Logistics Management: Management Update
An Executive Summary of Industry News
-- Logistics Management, 2/1/2009
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Have you had a remarkable logistics triumph? If so, tell us about it! Logistics Management is accepting entries for our 2009 Best Practices Awards contest from shippers who want to share their success stories. Three winners will be chosen from among entries that demonstrate how an innovative logistics strategy has cut costs and improved efficiency. All three will be profiled in the June issue of the magazine; the Gold Award winner will also walk away with an iPod nano and will be featured on the cover. Submissions are due by March 20. To fill out your entry form, go to logisticsmgmt.com/bestpractices.
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USPS price hikes go live. Changes in shipping prices that were introduced by the United States Postal Service (USPS) in November took effect last month. Express Mail went up 3.9 percent, Parcel Select went up 5.9 percent, Parcel Return Services are up 5.3 percent, and International Shipping Services are up 8.5 percent. USPS officials said that this is the first time the USPS has adjusted prices for its shipping services on a different schedule from its mailing service price adjustments. These pricing changes came about from a piece of legislation signed into law by former President George W. Bush in late 2006 called The Postal Accountability and Enforcement Act. When first introduced, the common consensus regarding the bill was that it would put the USPS in a better position to compete with private sector heavyweights UPS and FedEx, as well as enable the USPS to introduce volume-related and other price incentives for various service offerings
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Ocean cartel challenged. In a move to thwart the price-fixing efforts of the Transpacific Stabilization Agreement (TSA), one of the the nation’s largest shipper coalitions told federal regulators that “it had serious concerns” about expanding the carrier cartel’s antitrust immunity. The National Industrial Transportation League (NITL) told the U.S. Federal Maritime Commission (FMC) that it objects to a proposed amendment to the TSA’s effort to gain new authority for member ocean carriers to compare business strategies and share information in the eastbound Asia to U.S. trade. The published amendment to the carrier agreement contained little explanation regarding the reasons for the proposed change other than to note it would “provide authority for the (TSA) members to discuss cost savings and more efficient use of vessels and equipment assets and networks.”
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The price isn’t right. Soon after the House Appropriations Committee unveiled its $819 billion economic stimulus plan, which allocated roughly $43 billion for transportation infrastructure spending, several political and industry groups flatly stated that this number is far too low for to help get the economy moving in the right direction. Before these figures were disclosed, the House Transportation and Infrastructure Committee proposed $85 billion in transportation infrastructure spending. House Highway and Transit Subcommittee Chairman Peter DeFazio blasted the proposed funding in a recent “Marketplace” radio interview, saying that the transportation sector has received only 7 percent of the proposed stimulus package despite the potential of transportation funding to create jobs and help spur an economic recovery.
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Fewer vessels in the future? Although vessel operators worldwide have been reducing capacity and shifting deployment schedules, it may be a case of “too little, too late,” say industry analysts. “Shipping lines and ship owners are in a precarious position because they can do almost nothing to determine freight rates, charter rates, and asset values for their ships,” said Neil Dekker, a maritime analyst and author of Drewry Shipping Consultant’s quarterly Container Forecast. “Even at such low prices, it is not a buyer’s market for potential charterers or ship purchasers because demand and credit lines have dried up,” Dekker added. Indeed, the forecast concludes that this year will be the toughest test yet for the container industry and further casualties are a real possibility.
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Contraction in the forecast. While ProMat 2009 in Chicago last month had a surprisingly upbeat buzz about it, don’t take that to mean that the materials handling industry is immune to current economic conditions. The show’s sponsor, the Materials Handling Industry of America (MHIA), reported that new orders of materials handling equipment manufacturing grew 2.3 percent in 2008, but are expected to decline 18 to 20 percent in 2009, with a rebound expected to begin in late 2010. The MHIA also reported that shipments expanded 6.9 percent in 2008 but are predicted to contract by about 15 percent in 2009 and 3 percent in 2010.
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Lufthansa cuts capacity. In an attempt to offset lagging demand, Lufthansa Cargo AG freighter capacities will be reduced by around ten percent for 2009. Simultaneously, Lufthansa Cargo will reduce its cooperation with World Airways, which up to now has operated two freighters of the MD-11F type and a Boeing 747-400F for the airline. Those routes will be served in the future by Boeing 747-400ERF aircraft in the fleet of the German-Chinese airfreight carrier Jade Cargo International. “Lufthansa Cargo is adapting capacity in face of increasingly difficult economic conditions and a distinct falloff in demand,” said Lufthansa Cargo Chairman Carsten Spohr. “We will continue operating all our 19 MD-11 freighters, while utilizing the capacity adjustments to further improve our quality, reliability, and punctuality,” he added.
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Evergreen trims offices. Citing the “economic downturn, Evergreen Shipping Agency (America), agents for Evergreen Marine Corporation, announced that the company will consolidate some North America offices and reduce staff. “The worldwide economic turmoil has created a situation we have not seen in our lifetimes,” the company said in a statement to all North American-based employees. “The measures being taken will reduce costs and put EGA on a more sustainable structure moving forward.” Late last year, Evergreen Line had announced capacity reductions on several trade lanes affected by a downturn in ocean shipping business due to the worldwide financial crisis.
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Retail sales softer than expected. A deep recession, severe winter weather, and five fewer Christmas shopping days combined to create the most challenging sales environment in years for the nation’s retailers. According to the National Retail Federation (NRF), retail industry sales for December declined 2.2 percent unadjusted over last year and decreased 1.4 percent seasonally adjusted from November. At the NRF annual convention and expo in New York last month, members were told that November sales were revised down to a 3.4 percent decline unadjusted year-over-year from the original reported 2.2 percent. As a result, initial 2008 holiday sales, which combine November and December sales, declined 2.8 percent to $447.5 billion, weaker than NRF’s projected 2.2 percent holiday forecast. Holiday sales in 2007 were $460.2 billion.
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The winner takes it all. Logistics Management’s staff would like to congratulate Jeff Siewert, director of international logistics for The Home Depot, for winning this year’s Logistics Quiz contest. Jeff’s name was pulled from among the hundreds of readers who scored a perfect 100 percent on this year’s quiz—which, we heard, has been getting tougher over the years. Jeff wins an iPod nano and earns bragging rights through December 2009. He told LM that it took him about 20 minutes to complete the 25 question quiz, and he plans to play everything from Big Head Todd to Big Audio Dynamite on his new iPod.
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