Logistics: Management Update
An Executive Summary of Industry News
-- Logistics Management, 5/1/2009
-
Piracy surcharge. Following the jubilation over the freeing of the Maersk Alabama and its heroic captain last month, shippers began asking if rates will reflect the heightened risk of doing business in the Gulf of Aden. Spokesmen for the Maritime Administration (MARAD) at the U.S. Department of Transportation said that a surcharge would surely be the case. “The cost of the war risk binder for ships transiting the Gulf of Aden is estimated at $20,000 per ship per voyage, excluding injury, liability, and ransom coverage,” they said in a statement. A year ago, the cost of the additional insurance premium was only $500. It is estimated that the increased cost of war risk insurance premiums for the 20,000 ships passing through the Gulf of Aden could reach as much as $400 million.
-
Another LTL puts on the brakes. Mid-States Express, an Illinois-based less-than-truckload (LTL) and direct volume carrier, has shuttered operations due to financial and credit-related issues, according to media reports. Mid-States closed all of its 26 facilities across nine states, which employed roughly 750 employees, following layoffs in recent months, according to a report in the LaSalle, Ill., News Tribune. At the time of its closing, Mid-States had 537 tractors and 1,082 trailers for city pickup and delivery and line haul operations, according to its Web site. Its service footprint included 13 states.
-
Shippers will face a “greener” horizon. The Environmental Protection Agency (EPA) released a proposed finding stating that greenhouse gas (GHG) emissions contribute to air pollution and endanger public health and welfare. If this finding is made official it would allow for quick federal regulation of motor vehicle emissions of GHG. What's more, if the EPA does mandate new regulations on emissions, shippers will have to re-think their supply chains, which will require supply chain modeling to devise supply chains that are as “lean as possible” to reduce transportation usage, noted Brittain Ladd, director of logistics and manufacturing at Cognizant Technology Solutions.
-
FedEx set to reduce aircraft assets. Making good on its pledge to reduce expenses by about $1.0 billion for Fiscal 2010, FedEx took a step in that direction with the decision to permanently remove various aircraft used by its FedEx Express subsidiary by May 31. The aircraft being removed includes ten Airbus A310-200 aircraft and four Boeing MD10-10 aircraft owned by the company. “This decision reflects management's ongoing efforts to optimize the company's express network in light of continued excess aircraft capacity due to weak economic conditions and the expected delivery of newer, more fuel-efficient aircraft in fiscal year 2010,” stated FedEx in an 8-K filing.
-
Peak season 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) 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. “With the current market in the tank, I don't believe all the TSA carriers will play along,” said Jon Monroe, president of Monroe Consulting in Shanghai. “They can try to get more, but shippers are going to shop around with NVOs [non-vessel operators] and carriers like Maersk to undercut these efforts.” Maersk was among several major carriers to leave the cartel in recent years.
-
Green…and stylish. NYK released an initial exploratory design for its NYK Super Eco Ship 2030, an energy-efficient ship expected to emit far fewer CO2 emissions than current vessels. The design was created by MTI, a wholly owned NYK subsidiary charged with making use of advances in technology, along with Garroni Progetti s.r.l, an Italian designer of ships, and Elomatic Marine, a Finnish marine-technology consultant. NYK Super Eco Ship 2030 will make use of progressive technologies that have the potential of being realized by 2030. The power needed to propel the ship can be lessened by decreasing the weight of the hull and reducing water friction. Propulsion power can be increased through use of LNG-based fuel cells, solar cells, and wind power, all of which will lead to a reduction of CO2 by 69 percent per container carried.
-
First protectionism, then depression? A recently published survey by freight logistics and transportation management firm BDP International indicates that growing protectionism has the potential to spur a global depression and bring about a “prolonged reversal” of world trade. Just over 84 percent of survey respondents said that protectionism could lead to a global depression, another 60.3 percent said it could cause a collapse of globalization. A major driver for protectionism concerns, according to Richard J. Bolte, Jr., president and CEO of BDP International, is that 17 G20 members have implemented nearly 50 measures restricting trade since late last year that have “dramatic implications for global supply chains.”
-
Playing it safe. The U.S. and China have signed an agreement for safe transport of hazardous materials. Called the U.S./China Cooperative Project Arrangement on the Safe Transport of Dangerous Goods, the accord enables the countries to develop and strengthen avenues of communication concerning the safe transport of dangerous goods and cooperate on enforcement and investigative actions to improve dangerous goods transport safety. U.S. Secretary of Transportation Ray LaHood commented that the Dangerous Goods agreement is a step toward improving transportation's role in fostering a healthy climate for commerce and economic growth, while creating good jobs for both U.S. and Chinese citizens.
-
RFID still buzzing. Technology consultancy IDTechEx says the global RFID market will reach $5.56 billion in 2009 compared to last year's $5.25 billion. This figure includes tags, readers, and software services for RFID cards, labels, and other form factors; but the majority will be spent on RFID cards and their associated services which will account for $2.99 billion. IDTechEx added that the RFID market is growing due to government-led RFID initiatives for things like transportation and national ID's, among others.
-
Cool advantage. Spokesmen for Mercury Air Cargo said a new refrigerated transit facility at Los Angeles International Airport (LAX) will soon be taking in full freighter loads of flowers from South America, thereby increasing its move to create a hub for perishables at the gateway. As reported in LM, Mercury opened the 12,700-square-foot, $1.1 million facility at LAX in April. At that time, Mercury spokesmen stated that the operation could “create a shift in the U.S. flower supply chain and establish Los Angeles as a new West Coast hub for the flower trade.” LAX has seen a steady decline in imports from Asia, sending its air freight tonnage down 12.6 percent last year and 24 percent in the first two months of 2009.
-
DHS doles out the grants. Port security initiatives received the most funding from the Department of Homeland Security's (DHS) Federal Emergency Management Agency's final allocations for 2009 Preparedness Grants for 10 federal programs, with $388.6 million allocated for the Port Security Grant Program (PGSP). The PGSP's objective is to protect critical port infrastructure from terrorism, enhance risk management capabilities, protect against improvised explosive devices, and conduct training and support implementation of the Transportation Worker Identification Credential (TWIC). Other freight transportation-related grants included $15 million for the Freight Rail Security Grant Program and $2.2 million for the Trucking Security Program.
-
Is the party over? A recent Armstrong & Associates report says Q1 3PL revenues were down 6.7 percent year over year. The data was based on feedback from 30 3PL executives with cumulative revenues of more than $40 billion, according to Richard Armstrong, president of Armstrong & Associates, a leading 3PL research firm. In the survey, 53 percent of 3PL executives said revenues were down, while 37 percent said revenues were up due to new business. “These results are reflective of what's happening in the economy,” Armstrong told LM. “I still think that by the time we get to the fall things will be turning upward.”
-
Grand Alliance shift. A greater measure of fixed-schedule stability on the South China-U.S. East Coast trade lane was started in April by carriers comprising the Grand Alliance. “While we are not introducing any additional capacity, the move demonstrates that the carriers are keeping faith with shippers in this trade lane,” said a spokesman for Nippon Yusen Kaisha (NYK). Other members of the Alliance are Hapag-Lloyd; Orient Overseas Container Line (OOCL) and Zim Integrated Shipping Services. Together, they agreed to cooperate on the service using the Panama Canal. Zim, which has been a prominent player in the all-water East Coast trade since 1973, is added a transloading stop in Jamaica.
-
Deal-less in Seattle. Despite indications that the worst might be over for the nation's bond markets, the Port of Seattle is postponing its acquisition of the BNSF Eastside Rail Corridor. The sale was originally expected to close in December 2008, but the transaction was postponed after the collapse of the credit markets. Now, said port spokesmen, they intend to issue municipal bonds to finance the $107 million purchase price. “The port remains committed to public ownership for the corridor. But no one could have foreseen the continued turmoil in the credit markets,” spokesmen said. A further reason for delay is that the federal Surface Transportation Board had yet to complete its review of the acquisition. C. Kenneth Orski, a transport infrastructure analyst, and author of Innovation News Briefs, told LM that current interest rates are too high now for most private investors.
-
Has “Wal-martization” taken over containerized shipping? Many industry analysts think so, and an alarming new report suggests that a focus on cost alone may spell doom for some carriers. While the past six months have seen a huge amount of capacity changes in the industry, freight rates continue to plummet while the industry shirks the painful decisions that are needed to ensure their collective survival. “The old analogy about 'rearranging the deckchairs on the Titanic' is in fact a good one for the crisis the liner industry finds itself in,” said Neil Dekker, editor of a new report titled “Capacity Management: Surviving the container crisis.” In that report, Dekker and other analysts from London-based Drewry Shipping Consultants, examine how carriers have reacted to the global economic crisis and what steps will need to be taken if they are to survive. So far, said analysts, they have been altering capacity via service suspensions, slow steaming, service deviations and lay-ups.
-
Retail associations unite. The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) said that they will merge to become a single trade association representing retail interests in Washington. The organizations said this move will create value for members of both organizations and provide the retail industry with a singular voice to advance the industry on pertinent issues. The merger is expected to be made official this summer. Until the merger becomes official, NRF and RILA will continue to be “business as usual” with every scheduled event, conference, and meeting proceeding as planned without any service interruptions.
-
A warehouse & DC conference & expo…now on demand!Logistics Management & Supply Chain Management Review's 2009 Warehouse/DC Conference & Expo is not an old-fashion series of webcasts. Instead, it's a fully interactive virtual event that incorporates online education, live chat, active movement in and out of exhibit booths and sessions, white papers, and other collateral resource centers. This event is 100 percent virtual, so save yourself the travel expenses and get right to the best industry information and solutions available from the comfort of your desk. Go to logisticsmgmt.com/warehousevc to catch this virtual event on demand—all just a few clicks away! Join over 1,600 of your peers who already have.
Management update
02/01/2010‘Clean’ Ports act introduced in the House
08/10/2009Management Update
09/30/2009
View All On-Demand Webcasts