Management Update
An Executive Summary of Industry News
-- Logistics Management, 7/1/2009
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Oil prices on the upswing. Coming off a year in which diesel prices hit nearly $5 per gallon and the price of a barrel of oil was approaching $150, it was nice to finally see some relief towards the end of 2008 and into early 2009. But it looks like the fun is over, as diesel continues to make a new upward climb, with weekly diesel prices showing steady increases and barrel prices approaching $80. Continued increases are likely to put a wrench in the overall recovery of the economy, as higher fuel prices will result in higher goods and transportation costs.
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AES substandard. Shippers are still complaining about the confusion caused by Customs & Border Protection (CBP) enforcement policies. While the economy took center stage at last month’s annual meeting of the Agriculture Transportation Coalitions (Agtc) in San Francisco, shippers were also expressing considerable concern about the New Automated Export System Regulations (AES). “We are doing everything in our power to comply,” said Don Lake, an executive with Dunavant Cotton, “But without industry standards, it’s still difficult to avoid getting in trouble with Customs.” Currently, the CBP guidance is broken into various categories of non-compliance including non-filing and late-filing. Ag shippers are fine with this, said Dunavant, but other aspects of the law have been problematic.
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MOL misquoted. MOL was quick to shoot down the false news service report that it would get out of the box business to focus on other parts of its operations. Yet, the fact that such a story would run at all caused some alarm in the industry. “We immediately sent out a letter to our customers assuring that this was not the case,” a spokesman for MOL (America) Inc. told Logistics Management in an interview. “We have included an accurate version of the remarks made to the news service.” The letter said that statements “allegedly” made by MOL CFO Kenichi Yonetani regarding the possibility of spinning-off its container shipping business and consolidating it with another carrier were taken completely out of context.
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I have two words for you: Global trade. According to UPS CEO Scott Davis, global trade is the key to economic recovery. At a speech made in Detroit last month, Davis said global trade is a “positive force at a time when we are operating without a map and without precedent.” He added that up to 57 million Americans are working for companies engaged in global trade, with one out of every five manufacturing jobs linked to the exports of goods and services. And if global trade is to help overcome the global recession, the world must address three imperatives: the creation of a system of trade that not only is fair and rational but compassionate; deploying technology to reduce the friction that today slows down the flow of commerce; and moving immediately to rebuild transportation infrastructures.
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FedEx holds top spot for service. Strong customer satisfaction pushed FedEx into the top spot in the Express Delivery category of the University of Michigan’s American Customer Satisfaction Index (ACSI) in the first quarter. The parcel carrier also ranked first among 81 companies whose customers are surveyed in the ACSI. FedEx has occupied the top Express Delivery spot in this survey for 12 straight years and 13 of the last 15 years.
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Dying on the vine. A report from The Wall Street Journal said that New Vine Logistics, a Napa, Calif., provider of wine-shipping services for major winemakers, has suspended operations amid financial problems, potentially putting some consumers’ wine orders in limbo. The report said New Vine stopped receiving and processing new orders after a prolonged push to raise new financing failed. New Vine handled shipping and fulfillment for direct orders by consumers for about 200 wineries and other wine merchants. The WSJ added that New Vine’s difficulties raise questions about the viability of providing such services. The company is one of the largest of a handful of logistics firms that entered the field, seeking to capitalize on various California state laws permitting consumers to order wines directly from winemakers.
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Culture clash? When A.P. Moller/Maersk Group merges its supply chain management activities branded as Maersk Logistics and its freight forwarding activities branded as Damco this September, shippers should not expect a change in corporate culture. That was the message imparted during an exclusive interview with Logistics Management last month. Company spokesmen said the combining of three strong brands in Damco, Maersk Customs Services, and Maersk Logistics under the brand DAMCO is designed to deliver end-to-end services. In the meantime, the supply chain services will continue to be delivered under the Maersk Logistics brand, while the forwarding services will continue to be delivered under the Damco brand.
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Continued air cargo slump. The International Air Transport Association (IATA) revised its airline financial forecast for 2009 to a global loss of $9 billion, noting that it is nearly twice as high as the association’s March estimate of a $4.7 billion loss. IATA also revised its loss estimate for 2008 to $10.4 billion from the previous estimate of $8.5 billion. “There is no modern precedent for today’s economic meltdown,” said Giovanni Bisignani, IATA’s director general and CEO. During his “State of the Industry” address at the 65th IATA Annual General Meeting and World Air Transport Summit, Bisignani painted a bleak picture. “Recession is the most significant factor on the industry’s bottom line,” he said.
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Ag not so agitated. At the annual meeting of the Agriculture Transportation Coalitions in San Francisco last month, shippers were told that the worst may be over for cargo vessel operators. But that may not be an entirely positive message, as prices are likely to get a boost during the coming peak season. That was good news/bad news for those shippers attending the annual meeting as they brace for a new rate structure to be introduced on the transpacific and other key trade lanes. “We don’t think that there will be any container lines going out of business,” said Edward Zaninelli, vice president Trans-Pacific Westbound Trade, OOCL. “But we will see more slot-sharing and consolidation, and rates have got to go up, that’s a given,” he added.
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Bench strength. The Federal Maritime Commission (FMC) may have a new commissioner this summer, bringing the agency closer to full strength. Following the news released last week that Joseph Brennan had been designated Acting Chairman of the Federal Maritime Commission by President Barack Obama, the administration announced that one of three vacant seats may be filled soon. Pending Congressional confirmation, the new commissioner will be Richard Lidinsky Jr. As reported in Logistics Management, Commissioner Harold Creel Jr. plans to retire at the end of June. That would leave the FMC with Brennan and Rebecca Dye as the only two on a five-seat forum. It has been over three years since the Commission was operating with a full bench.
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Mid-Year Rate Outlook 2009 Webcast: July 29, 2009, at 2 p.m. ET. In case you haven’t noticed, the U.S. economy overall remains disappointingly weak, and prospects for any meaningful improvement remains mixed. So, what does all this news mean to your freight rates over the next six months? Join Group Editorial Director Michael Levans and an all-star cast of industry analysts on July 29, 2009, at 2 p.m. ET as they put the general economic picture into perspective for shippers and help explain the affect the economy is currently having on your rates for the second half of 2009. Register now at logisticsmgmt.com/midyear09.
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