– Page 3

PLUAs many of the TCT members are already aware, Pacific Lutheran University’s Center for Graduate and Continuing Education is launching a new Certificate in Maritime Management in 2016.  The four workshop series scheduled to run on four Saturdays in January and February covers an array of topics and data under The Shipping Business, Maritime Management, Maritime Law and Regulation, and Terminal and Vessel Operations.  The main objective of this new program is to meet an industry need, identified by Port of Tacoma leaders, of developing more knowledgeable middle managers across all sectors of the industry, but in particular for the Logistics and Shipping subsector.  The Washington State Maritime Cluster Economic Impact Study of 2013 revealed this subsector of the overall industry as one of the largest for number of employer establishments and jobs (viii, 31).

PLU is fortunate to have been able to recruit four industry professionals, mostly from the TCT membership, to teach the workshops.  Greg Shelton, who taught previously for the University of Washington’s maritime program, will be delivering the first workshop on the shipping business, which will be a general overview of shipping history, key concepts, trends, and governance.  Anna Sodorstrom from Washington United Terminals will cover a variety of management practices specific to the industry in the second workshop.  Steven Block, an attorney with Foster Pepper PLLC, will offer his expert knowledge on maritime law and regulation for the third workshop.  And TCT Board Member, Mark Miller, from MacMillan-Piper, Inc, will be drawing from his extensive background and knowledge to deliver the final workshop on terminal and vessel operations.  Mark will also be leading a tour of the Port of Tacoma as a part of this program.  I was able to get a glimpse of this tour with Mark before the Christmas holiday and it was an enlightening experience.  The tour will bring into sharp focus many of the lessons from the four workshops.

PLU anticipates offering the Certificate in Maritime Management twice a year.  We currently have fourteen registrants for the upcoming series of workshops, which is a nice class size for collaborative learning with the instructor and peer registrants.  If TCT members are interested in learning more about this new certificate program, they can either go to www.plu.edu/continuing-ed or contact me directly at the Center for Graduate and Continuing Education, 253-535-7231.

 

Best wishes,

Geoff E. Foy, Ph.D.
Associate Provost

 

sinkelfaroaffectstacomaWhile the nation and maritime industry are still searching for answers regarding the sinking of the vessel “El Faro”, the port of Tacoma and the local maritime industry have begun realizing the impact of this important ship. The El Faro was expected to make the trip from Jacksonville to Tacoma this winter. The ship was to service the Tacoma to Anchorage trade lane and relieve two Tacoma ships that were to have engine replacements and be transitioned to liquefied natural-gas (LNG) this winter and next.

To the Port of Tacoma, one of the most important factors of the multiple vessel conversions to LNG is the actual supply the LNG. In early 2016, Tacoma waterways was to see a 2,200 cubic meter (cbm) LNG barge call on our port. The plan was to service the two new LNG converted vessels, and others, in the Port of Tacoma. To add to the service offerings, Puget Sound Energy plans to build a $275 million LNG facility at the Port of Tacoma to provide supply for vessels at the port. The completion date of that facility is projected in 2018.

The additional benefits for the Port of Tacoma, along with a dedicated LNG supply for many uses, is the potential enticement of other large shipping lines joining the conversion trend and calling on Tacoma because of its access to LNG at the port. The supply can serve not only the PSE customers of Tacoma, but ships, rail and trucks as well. The benefits for all parties can grow exponentially.

For a facility of this scale to be built, and the success of the conversions to LNG, all partners have to rely on each other to meet deadlines and promises. The El Faro was a key element for TOTE Maritime Alaska to start the LNG Conversion process and jumpstart the LNG abilities of the Port of Tacoma. The News Tribune re- ports that the conversion will be delayed by a year, and El Faro’s sister ship, El Yunque, will replace the lost ship in the Tacoma trade during the other ships conversions. As many have begun to see, the lost ship and crew members have a greater impact on Tacoma than many would ever have imagined.

About El Faro:
Nearly a decade ago, El Faro was in service in the Alaska trade lane, and was called the Northern Lights. The ship was moved to the Puerto Rico trade lane in 2006, being renamed El Faro at that time. The ship was 790 feet long and had recently gone under inspection by the Coast Guard in March 2015, before the unfortunate sinking September 30th of this year.

It should be noted that Tacoma Club of Transportation expresses our deepest condolences and sympathy to the family and friends of the crew of the El Faro vessel during this difficult time.

This article was provided by Jake Nyman, Marketing Services Manager at American Fast Freight, on behalf of the Transportation Club of Tacoma Education Committee

A container-on-barge and rail shuttle service in the Pacific Northwest is preserving the ability of exporters of agricultural and paper products in the region to serve their customers in Asia since the Port of Portland lost well over 90 percent of its container volume earlier this year due to a prolonged labor dispute.

containerbargeParticipants in the Upriver Container Barge-Rail Shuttle include Northwest Container Service, Tidewater Barge and the ports of Morrow, Oregon, Lewiston, Idaho and Portland. The first barge is scheduled to leave Lewiston on Thursday.

The International Longshore and Warehouse Union in 2012 slashed crane productivity in Port- land and engaged in other forms of work slowdowns during a labor dispute with International Container Terminal Services Inc., which operates the port’s only container facility, Terminal 6. The jurisdictional dispute with another union involved the equivalent of two jobs, and then escalated to create a toxic atmosphere in the port over the ensuing two and one-half years.

When it became apparent that the ILWU hard-timing could continue indefinitely, Hanjin Ship- ping Co. and Hapag-Lloyd ended their weekly services to Asia, forcing exporters in the region to shift to the Northwest Seaport Alliance of Seattle and Tacoma. Portland’s container volumes plunged from more than 10,000 twenty-foot-equivalent units each month in 2014 to 614 TEUs in September, according to numbers published on the website of the Pacific Maritime Association. Westwood Shipping, which has a monthly service to Asia, is the only liner company left in Portland.

However, the Oregon, eastern Washington and Idaho region has a healthy export trade that includes peas, beans, lentils, hay, paper products and scrap metal. In order to maintain cost competitive inland transportation in the region, participants in the barge-rail service are now providing service to Seattle and Tacoma.

Empty containers are carried by barge to the Port of Lewiston, where they are loaded with agricultural and paper products and then sent by barge to the Port of Morrow. Those cargoes are combined with Oregon agricultural and paper products and taken by train to the Northwest Container Service yard in Portland. From there, the exports are exported to Asia on Westwood vessels, or the containers continue by rail to Seattle and Tacoma for shipment to Asia.

Oregon Gov. Kate Brown, who recently returned from a trade mission to Asia, said there is a growing interest there for products from Oregon, especially agricultural products, and the key is to get the shipments to Asia in a cost-competitive way. Barge/rail service is less costly than over-the-road trucking to Seattle and Tacoma.

Although the barge/rail shuttle will help to keep exporters and importers in the region competitive, the Port of Portland continues to meet with shipping lines and hopes to attract weekly liner services to the port. Bill Wyatt, Portland executive director, said that the creative thinking of the barge and rail operators is only a partial solution.Mongelluzzo_Bill_0141

“We hope the success of this plan will entice labor and terminal management to come together in agreement sooner,” and for resumption of frequent, regular container service, he said. The Portland region generates about 336,000 TEUs a year and could support two weekly trans- Pacific services to key markets in Japan, China and Korea, Wyatt said. Resolution of the productivity issues at Portland’s T-6 container terminal will be critical to recruitment of new services, he added.

This article was written by Bill Mongelluzzo, who was our November speaker and reprinted from the Journal of Commerce with their approval.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihs.com and follow him on Twitter: @billmongelluzzo.

If you yawn or roll your eyes when you hear the words “social media,” you are depriving your business of opportunities and profit potential.

Yes, you can use Twitter to follow the antics of Paris Hilton, the Kardashian Gang, and Donald Trump.  Yes, you can learn too much about your friends’ politics and gaming habits on Facebook.  That is at best entertainment and at worst sheer boredom. They are not your customers and are not your vendors.  So how can social media generate value for you?

The Case for Including Social Media in your B2B Marketing Mix

Think back to the best mutually beneficial B2B relationship you had with a client or vendor about 10-15 years ago.  If you were to describe that relationship, what words would you choose?

“Friendly,” “considerate,” “reliable,” and “fair” are probably near the top of your list.  I will also bet that you knew this person on a first name basis, knew something about each other’s families and interests, and maybe shared a few meals together.  It took time to get to know that person, but it was worth it, and that paid off for both your business and your counterpart’s.

When talking broadly about marketing in the B2B environment, it is tempting to discount the value of such relationships and say, “low price rules.”  But I will bet that “the cheapest” did not make your list from the paragraph above.

High quality B2B relationships are about people.  They were ten years ago.  They are today.  Social media platforms are not inanimate things.  They are organized communities where people congregate, including the people who drive your customers’ and suppliers’ companies.  They are the means by which people share things about themselves, stay abreast of current industry trends, communicate with each other, and meet new prospective B2B relationships.

Still not convinced?  Why do you go to Transportation Club meetings?  What are you doing there?  Is it worth your time?  You go there to maintain relationships and to build your network.  “Sure,” you scoff, “but those people are in my industry.”  Yes, and by using social media cleverly, you can enhance relationships with existing contacts and build an even larger network beyond the parameters of club membership and meeting attendance.

Engaging in Social Media with a Business Purpose

It is pretty safe to assume your goal in B2B is not fame.  So celebrities are not the business models for you to study.  You want leads.  You attend industry meetings partly to meet potential clients.  Apply this same logic to social media.

Here is a gradual path to boosting your B2B social media marketing that you can do starting with LinkedIn, which may be the best B2B platform.  Do not let my time estimates drive you away.  This is not goofing off; it is business development.

The bare minimum (1 hour of set-up, then 5 mins per day):

Establish or update your personal and corporate LinkedIn profiles.  Connect with your clients and industry peer contacts.  Then dedicate five minutes in your calendar each day to check LinkedIn for your contacts’ status updates.  When your contacts change employers, they will usually update this on LinkedIn, which provides you with the opportunity to send a congratulatory note or make a similar phone call.

Getting more comfortable (additional 5 mins per day):

Explore LinkedIn’s Groups for groups in your industry and join some of them.  These can provide advance notice of industry news.  (Tip:  there are closed groups and open groups; open groups can get overwhelmed with spam posts while closed groups tend to be monitored and governed).  Connect with and actively engage with your contacts and their employers on LinkedIn by liking or commenting on something you see.

Starting to do market research (additional 5 mins per day)

  • Follow corporate profiles that are of interest. These could be customers, prospects, vendors, and and industry peers.  Some will publish articles and share information that will give you additional insight into the company.
  • Notice that when you look at a company profile, LinkedIn will show you whether and how you have a relationship that leads to that company. If you do not have a first degree relationship, LinkedIn is showing you a path to get there.
  • Figure out which LinkedIn groups your customers favor and try to join those. Again, if you see a post you like, commenting on it online raises your profile a bit.

If you share a post you like, you have just done someone a favor and will earn a little gratitude from the person who originally posted the piece.

Advanced research (1 hour CRM set-up, 1-2 additional minutes per day):

Some online CRM’s like SalesForce.com can tie social media profiles and updates into a contact’s record.  Some, like Nimble.com, are also superb at sniffing out your contacts’ social profiles on other platforms, such as Facebook, Twitter, and Instagram.  It may not be wise to connect with your professional contacts on Facebook, but being able to view their status updates on Facebook and other platforms may reveal common interests and sometimes valuable business intelligence.

Positioning Yourself Online as a Leader in your Field (1-3 hours per week with a goal of publishing new content every other week)

  • Create a blog with your website.
  • Publish content to your blog regularly. If you do not want to type that much, do a video blog.
  • Post links to that content on LinkedIn and specifically into relevant groups you have joined.
  • Research and follow-up with anyone who comments or shares your post.

By the way, when you are in despair wondering if anyone actually ever reads your blog, take comfort that Google reads it every week!

Post-graduate level work:

Work to identify who influences the purchasing decisions of your key customers and prospects.  As in real life, this will not be easy, but it can be done.  It is the true deep water opportunity of social media marketing.  If you can position your company to be top-of-mind with the influencers of your key prospects, you have laid a serious foundation toward winning new business.

Measuring the Effort

How can we measure the value of this work in a way that you and your boss will respect?  Social media marketing vendors happily toss around bits of new media jargon like “shares,” “views,” “page likes,” “re-posts,” “re-tweets,” “tweets favorited,” and “+1’s.”  Those are partial indicators of your value to your audience, but they do not translate well to corporate revenue goals.

Here are some suggested key performance indicators:

  1. # of new prospect relationships that started via social media.

You will need to define what constitutes a valid prospect for your business, then add all prospects developed from social media to your CRM with an appropriate classification tag.  You could do a blanket “social media” tag, but over the long run you will learn more if you tag prospects according the original social media platform they used to find you (e.g., LinkedIn, Facebook, Twitter, etc.).

  1. Telephone and/or face-to-face meetings generated from social media leads.
  2. ROI — dollars vs. cost of time invested. Some social media marketing vendors will tell you it is impossible to measure this.  It is not impossible. It may be difficult and you may have to do a little cost accounting work to capture the data you need, but you ultimately need the data to justify the effort and to evaluate additional investment.
  3. Elapsed time to develop a new client or referral. Be patient.  Some recent studies have suggested that it may take two years of work before you begin to see a return on the investment in social media marketing.  Is that an outrageous period of time to develop a quality client relationship?  Would two years be reasonable if the activities that led to the conversion were golfing, meals, and gifts?

In addition, active social media engagement will likely generate new traffic to your website as people check your company out.  You can measure “social referral” activity to your site through Google Analytics.  So we should also measure:

  1. Clicks referred through social media posts to your website (a.k.a. “social referrals”)
  2. “Social referral” visitors who engage one step beyond visiting. This can include telephone calls, completing your Contact Us form, subscribing to your newsletter, or engaging via social media.  You will want to be able to query all new prospects as to whom you may thank for referring them to you…and collect that data so you can measure it!

Conclusion

What Paris Hilton, the Kardashians, and Donald Trump do exceedingly well is brand themselves.  They are branding themselves in a consumer-marketing posture –they are broadcasting, not listening.  That does not work well in B2B.  B2B requires listening skills.  You can apply those listening skills on LinkedIn and other social media platforms, and there are tools to help you filter out the noise and focus in on key signals.

Will social media marketing replace traditional forms of business development?  No, but then it is not really meant to replace anything.  It is a new selection of channels by which people communicate with each other.  And if some people have a serious preference for communicating and connecting via those channels, it would be unwise to ignore that preference.

By the way, TCT currently has a closed group on LinkedIn that you are invited to join. The TCT Board wants to make that a more active space, so feel free to share with the Club’s board members the sort of content you would like to see there — what would make you want to visit that group page regularly.

 

by Gerald Moczynski
Co-Owner, I’m In Stitches, LLC
Owner, Blackfish Strategy, LLC

Cybersecurity Brief

by Dan McCabe

Cybersecurity can mean many different things to different people and organizations. For example, a small trucking company with limited web presence would have a different view on cybersecurity than a bank that provides online statements and transactions. It comes down to the level of risk involved. Individuals and organizations with higher cyber risk need to invest in cybersecurity measures that are appropriate. In some circumstances, these measures are even enforced through regulation.

This brief will help define some of the typical language used with cybersecurity threats. It should also help distil some of the rumors around cybersecurity in general.

Security Vulnerabilities
Operating Systems (i.e. MS Windows, Apple Mac OS X, Linux, etc.) have millions of lines of code. MS Windows 7 itself has over 40 million lines of code itself. If put into a typical novel of 25 lines per page and 400 pages, the series would span 4,000 books. All of these lines of code are checked and tested to meet requirements. However, just like one could typically find a couple of grammar mistakes in a novel, so do OS companies, researchers and hacking groups. Typically, if a researcher finds a vulnerability, they will alert the company with 30 days’ notice before releasing it to the general press. Hacker groups either offer the same consolation, or exploit it to their advantage in the wild. 2014OSvuln

Mobile Operating Systems have also been compromised in various ways. Stagefright has been in the news recently affecting the Android platform. Stagefright has to do with picture and video pre-processing in text messages. Android is not alone though. Apple’s iOS (iPhone) and OS X (Mac) have a major zero-day security flaw that allows a malicious application to steal passwords and confidential account information. The flaw was reported in October of 2014 and has yet to be patched through June 2015.

Lately, car manufacturers are finding that they have a similar problem. A Chevy Volt has an estimated 10 million lines of code. It has a security vulnerability that could allow an attacker to locate, unlock and remote start the vehicle when used with a compatible cell phone app. In an extreme case, Chrysler has issued a recall of 1.4 million vehicles after it was found that a Jeep Grand Cherokee’s radio, ventilation and engine could all be manipulated remotely while the car was in operation.

Adobe Flash is synonymous with security vulnerabilities. If you can, just avoid it completely and remove it from your systems. Fewer and fewer websites are utilizing the technology.

Security vulnerabilities are going to happen. It is important to keep your software and systems up to date as best you can to mitigate vulnerability consequences. If no update is available, there are typically workarounds or tips to avoid being exploited.

Virus Protection
Yes, you should run virus protection on your computer. Even if you have a Mac. Apple had a nice bit of time where they didn’t have much of a computer population. The focus had mostly been with Windows which held a significant market share. Now that Macs are roughly 10% of the computer population, they are being targeted as well.

Microsoft has provided a base level of virus protection with Windows 7. It is called Microsoft Security Essentials and is a free utility available through their website. In Windows 8 and above, it is part of Windows Defender that is automatically installed. There are other free virus protection applications, but most of them will prompt you for upgrading to their premier suite of applications. Paid virus protection applications are generally better.

Phishing, Malware & Ransomware
Phishing is the attempt to acquire information such as usernames, passwords and credit cards by pretending to be a trustworthy entity; typically via email. There’s spear, clone and whale phishing scams. To avoid phishing these scams, don’t automatically trust an email from a known entity (i.e. eBay or Amazon). Instead, inspect the document first. Does the “from” address look appropriate? When hovering over a link, does the link actually go to their website? Is there any information provided in the message that clarifies that this couldn’t have been created by a random person guessing that you have an account?

Malware, short for malicious software, infects a computer with computer viruses, worms, Trojan horses, ransomware, spyware and adware. Malware is typically used to either exploit a user or their computer. A user exploitation can consist of random ads or keystroke logging to gather information such as credit card information. A computer exploitation is one where the malware uses the computer to act against other computers.

Ransomware is a type of malware. It will lock up a computer in any number of ways and ask for money to have it unlocked. The most recent high profile ransomware attack called CryptoLocker started in late 2013. It spread through infected files that were distributed via email and other internet communications. CryptoLocker would encrypt both computer and network files then ask for a ransom. It is estimated that the operators of CryptoLocker extorted a total of about $3 million.

Passwords
There is an enormous amount of information on the internet about strong passwords and that you should use them. You should use them and you should use a different one for every service. A strong password are 8 characters or more comprising of upper case letters, lower case letters, numeric digits and special characters ($, @, #, etc.). With that said, “P@ssword1” is not a strong password. Capitalizing the first letter, substituting an “a” with a “@” and adding a “1” at the end are all obvious.

One way to make a password different for each site is to have a strong base password and then something unique to that site. For example, a base password could be “aPh*25009TcT”. This was derived from a vehicle license plate and the Transportation Club of Tacoma initials. Once you have a strong base password, choose a unique identifier on each page to add to it. For example, Amazon has a black bar that crosses the site and a smile in its logo. The Amazon unique password could be “aPh*25009TcTBlkBar” or “aPh*25009TcTsmiLe”. In this way, it is easier to remember for the user and difficult for an attacker to replicate if the Amazon password was compromised.

For additional security, some websites offer two step verification. This typically comprises of an email or text message to further validate your identity. For example, logging into a Microsoft account can trigger a text message with a randomly generated number code. To access the account a user needs to enter both the password and then the code. Some services allow the user to trust one computer or another after providing the code so that the two step authentication doesn’t have to happen every time.

There are password services that allow you to store your passwords for other sites if you need or want to use them. Just make sure your password to access the main account is very strong and/or utilizes two step verification.

Administrator Accounts
Computer administrator accounts shouldn’t be given to the typical computer user. As an at-home example, all family members should have a non-admin user account with one or more separate administrator accounts that aren’t typically used. This protects the user to a degree from accidentally (or intentionally) installing software with unintended consequences. This should help keep a 10 year old from installing malware designed to cripple a computer when all they really wanted to do was add birds to Minecraft or change their desktop wallpaper.

 

Cybersecurity is a large topic and this brief has only scratched the surface. Large organizations like Target and Sony are being hacked every year. The Wall Street Journal stated in 2013 that the demand for cyber security experts is growing at 3.5 times the pace of the overall IT job market and 12 times the overall job market. As systems evolve and become more integrated into every part of our lives, cybersecurity efforts should be engrained as well. It is up to organizations, parents and colleagues to help enforce good disciplines as there is no driver’s license to navigate the internet and all of its associated technologies.

By Jeff Jagosh and Christopher Steele

Re-shoring: It’s a term that’s thrown around quite a bit, and certainly there is new manufacturing activity that is happening in North America. However what does the term really mean, what are the implications for American communities, particularly those that have significant investment in logistics and global trade?

Jan Rivkin of the Harvard Business School speculated in a December 2014 article with the Economist Intelligence Unit[1] that the change in the cost arbitrage between North America and developing nations has quite a lot to do with it.  Rising wage levels over there and lower energy costs over here have made the financial calculus very different to what it had been just a few years ago.  Professor Rivkin also noted that companies that did offshore are also discovering the hidden difficulties inherent in offshoring.  Supply chain risk, loss of nimbleness, and intellectual property risk are all playing a part in companies rethinking where they make things.

The implications for North American communities are different depending on whether they have been more traditionally manufacturing based, or whether they instead make their economic life from global trade.  Logic suggests that the former should be on the ascendant and the latter looking for ways to diversify.

Mexico – The Land of Opportunity

As an example of what kinds of opportunities might be open to North America, it’s useful to first look at the nation that has benefitted most from this overall change in Calculus: Mexico.

WageCompMexicoChinaFor more than a decade, Asia has been one of the world’s most cost-effective manufacturing regions.  However, the cost of production in Asia continues to rise, particularly in China.  Coupled with long lead times in Pacific Ocean freight many companies are turning to Mexico as they re-think their supply chain.

Bloomberg: “for the first time in recent history it is cheaper to manufacture in Mexico than in China for Companies targeting the US market”.  According to studies performed by HSBC Global Research, they expect Mexico to displace China as the top U.S. trading partner by 2018.  As shown in the graph, Mexico’s fully loaded manufacturing salaries registered US $2.10 per hour in 2011 up from US$1.72 in 2001, a 19% increase.  In contrast China had an average wage at US $1.63 in 2011 from US $.0.35 in 2001.  That’s nearly a four times increase in labor costs.

Mexico’s shipping cost and transit time per cubic foot to Chicago are also significantly lower.  For example, marine and ground costs from Shanghai are about $2.19 and take roughly 25 days.  The same situation by truck from Monterrey Mexico is $0.91and 4 to 5 days.  By rail, Mexico is even more cost competitive (at a slight loss of speed):  $0.40 in 6 to 7 days.[2]  With the changing landscape in the global supply chain, cutting all the extra miles and reducing warehouse operating costs is crucial to success.

Implications (and Opportunity?) for the Pacific Northwest

On first glance, it might be hard to see how a Pacific-facing port-oriented region would benefit from having activity return to North America.  Nonetheless, here in the PNW we have seen over 4,500,000 square feet of warehouse space absorption in 2014 to 1Q15.  This absorption helped fuel over 6,000,000 SF of new class A development since 2013 to present.   This is even in the face of further threats, ie; driver shortage, Panama Canal expansion, the 2014- 2015 slowdown, etc.

Speculation has been strong however that for the same reasons that manufacturing has returned from low labor-cost Asian locations, very low labor-cost locations in North America may also not be as dominant in this new trend.  Instead, regions which have very strong labor efficiency and a highly skilled workforce might be the greatest winners in the new trend.  Previous rankings have noted this and have specifically noted the Seattle area as strong contenders in this changed economic playing field.[3]

The implications for real estate are still somewhat unknown, other than to say that there will be renewed demand for industrial and warehouse space.  The broader lesson is that landlords, site selectors and brokers alike will need to be sensitive to the needs of a different kind of user, will need to be flexible, and may wish to look to incentives like FTZ, tax credits, lower energy costs, better proximity to the intermodal and other programs to build competitive advantage.

 

 

Christopher Steele is global COO and the North American President of Investment Consulting Associates, a business consulting firm specializing in location strategy, site selection, and business attraction.  He may be reached at chris@ic-associates.com or you may follow his tweets at @icanortham.

Jeff Jagosh, SIOR is President of Site Selection NW, a logistics and warehouse site selection and lease negotiation company based in Tacoma Washington.  

 

 

[1] http://www.economistinsights.com/countries-trade-investment/opinion/reshoring-us-manufacturing

[2] IMS World Wide Consultants – Shipping costs comparison

[3] http://www.hklaw.com/ManufacturingBlog/Reshoring-Manufacturing-A-major-trend-02-14-2013/

RUNNING A SMALL BUSINESS

Written by Vincent Santiago

Historically, many members of the Transportation Club of Tacoma worked for larger, publically held enterprises and government entities. As our Club has grown, an increasing number people who own or work for small businesses have joined our membership ranks. I am one such member. I spent eleven years in the Marine Corps and nearly twenty years in the corporate world. Almost nine years ago, my wife, Celine, and I opened our own business. Because we are gluttons for punishment, we opened a second small business five years ago. My experience with our small businesses is quite different from the experience I had with the large organizations for which I previously worked.

Defining “small business” is probably a useful starting point. The US Small Business Administration defines a small business concern as one that is independently owned and operated, organized for profit, and not dominant in its field. Generally, the SBA characterizes small businesses as having fewer than 500 employees (for manufacturers) and less than $7.5 million in revenue. The Patient Protection and Affordable Care Act qualifies a small business for a tax credit if it has fewer than 25 full-time equivalent employees with average annual wages below $50,000. All of these guidelines seem like pretty big businesses to Celine and me.

Small businesses have different cultures than do their larger counterparts. The entrepreneurial reputation associated with small businesses comes from the ability to act quickly, adapt, and work “outside the box.” This separates small businesses from large ones, where size alone imposes bureaucratic methods of control and slow communications through many layers of decision-makers. Small businesses tend to have closer and more constant contact with their employees, customers, and suppliers. On the other hand, small businesses’ capabilities and resources are typically limited compared to their larger counterparts. Capital for investment is scarce. Small businesses typically offer less in the way of benefits to their employees.

It is worth noting that these observations about small and large businesses are generalizations. There are big businesses that are as nimble as any small one. There are small businesses that a painfully slow to react to an opportunity when one is presented. The difference between the corporate world and small business ownership for us is that we no longer have staff experts (Accounting/Finance, Human Resources, Purchasing, Safety, Real Estate, Licensing, etc.) who advise us on what to do. We have to figure it out ourselves and hope we got it right! We believe that it why most small business owners put in so much time. You run the business during business hours and do the extra work at night and on weekends.

For Celine and me, the first distinction for our small businesses is that the money we risk on our ventures really is our own. I always tried to “treat the company’s money like my own” when I worked in the corporate world. This took on a completely new meaning when we leveraged our home to start our first business. We do not play “let’s bet the house” with our businesses. While we pay for a ton of insurance at a very significant cost, we always keep in mind that our home and savings are at risk if someone sues one of our businesses. We would most likely consume most of our personal assets simply defending ourselves if something bad were to happen. We are amazed when billion dollar corporations require us to subrogate our insurance to them in order to do business. We buy our insurance to protect ourselves and do not understand why large corporations expect us to subsidize their insurance when they have better coverage and lawyers than we do.

Another aspect of small business is what happens with profit. Celine and I are the shareholders, so we pay ourselves with what is left after everyone else is paid. We can choose between investing for retirement or reinvesting in the business. We favor reinvesting in business and favor investing in business relationships. One time, I took a customer on a fishing trip. While he was eating a sandwich that Celine made for him, this customer decided he might be paying us too much because we could take him fishing and feed him. I explained our alternatives with respect using our profit. I explained that, unlike him, we pay for 100% of our medical coverage, dental coverage, life insurance, and retirement. I told him that we valued his business enough to reinvest in it. As he took another bite out of Celine’s sandwich, I asked him how our medical/dental/insurance/retirement tasted. The business relationship has blossomed.

Another thing that really challenges small businesses is getting paid. We work with business entities that have significant resources. We sign contracts that place significant responsibility and liability on us. These contracts also state we will be paid in a specified amount of time. Most of our business partners are small businesses, and we typically pay our business partners more quickly than our customers pay us. We are often told that we are not paid in a timely manner because “our customers haven’t paid us.” We don’t sign contracts that say we will wait to get paid until someone else gets paid. We shed slow-paying customers relatively quickly, and some of them can’t understand why.

Finally, the most taxing activity for us is paying taxes. We never imagined how many government entities would have their hands in our pockets. Literally, we pay taxes every week. On January 15th, we sent out fourteen checks for taxes. Federal taxes, state taxes, local taxes. Payroll taxes, use taxes, licensing fees (aka…more taxes). And never forget to pay taxes. The affected government agency will threaten to shut your business down within days. A few years ago, a clerk at a state agency decided they we couldn’t possibly be owed a refund. So she simply reclassified our business and tripled our tax liability. The move was completely unfounded and would have broken our business. We paid $5,000 in attorneys’ fees to get this fixed, and we had no recourse to recoup the legal expense this enterprising state employee generated. A couple of years ago, I sat at a table with the owners of three other trucking companies. We agreed that the government believes that our primary responsibility is to pay taxes, not operate tractor-trailers safely on our roadways.

Despite these challenges, I could never go back to the corporate world. I have the best boss I have ever had in my entire professional career – my wife, Celine. We have been able to bring our son, Dominic, into our business. We have three wonderful veterans driving for us – Dave, Casey, and Ben. Jan and Gayle work wonders in the office. Some people think that you get to choose your customers when you have your own business. That is true to a degree. We have some wonderful customers and some challenging ones. What we are able to do is choose customers who benefit from our companies’ strengths. We have a great group of business partners, to whom we owe most of our success. What is most important to Celine and me is that we are still able to keep the promise we made when we started our first business from scratch almost nine years ago. We are able to share the blessings of our success with our employees, customers, and business partners. That will never change.

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While the economy is on the upswing, unemployment rates for youth continue to remain high.  Nationally, “Millennial” cohort has seen double-digits unemployment rates, twice the national unemployment averages for working adults (U.S. Census 2014).  Close to one-fifth of Pierce County young adults are unemployed.  With thousands of jobs lost through the recession and experienced workers vying for every position, young people are often the last in line for jobs. Lack of jobs and opportunity has led many discouraged young adults to leave the labor market completely, leading to an unproductive workforce. This has placed heavy burdens on not just our young adults but on our economy and on each one of us.  Connecting businesses with qualified talent and putting young jobseekers on a path of employment is essential to our economic growth.

Recent signs indicate that Pierce County is moving in the right direction, but continues to face challenges. One of our greatest resources to help combat these challenges is our young people.  The young are passionate, creative, and savvy, with a wealth of knowledge.  Given the high employment demands and needs from many businesses, young adults can bridge the employment gap and provide much needed labor. This population can provide skills and talent in forms of volunteering, being interns, filling part-time positions, providing seasonal and summer labor.

To help Pierce County businesses connect with such talent, WorkForce Central’s JobFest 2015 provides a vital connection between classroom learning and actual on-the-job experience that matches young people’s skills and interests with employment opportunities. Joining forces like this guarantees a globally competitive workforce that will move our economy forward.

JobFest is one of the largest young adult jobs fair in Washington for age’s 16 to 24 year old job seekers to be held at that Star Center on April 14, 2015. The event provides young adults an opportunity to interact with various businesses and provides a venue for businesses to access talent from over 500 plus candidates. For Job Seekers, the event hosts several pre-event workshops to prepare them to put their best foot forward, providing insight in interview skills, interpersonal skills, and employment seeking best practices.   In 2014, over 600 young adult job seekers attended the fair and networked with employers.  The pre-event workshops were attended by 125 young job seekers. This resulted in many young adults getting interviews and employment with companies such as State Farm, Verizon, Starbucks, Taco Time, Office Depot and other local businesses.

For businesses, this is an excellent opportunity to find young talent and connecting with their future workforce.  The event provides employers a “one-stop” experience to conduct on-site interviews, giving employers a chance to speak one-on-one with job seekers.   Participation is free for businesses and an excellent way for employers to find their next hard-working and eager employees.  Additionally, it provides a great networking opportunity for employers and a way to share information on their current and future career opportunities, thus connecting with the workforce of the future.  JobFest is supported by many local organizations and businesses including Metro Parks Tacoma, STAR Center, Tacoma Community House, REACH, STEPS, Express Employment Professionals, General Plastics Manufacturing Co., Starbucks, Phoenix Protective Corp, CareerLink Pierce County, WorkForce Central and Tacoma Public Schools.  For more information and to sign up for space at the fair, go to:  www.workforce-central.org or contact John Traugott at 253.448.8285.

About WorkForce Central – WorkForce Central is the workforce development organization for Tacoma/Pierce County.  It provides a pathway to employment for job seekers and is a single point of contact for businesses needing to address their talent gaps.  WorkForce Central also develops and implements innovative training and business solutions to further the economic growth of the county by partnering with business, education, government, labor and community organizations.

CONTACT:
Jacqueline Smith
253.448.8635

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