works! Develop True Partnerships Establish an attitude within your organization that you really and truly want to solve and satisfy your partner’s (customer’s) needs and problems. Encourage suppliers to provide feedback to you without retribution. You must believe this will bring to you more business, because it will. This too must start at the top of the company and flow through. It is not easy to change attitudes. Each supply chain participant must do his part – from shipper, motor carrier, driver, railroad, railroad dispatcher, to warehouse receiver, checker, etc. – to enhance team achievement for mutual benefit and total national logistics system efficiency. If you portray the proper attitude with your internal customers (your company’s employees) the chance for unethical behavior occurring becomes rare indeed. Benefits Of An Ethical Shop Needless to say, running an ethical company is the right thing to do. The cost of your company’s logistics operation will be reduced. How you ask, if your people are again doing the things they should be doing in your activity like sorting and segregating your products for warehouse storage? For one thing, your employees will be doing it correctly and accurately and not depending on outsiders. If your people are not giving merchandise away, your inventory will be more accurate. If your people, who are most familiar with your products and customers, are properly handling and palletizing the products you ordered, your inventory will always be on target. If your employees are not participating in the underground economy, your suppliers and carriers will want to do business with you. They will in fact help you to become more productive. Your customer’s perception of your customer service will reflect dramatic improvement. Your equipment and facilities will be more efficiently used. But most importantly, you and your organization will have contributed to providing a more productive and ethical food supply chain for all of us. In Conclusion If the foregoing does anything, it should raise the CEO’s awareness that these things may be occurring on the company’s back dock. No organization is exempt! If you truly believe yours is, as stated above, you’ve really got a problem. You need to quickly enlist the help of a professional security company to determine how bad. Once corrected, and with the proper controls in place, you will have done your part in attacking this epidemic in our food and grocery supply chains. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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By Dante Mattioni, Esq. The Chilean Grape Crisis of 1989 and the litigation it spawned illustrates that shippers, importers, exporters, consignees and all with a cargo interest must review their policies carefully and make inquiries as to what endorsements have been omitted and whether even more comprehensive coverage is available. On March 2, 1989, an anonymous caller to the United States Embassy in Santiago, Chile, stated that Chilean fruit bound for the United States would be injected with cyanide. The FDA detained all incoming Chilean fruit over the weekend of March 4 and 5 while it investigated. On March 6 it announced it considered the call a hoax. The embassy in Santiago then received a second and more specific call claiming access to orchards, storage facilities and shipping locations in Chile. On March 12 an FDA inspector at Philadelphia discovered two grapes on the incoming Almeria Star that appeared punctured and displayed uniform white rings. A third white-ringed grape in the crate appeared to have been slit rather than punctured. The FDA technicians used all of the two punctured grapes in conducting their tests. At approximately 9:30 p.m. on March 12 the Philadelphia laboratory reported positive cyanide tests results. However, the Cincinnati office could not find evidence of cyanide in the slurry from the two punctured grapes, in the third grape or in their bunch. On March 13, the Commissioner issued an order refusing entry of any additional Chilean fruit into the United States requiring the withdrawal and destruction of all Chilean fruit then in domestic channels of distribution. Consumers were encouraged to destroy any Chilean fruit in their possession, and grocers were instructed to remove all Chilean fruit from their shelves. In New Market Investment Corporation v. Fireman’s Fund Ins. Co., 774 F. Supp. 909 (E.D Pa 1991) one of the fruit importers brought suit under the Strikes, Riots and Civil Commotions Endorsement to an Open Marine Cargo Policy. During the Chilean Grape Crises which lasted until April 14, 1989, much of plaintiff’s fruit had eventually spoiled, was destroyed, or was so damaged by inspection that it had to destroyed. Plaintifff also had to give credits to some of its customers who had been unable to sell fruit which had already been delivered to them and was either returned or destroyed. Plaintiff presented testimony that it had been motivated to obtain the coverage provided in the S.R. & C.C. Endorsement by acts of terrorism which had occurred in Chile, particularly, the fire bombing of a truck in 1985. The endorsement provided. THIS INSURANCE ALSO COVERS:
c. delay or loss of market. Clearly, the parties knew how to limit coverage to physical loss where that was their intent . . . This language cannot reasonably be interpreted to mean that physical damage is a prerequisite to liability under an endorsement which purports to cover acts of terrorism. By answering "yes" to all three interrogatories, the jury found that the proximate and real efficient cause of Frupac’s losses was the acts of terrorism, and not delay, loss of market, or the actions of the government. However, this did not end the matter. In Fisher Bros. Sales, Inc. v. U.S., 46 F 3d 279 (3d Cir. 1995) (en banc), approximately 2400 Chilean growers and exporters of fresh fruit, a Chilean shipping line, three United States firms engaged in the importation and distribution of fresh produce, sought damages from the United States government, contending that the technicians in the FDA’s Philadelphia laboratory were negligent in failing to preserve any portion of the two punctured grapes for later confirmation testing. However, the Court held 706 that the Government was immune under the discretionary function exception to the Federal Tort Claims Act 287 U.S.C. 2680(a) reasoning that the plaintiffs would not have been injured by the alleged negligent acts were it not for the exercise of the Commissioner’s policy making decision. In New Market, the S.R. and C.C. Endorsement was purchased subsequent to the original policy. Apparently, the Chilean government had reimbursed Frupac over 50% of its claimed damages, paying $5,342,444. Fireman’s Fund claimed Frupac had overvalued its loss, especially fruit destroyed in Chile, and had already received $19,117 more that it was entitled to. The jury was left with a range of damages from $4,916,252.25 claimed by Frupac to negative $19,117 as the insurer contended. It awarded $217,218. The above saga suggests that one should carefully review the exclusions in his policy and inquire about all possible endorsements and the most comprehensive cover available. It will be noted that the 1963 and 1982 London Institute Cargo Clauses as well as the 1966 American Institute Cargo Clauses specifically exclude S.R. & C.C. coverage. Had not the prudent vicissitudes that might befall his cargo and purchased this additional cover, he would have been left without recourse.k | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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New Members Patrick Burnson Andrew Bickley, Esq. Lucia Avetikian de Renart Jeffrey D. Brown Ron Roberts Ernerst Beaurogard Howard Posner | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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By Peter F. Vickers The global movement of perishable commodities by sea is growing at an estimated compound annual rate of six percent. Total volume is expected to reach approximately 55 million metric tons by the year 2000 according to DRI/McGraw-Hill projections of which about sixty percent is estimated to be containerized. Bananas move in the greatest volume followed by seafood, meat, dairy, citrus and deciduous fruits. Worldwide economic growth, rising incomes and consumer desire for fresh foods throughout the year, irrespective of the season, are the driving force. To satisfy these requirements, exporting countries have increased production, new refrigeration technologies have been introduced on board ship, in containers, and in shore-side warehouses; all factors that have helped to extend the shelf life of the product and contribute to customer satisfaction. Marine terminals accustomed to handling refrigerated container traffic are well equipped with electrically powered reefer plugs to maintain temperatures between transfer from vessel to shore and vice-versa. Some terminals, and the numbers are increasing, have invested in on-dock refrigerated warehouses because not all refrigerated cargoes move through the port, in containers, from point of origin to point of discharge. In many instances, for marketing or logistical reasons, it is expedient to unload the perishable commodity into a refrigerated warehouse prior to delivery to receiver or exporting vessel. While bananas move on a year round basis, conventional refrigerated or pallet friendly vessels make considerable use of dockside refrigerated warehouse space as they move large volume shipments in seasonal markets. Latin America and the Caribbean are the dominant sources of refrigerated commodities to the United States, supplying the bulk of our bananas and deciduous fruits. South Africa is becoming a major supplier. Europe provides vegetables and tulip bulbs. Imports of meat come from Australia, New Zealand, Argentina and Uruguay. The export of refrigerated cargoes from the United States is increasing annually. Significant commodities are citrus, meat, poultry, apples and pears and an increased requirement exists for refrigerated space from the non-food business who are shipping commodities such as film, chemicals, and pharmaceuticals. As the number of United States ports that handle refrigerated cargoes grows it becomes important that those persons engaged in the movement of perishable cargoes have prompt access to up-to-date information on the facilities available to them at those ports. The Internet and World Wide Web are an additional source of such information and have been used to assist in reviewing the dock-side refrigerated facilities available at the selection of United States ports listed below. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Elsewhere in this issue author Michael Pregman discusses ethics in transportation with particular emphasis on questionable practices encountered in the distribution of food. One of the most objectionable actions is "limping", requiring drivers to pay for assistance in unloading their trucks, whether needed or not. Now, the Owner-Operator Independent Drivers Association has filed suit against two grocery warehouses. OOIDA’s motive in addition to winning monetary penalties, is to place the glare of publicity on a practice which no one – politicians, regulators, trade associations, even the IRS seems able to curtail. The Journal of Commerce recently published a special report on the top 100 importers and exporters, both containerized and non-containerized. Dole Fresh Fruit topped the list of containerized importers with 106,900 TEU. Third was Chiquita Brands at 86,000 TEU. Indeed, eight of the top 50 are food and agricultural importers. On the export side, ten of the top 50 ship food and agricultural products but the category includes tobacco, beer and hay cubes. Only one, IBP, could be characterized as a shipper of refrigerated foods. Much food export activity is handled by trading houses and this is evident in the non-containerized group where 18 of the top 50 can be characterized as traders. C.H. Robinson Company, a third party shipper and logistics provider based in Eden Prairie, Minnesota, recently published its 1998 Temperature-Controlled Logistics Report, a follow on to the 1997 study. The report, while primarily oriented around domestic transportation of refrigerated products by truck, rail and intermodal, also has lessors for the international shipper and carrier. Readers who are interested in learning more about shipper needs and attitudes should contact C.H. Robinson at (612) 937-8500. The Food and Drug Administration recently released a draft of its "Guide To Minimize Microbial Food Safety Hazards For Fresh Fruits and Vegetables". Its purpose is to provide guidance to growers and packers in improving the safety of imported and domestic produce throughout the process of growing, harvesting, packing and transporting such products. The Guide lists eight principles which, if adhered to throughout the distribution chain, should significantly improve the already high quality of food safety in the U.S. One section of the Guide addresses transportation consideration and makes common sense, but often ignored, recommendations such as ensuring that all personnel who have contact with the product (handlers, drivers, inspectors, buyers and visitors) comply with good hygienic practices; trucks should be inspected for cleanliness, odors, obvious dirt and debris; proper temperatures should be maintained throughout the cycle and trucks should be loaded in a manner that will minimize damage. Comments on the document are due June 29, 1998.k | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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