Logistics: Management Update
An Executive Summary of Industry News
Staff -- Logistics Management, 4/1/2009
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NRS Chairman Walsh remembered. LM regrets to report that Frank J. Walsh, Chairman of National Retail Services (NRS), a provider of global logistics services for U.S. retailers, recently passed away. Walsh led the transformation of his family's trucking business, which was owned by his father, into a large, global third-party logistics entity. Among his many achievements, Walsh led NRS as it established distribution operations on the West Coast next to the Port of Los Angeles as offshore outsourcing in Asia gained traction in the 1980s. He was also instrumental in collaborating with retailers to develop Electronic Data Interchange (EDI) communication.
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Are you really measuring your carbon footprint? According to a recent Accenture survey, only a small number of companies monitor their carbon footprint, let alone have green initiatives in place. Of the 245 supply chain executives surveyed, only about 10 percent "actively model" their carbon footprints, according to Jonathan Wright, Accenture global director for supply chain fulfillment. Companies just aren't putting sustainability high enough on its list of priorities, Wright told LM, something that will change if companies place more sustainability-minded executives at the boardroom level. The survey also noted that 38 percent of respondents said they have started at least one green initiative in their private fleets, while 86 percent of the respondents have started at least one initiative in their warehouses—such as natural light, energy-efficient bulbs, and recycling.
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Air cargo security on hold. Despite significant progress being made in screening cargo on passenger planes, there are still major challenges ahead on the path to safeguarding air cargo in the U.S. according to the Airforwarders Association (AfA). Testifying last month before the House Homeland Security Subcommittee on Transportation Security and Infrastructure Protection, Brandon Fried, executive director of the AfA, acknowledged the progress made in reaching the 50 percent milestone, but warned that there are three primary challenges still facing the Transportation Security Administration in achieving the 100 percent screening mandate by the August 2010 deadline. "The ease of attaining the first portion of the screening mandate should be both a sign of encouragement and caution," said Fried. "It proves that our industry and its airline partners can collectively rise to any challenge."
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Border brawl. The Mexican government has placed tariffs on 90 American agricultural and manufactured exports as payback for the U.S. Congress' decision to officially nix the cross-border trucking pilot program between the U.S. and Mexico. The program was eliminated as part of the recently passed $410 billion Omnibus Appropriations Act, H.R. 1105, which was signed by President Barack Obama. Launched in September 2007, the program permitted up to 100 carefully-screened Mexican trucking companies into the U.S. for international deliveries and to operate beyond the 20-to-25 mile commercial zones along the U.S. Southwest border. But since its inception, the program was plagued by obstacles and set-backs, including a September 2008 Senate vote to terminate the program and a July 2007 amendment that intended to remove funding.
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Matson still bullish. While many ocean carriers are pulling capacity and cutting service in the transpacific, a smaller player is announcing a bold move. Matson Navigation Company announced that it is expanding its presence in China to include the southern port of Xiamen—one of that nation's top 10 ocean gateways. "This is just one more way for us to differentiate our service during challenging economic times," a Matson spokesman told LM. With the additional port call in its China to Long Beach Express (CLX), Matson will provide the Xiamen region with a number of service features that have made it popular with U.S. shippers even during a down economic cycle. Analysts noted that fixed-schedule integrity, next day cargo availability on the West Coast, and one-stop intermodal connections are still highly regarded values.
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IATA alarmed by economy. The International Air Transport Association (IATA) called on the cargo supply chain to battle the current air cargo crisis by improving security, delivering a better product, and boosting efficiency. "The industry is in crisis and nobody knows that better than our cargo colleagues," said Giovanni Bisignani, IATA's Director General and CEO, in a message to industry experts attending IATA's World Cargo Symposium in Bangkok last month. "Cargo demand has fallen off a cliff, and after a shocking 22.6 percent decrease in December it dropped a further 23.2 percent in January." As noted in LM in recent reports, air cargo represents about 10 percent of industry revenues. As 35 percent of the value of goods traded internationally is transported by air, air cargo is a barometer of global economic health. "The continued decline in cargo markets is a clear sign that we have not yet seen the bottom of this economic crisis," added Bisignani.
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Transpacific rate hike? As the peak transpacific season approaches, ocean carriers comprising the industry's last rate-fixing cartel will try to charge shippers more. The CEOs of container shipping lines of the Transpacific Stabilization Agreement (TSA) have collectively voiced their intentions to raise rates as 2009–10 service contracts are being negotiated. As to whether any of them will stick is a matter of some conjecture. At their most recent meeting in Tokyo, the 14 remaining TSA carrier CEOs expressed their intention to avoid any further erosion of the current rate structures by expiring, no later than June 30, 2009, any short term rates that have been reduced over the past four to five months. According to TSA chairman Ronald D. Widdows, some TSA members have not kept faith in ensuring that rates would be consistent with those of others in the trade lane, thereby failing to "arrest the (pricing) volatility." Furthermore, he said, this rogue behavior contributed to more erosion in a number of cargo segments, most significantly in the spot market.
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Suez Canal loses traffic. As if piracy were not enough of a deterrent, several ocean carriers are now avoiding the Suez for the other "P" word: Pricing. Grand Alliance members Hapag-Lloyd, MISC Berhad, Nippon Yusen Kaisha (NYK), and Orient Overseas Container Line (OOCL) announced that they would re-route all eastbound EU3 service vessels around the Cape of Good Hope instead of transiting the Suez Canal. "The decision, which takes place with immediate effect, is in response to high Suez Canal toll fees, which are difficult for carriers to afford in the current economic environment," said an alliance spokesmen, adding that the Grand Alliance will consider re-routing more services if the overall economic situation does not improve.
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And the Port Person of the Year Award goes to... U.S. Congresswoman Jane Harmon (D-CA). The American Association of Port Authorities (AAPA), a trade organization representing public ports in the Western Hemisphere, selected Congresswoman Harman due to "her role in authoring the SAFE Port Act of 2006 and for advancing other significant legislation to ensure the safety and security of America's seaports and the commerce flowing through them." Harmon received the award at the AAPA's Spring Conference in Washington, D.C., last month.
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