Management Update
An executive summary of industry news
-- Logistics Management, 8/1/2008
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Contract near? The International Longshore and Warehouse Union (ILWU) said in an interview with Logistics Management late last month that a new contract agreement with the Pacific Maritime Association (PMA) was “within sight.” The new contract being negotiated and administered by PMA covers wages, benefits, and conditions of employment for the more than 26,000 ILWU members and identified casuals working at 29 West Coast ports in California, Oregon, and Washington. The previous contract expired on July 1, 2008. Meanwhile, the PMA had been sustaining a public campaign by repeatedly stating that West Coast ports generate almost $1.3 trillion in domestic business impacts—representing 11 percent of total U.S. gross domestic product—and support more than 8 million direct and indirect U.S. jobs. “The ILWU’s actions jeopardize an already fragile economy that can ill afford another hit,” said the PMA in a recent statement.
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Is FedEx buying TNT? A Financial Times report says that may be the case. If FedEx were to buy the Dutch mail and courier services provider the purchase would likely have a positive affect on its European operations and make it better equipped to compete globally—as well as provide a way for the company to respond to UPS’s recently announced partnership with DHL, say industry analysts. JP Morgan analyst Tom Wadewitz said that there is still time for UPS to get into a bidding war with FedEx for TNT, adding that he would not expect UPS to allow FedEx to buy TNT without a fight.
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New Chinese logistics super-force. Reports out of China indicate that logistics services provider Sinotrans Group has agreed to merge with China Yangtze Transportation Group, the country’s largest river shipping operator, creating a full-service logistics operator valued at $15 billion. A Reuters story commented that if this deal goes through it would create a sprawling transport corporation with various services, including marine, oil, river shipping, express delivery, freight forwarding, and warehousing.
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Chemical shippers pump up surcharge. In an effort to combat rising fuel prices, chemical giants Dow Chemical and Oxea have taken steps to offset transportation costs incurred by the ongoing spike in fuel. Effective August 1, Dow plans to impose a $600 surcharge per shipment in North America, and Dow customers in other global regions will pay fuel surcharges when deemed appropriate. Oxea, meanwhile, has gone forward with $300 and $600 fuel surcharges for truck and rail shipments, respectively, for North American deliveries. But Oxea officials added that these surcharges “will be removed when fuel prices return to normal levels.”
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Ports win one for a change. The American Association of Port Authorities (AAPA) praised Congress for passing H.R. 802, the Maritime Pollution Prevention Act, which will now be sent to President Bush for his signature. The legislation will implement Annex VI of the International Convention for the Prevention of Pollution from Ships, more commonly known as MARPOL, providing air quality benefits for port communities in countries that are signatories to the treaty. Annex VI is a global treaty that establishes emission limits for oxides of nitrogen (NOx), oxides of sulfur (SOx), and other pollutants from vessels. Kurt Nagle, AAPA’s president and CEO, said the ports association has strongly advocated for tough new air emissions standards for both foreign and domestic ships that call on U.S. ports. “While land-based emissions and some marine emissions are the responsibility of the U.S. EPA, AAPA believes that an international process is the most effective for vessels, the majority of which are flagged in countries other than the U.S.,” Nagle said.
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Air freight dips. According to new figures released by The International Air Transport Association (IATA), international traffic showed a significant drop in cargo growth, to 1.3 percent, compared to 4.3 percent this time last year. The biggest cause of the slow growth came from a 0.5 percent contraction in Asian carrier traffic. This resulted from the impact of the earthquake in China and weakness in the Japanese economy. According to Giovanni Bisignani, IATA’s director general and CEO, “The high price of oil is re-shaping the industry.”
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Crane lands back on the scene. Jim Crane, former CEO and founder of EGL Eagle Global Logistics, is returning to the global freight forwarding market with the pending launch of Crane Worldwide Logistics. The new entity expects to generate more than $5 billion in revenue in the next five to seven years and will handle expedited heavyweight transportation on a global scale. Crane’s new venture is expected to offer shippers customs brokerage, international air, ocean, project work, and domestic and ground transportation.
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Balanced security? While major U.S. freight forwarders and shippers support the Transportation Security Administration’s (TSA) “Certified Cargo Screening Program,” key industry leaders are telling lawmakers to reevaluate its enforcement. In testimony late last month before the House Committee on Homeland Security’s Subcommittee on Transportation Security and Infrastructure Protection, Cindy Allen, security chair for the National Customs Broker and Forwarders Association of America (NCBFAA), explained how “independent air carriers” are at a competitive disadvantage when it comes to compliance. “We estimate that outlays will require between $150,000 to $500,000 or more per facility,” said Allen. “It is unrealistic to assume that a typical independent air carrier can afford this equipment for use in his own company, just as we understand it may be difficult for some of the larger participating companies to do so.”
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Californicated again. West Coast shippers were given some more bad news in July as the California state assembly passed Senate Bill 974, authorizing new fees for containers moving through the state’s major seaports. Authored by State Sen. Alan Lowenthal, the legislation was headed for the State Senate. Shippers expected the bill to be quickly passed in its amended version and to be signed by Governor Schwarzenegger. Once the bill is passed, containers moving through the Port of Los Angeles, the Port of Long Beach, and the Port of Oakland would be assessed $60-per-FEU (forty equivalent units). The bill was amended before passage to define which infrastructure projects would be eligible to be funded from the fee. Once signed, the new fees will go into effect in 2009.
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More problems down the road for the trucking industry. A recent report from Standard & Poor’s Rating Services explained that overcapacity and fuel prices will continue to hinder the trucking industry through 2009. Aside from industry-specific travails, things like lower consumer spending and a weak housing market are taking a toll on trucking—and will continue to do so. Other factors cited for the ongoing lull are rising commodity prices which have resulted in lower consumer spending levels and tonnage totals.
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2008 Green Logistics and Supply Chain Conference. Wholesale “green” supply chain transformations should only be attempted by companies that have an experienced staff of logistics professionals running their operations, or by companies that have partnered with a respected consulting firm. That’s the message imparted by Brittain Ladd, director of logistics and project management for the private equity firm PMPG and former manager of logistics, transportation strategy, and Green Logistics for Dell. In his keynote address for the 2008 Green Logistics and Supply Chain Conference presented by LM and Supply Chain Management Review, Ladd says that many companies are attempting to undergo massive changes to their business models and logistics network without being fully prepared. Learn how you can prepare and register at logisticsmgmt.com/green08.
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