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In Their View is a freewheeling discussion of the day's burning issues. Open to anyone who has anything to say about the transportation and logistics industry in the Philippines.


You are now in: In Their View Archive : 2003 Q

 

Ensuring Inventory Integrity (September 8, 2003)

When we talk of warehousing, logistics or distribution as a function in any organization, big or small, some of the things that come to mind are customer satisfaction, delivery efficiency, order cycle time, savings in transport costs, headcount, materials handling equipment, warehouse management systems, etc. But in all of these, no matter how efficient and cost effective an organization is, every investment and effort is wasted if "inventory integrity" is doubtful.

On many occasions, partners (brand owners on the one hand and distributors/logistics service providers on the other) have walked away from their partnership simply because they could not agree on the correct inventory balances under the care of the distributor or logistics service provider.

"Inventory integrity" has always been a pain in any business partnership, and the tendency of brand owners to be "all-knowing" does not help resolve faults of the system. Huge amounts have been claimed and paid when, in fact, the majority of inventory variances or stock shortages are mere "paper variances" and not losses due to pilferage. Hijacking while goods are in transit is, of course, another issue altogether but one I do not wish to dwell on; the industry's frustration on the subject is no secret to anyone.

In spite of modern warehouse management systems, delivery systems, inventory tracking systems, etc., why do "paper variances" continue to occur? Simple! Because people who post transactions, stock receipts or issues in these systems have not been properly trained and/or achieved a level of pride in their work that will make them by nature cautious and perfectionists.
Other than errors in the posting of transactions in an otherwise system-controlled environment, the low quality and low accuracy of physical counts (or what others prefer to call stock takes) contribute to the problem of inventory variances.

In my many years of experience in the logistics and distribution industry, I had been asked by industry colleagues why they can't seem to get a stock take correct in just one count. My answer is, again, simple enough. Count errors being human errors will always happen at roughly 20% of the time. These are proven statistics - at least locally - particularly when bar-coding systems are not employed in stock takes.

So the answer to this problem is to count the stocks TWICE!! There must be two independent teams to represent two independent count sheets. After the two independent counts have been completed, the two count sheets must be compared. You can be sure around 20% of the counts sheets will not match. Imagine the variance (either way) when results are compared with system balances.

Also, one must make sure that the teams who conducted an accurate count are recognized and those who committed massive errors are reminded of the critical task. Accountability, after all, is an important factor.

The next thing to do is for the 20% errors to be counted a THIRD time. In this stage, you can be sure all participants will be very, very careful. Now, is this not the way to ensure an accurate stock take?

In closing, it would be advantageous if the ECR sets up for its members a continuing training program on inventory management as this function impacts the industry as a whole. Imagine if all companies boasted a sound inventory management! This will dovetail favorably with the purchasing of raw materials, production planning, replenishment of stocks in the pipeline, management time, distributor-brand owner relationship, and so on.

Reprinted with permission from the author and publishers of ECR Trends newsletter. The author is president and CEO of United Terminals Services. For questions, email him at racarino@united-terminals.com.

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Stopping the Circle of Death at Sea, Part II (August 25, 2003)

Modernizing the Domestic Fleet
WE can not grow as an archipelagic country for as long as we have an unsafe and inefficient sea transport infrastructure. We need to modernize our merchant fleet and our ports system. Sure we have obstacles to overcome: lack of financing for acquisition of replacement vessels, lack of funds to reconfigure municipal ports to be able to accept safer but deeper-draft steel-hulled vessels, the inability of the market to absorb higher freight and passage rates to justify investments in steel-hulled vessels, to name a few. But with political will on the part of the government and with the support of private-sector stakeholders, we can do it. We have to do it. Modernizing the Philippines' domestic shipping is investing in safety in Philippine waters.

Typhoon Warning System
Most sea accidents happen in times of heavy weather with rains and strong winds inducing rough seas and reducing visibility at sea. We have to have a more effective typhoon warning system for our domestic vessels to keep them from harm's way during typhoons.

At present, there is no organized way for vessels to receive authorized or official weather advisories. Ship operators and ship crews depend generally on commercial radio broadcasts of weather reports from our weather bureau and from official advisories from the Japan Maritime Commission, to plan for whether their vessels can leave port or whether they should take shelter after having left port.

The Coast Guard, like the Japan Maritime Commission, should operate a weather station exclusively for shipping and fishing to broadcast on 24-hour basis weather and sea conditions along storm-affected routes and to issue any advisory for vessels to stay in port or to proceed to the nearest shelter coves. As part of safety procedures, vessels should be required to tune in to the Coast Guard weather station on a regular basis.

Coast Guard detachments must be given very specific guidelines on granting vessels departure clearance at the onset of stormy weather in their areas of jurisdiction. Where there is no Coast Guard station, the Coast Guard should be allowed to deputize LGUs or the local police to act on a vessel's request for departure clearance. This arrangement can be covered by a DOTC-DILG agreement. It is best not to leave the decision to sail in uncertain weather to the shipowner or the ship captain.
Vessel Traffic
Separation Scheme
Narrow sea passages, like that between Corregidor and Linbones islands where the MV San Nicolas collided with the Superferry 12, and busy channels to harbors make navigation tricky. Maneuvering vessels are liable to get into close-quarters situation, especially when visibility is poor.

It is difficult to understand why the government has not found it important to establish navigational sealanes and mandatory vessel traffic separation schemes in narrow passages and congested harbors. We could have avoided the MV San Nicolas-Superferry 12 collision if we had one in place in the Corregidor Island passages.

We have been talking about navigational sea lanes and vessel traffic separation for years. Let us stop talking now, plot those lanes on the nautical charts, find the money and set up a workable traffic separation system in each critical area.

Swift Justice to Instill Discipline

It has been a while since a Special Board of Marine Inquiry found the captain and chief mate of the MV San Nicolas at fault for the May 25, 2003 collision and recommended filing of charges against the two. Nothing has yet been heard about the police or some prosecutor initiating criminal proceedings on the case. If the public does not watch out, that case may find its way to the archives later if not sooner.

It is imperative, if we are to prevent further accidents at sea, to quickly hail to court a captain liable for loss of lives of passengers and crew and to put him behind bars if found guilty. Swift justice against an erring ship captain will instill the discipline within the ranks of our seafarers to uphold the maritime code of safety at all times.

The Philippine Coast Guard should be held accountable for insuring that its fact-finding Board of Marine Inquiry does its job with dispatch and the Board's findings forwarded to, and acted upon by, the prosecuting agency without delay.

Breaking the Cycle of Accidents

The Philippines suffers the ignominy of being branded the "maritime disaster capital of the world" for the sheer number of lives lost from the series of accidents in Philippine waters in the recent past. That the Philippines is one of the oldest maritime nations in the world and that Filipino seafarers, being the number one seafarer of choice among foreign shipowners, proudly and competently man 25% of the world's fleet, do not square with the notoriety the country has gained because of those accidents happening in her waters with eerie regularity.

We must stop the circle of death at our seas. We have to break this cycle of sea accidents. Let us focus on the immediate causes of the accidents. With nothing more than common sense, we can find the solutions. All we have to have is the will and the unity of purpose to do what is right and necessary, no matter the cost.

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Stopping the Circle of Death at Sea (August 11, 2003)

IN her statement to the media on accidents at sea on June 2, 2003, President Gloria Macapagal Arroyo mentioned that "as the painful stories of this tragedy (the sinking of MV San Nicolas on May 25, 2003) move out of our front pages and headlines, we must dedicate ourselves to doing more to prevent similar accidents in the future."

I can not but agree that we need to do a lot more to prevent accidents in the future. Much more than finger-pointing and conducting investigations that do not lead to any punishment - for those guilty for loss of lives - heavier than suspensions of licenses and transfers of personnel to some other posts. Much more than congressional hearings pursued "in aid of legislation" which do not produce legislation to make sea transport safer. Much more than threatening to slash the budget for a maritime agency, as if abolishing that agency can nudge a ship away from colliding with another vessel.

But as we try to do more as the President exhorts us to do, let us be smart that we do first things first. We confront the most obvious causes of maritime accidents. We institute measures that have the most immediate impact on minimizing the risk of maritime accidents recurring. Later, after the leaks are plugged, so to speak, we can start talking about other initiatives that should be part of a holistic approach to preventing sea accidents but which, by their nature, would not produce an immediate impact or would take time to put in place.

The Human Factor in Sea Accidents

The President expressed concern that "smaller vessels like the MV San Nicolas are commanded by Major Patrons who don't have the formal training necessary to secure a license." Her concern is not unjustified. Research has shown that up to eighty percent of maritime accidents could be attributed to human error, meaning failure on the part of those in command of the vessels involved.

We do not have to look elsewhere to find support for the conclusion that human error is the principal factor contributing to accidents at sea. In the case of the MV Do-a Paz incident in 1987, the investigation concluded that the smaller vessel, MT Vector, a petroleum tanker under the command of a Major Patron, was at fault. The weather and the sea were not heavy and neither vessel reported any engine or mechanical trouble. It could only be a case of human error. In the case of the more recent accident off Corregidor, the Board of Marine Inquiry faulted the captain and chief mate of the MV San Nicolas, both Major Patrons, for their "erratic maneuvers" in violation of basic rules of the road.

The officer who goes on watch at the bridge of a ship at sea should be the primary and immediate object of an accident prevention strategy. We can have sophisticated aids-to-navigation infrastructure all over the place. We can streamline our fragmented maritime administration with the creation of a Department of Maritime Affairs. We can establish a Transportation Safety Board as well as an Admiralty Court. We can even enact a Maritime Code. We will not prevent sea accidents with these initiatives for as long as we allow an officer to take command of a ship, who lacks the skill to use his radar or plot his position on his nautical chart, or who is not sure if he should pass the other ship on his starboard or port side.

It is disconcerting that after major sea accidents in the past, including those obviously caused by human error, everybody would talk about everything else but the aspect of our seafarers' competency. It is time we focus on this problem, and a few other critical issues, before we spend time, effort and resources on much less urgent matters.

Competency Testing and Requalification
The immediate task to my mind is to require every seafarer performing watchkeeping duties on board domestic vessels, except those already certificated under the 1995 International Convention on the Standards of Certification, Training and Watchkeeping (STCW 1995), to go through a rigid requalification process. Those who fail the test should be sent to a comprehensive recurrency training and be required to take the requalification test another time. A second failure should lead to non-renewal of license. The whole idea is to have only those proven qualified, stay in command of domestic vessels.

A competency testing and requalification program should be so designed as to cover Major Patrons and all other merchant marine officers not holding the STCW 1995 Certificate within as short a period of time as possible, hopefully without adversely affecting the operations of shipping lines. Shipping lines may be asked to bear the cost of requalifying their own officers. The government, for its part, should provide shipowners incentives to mitigate the cost of the requalification process.

Major Patrons Commanding Vessels
Many vessels in our merchant fleet which are less then 500 GRT, including wooden-hulled ships, are commanded by Major Patrons - seafarers who start as ordinary sailors and who, through the years, learn to navigate vessels on the job and eventually are entrusted command of their vessels. Most Major Patrons have not gone beyond high school and have no formal education in navigation. I still have to understand how they obtained their licenses. On the other hand, we have more than 70 maritime schools which each year turn out more than 5,000 graduates on marine transportation or marine engineering with bachelor's degrees.

It is injudicious to continue with the present situation where officers without formal education and training and professional licenses command many of our domestic vessels, including passenger ships, while thousands of graduates from our maritime schools are idle, or employed nowhere near a vessel. We must upgrade the level of education and training among those entrusted to command our domestic vessels as part of an accident-prevention strategy.

A phase-in program for licensed maritime graduates to match a phase-out program for major patrons over a period of say 5 to 10 years should be put in place. To ensure that enough licensed officers are available for domestic vessels, the government may have to require service time on any domestic vessel before an officer is allowed to be deployed on a foreign vessel on the license he holds. When the officer obtains a higher license, he can again be required to serve time on a domestic vessel on that higher license. Of course, waivers can be granted in instances where no positions are available on domestic vessels, which means some government agency should be tasked to keep a supply-and-demand data base.

The government must encourage shipowners to give licensed officers higher pay rates than those given to major patrons to be replaced under the program, with some kind of fiscal incentives.

For the time being, serious consideration should be given to limiting major patrons to carrying out voyages not more than six hours, only at daytime and only in sheltered waters. There will definitely be some initial dislocation in interisland shipping with those restrictions on the employment of Major Patrons. That should be a small price to pay for the sake of safety at sea.

Vessel Inspection System
After the officer performing watchkeeping duties on a vessel, the next most important target of a sea accident prevention strategy is the pre-departure vessel inspection and clearance system. The whole procedure is intended to keep an unseaworthy vessel or an overloaded passenger ship from leaving port, unless rectifications are done to the satisfaction of the inspector. When a vessel sails with a clean bill of health, so to speak, the risk of that vessel becoming a marine casualty en route to her destination is greatly minimized.

The Philippine Coast Guard, to its credit, has designed a comprehensive pre-departure inspection system. Theoretically, it is a fool-proof system that should prevent such situation as that where the MV San Nicolas was given the green light to sail, when the vessel reportedly had taken unmanifested passengers. The problem is that the Coast Guard can not perform the inspection routine on one hundred percent basis, given its puny resources. An ever bigger problem is that many of the smaller ship operators are unable to meet the desired safety standards - for economic reasons. If the Coast Guard throws the book at each of our 5,000 vessels in the domestic fleet, a significant number of non-convention-sized ships, including our wooden-hulled vessels, might not qualify to leave port, disrupting interisland commerce and movement of people. The subject of obsolete or unseaworthy ships in the context of accident prevention will be discussed later.

With only 4,000 coast guards deployed on various missions at different places, pre-departure inspection being only one of their many functions, the Coast Guard is definitely not equal to its enormous task. It is bound to fail somewhere. In fact, it has failed specifically in the area of pre-departure inspection a number of times. Our headline-grabbing politicians, they who materialize ever so quickly for some media mileage after each sea accident, better put their money where their mouths are. Whining and ranting won't prevent accidents. Finding the money to increase the organizational capability of the Coast Guard - at least for its pre-departure inspection function - is what will help reduce the risk of accidents at sea.

To enable the Coast Guard to do a good inspection job on each of the more than 5,000 ships that sail at any time of the day from at least 1,000 loading or embarkation points all over the country, we need to triple the Coast Guard's personnel count. That's a lot of money but, again, it should be a small price to pay to prevent loss of lives at sea.

Need for Passenger Terminals

The pre-departure inspection system should be able to effectively prevent overloading of passenger ships. It's all a matter of setting up a passenger processing and manifesting system similar to what we have in the airports. But without passenger terminals, that system can not be enforced, and the Coast Guard will have no recourse but to do the head count on board the vessels where unticketed and unmanifested passengers can play hide-and-seek with headcounters. Our port authorities should start putting those passenger terminals now in ports where there are none.

Phase-Down of Wooden-Hulled Ship Operation
The wooden-hulled ships in our merchant fleet - the batels, the pumpboats and the motorized bancas - have been the backbone of our marine transportation system between small islands and centers of populations in the bigger islands. Their significant contribution to the growth of remote island economies and interisland commerce can not be disputed. But it is time we graduated from the wooden hull age not because a wooden-hulled ship is inherently unsafe, but because we have the steel-hulled vessel as an evidently safer alternative. (The Galleon ships which traded between Manila and Acapulco in Mexico in the olden days were built of wood. That probably was because they did not have steel vessels then).

Our maritime authorities should now formulate a long-term national merchant fleet development plan which should provide for the retirement over time of wooden-hulled ships and obsolete steel-hulled vessels. Pending formulation of a fleet modernization master plan, we must start a phase-down of the operation of wooden-hulled vessels. We should limit their operation to voyages not longer than six hours, at daytime and in sheltered waters. We may allow them to continue only where and while no steel-hulled vessel service is available. Operators of wooden-hulled vessels who will be affected by these limitations should be given the first crack at offering steel-hulled vessel service on routes from which they will be asked to withdraw their wooden-hulled vessels.

To be continued on August 18

You are now in: In Their View Archive : 2003 Q

 

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