Management Update
An Executive Summary of Industry News
-- Logistics Management, 10/1/2008
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What's the result of a flawed supply chain? Last month's tainted baby milk scandal that has killed four children and sickened nearly 53,000 others in mainland China, Singapore, and Hong Kong has highlighted flaws in the country's entire food supply chain, according to The World Health Organization (WHO). The offending chemical, melamine, has been detected in formula milk powder from 22 dairies across China. And, while the crisis was initially thought to have been confined to baby milk powder, tests have found melamine in samples of liquid milk taken from China's two largest dairy producers as well as Shanghai-based Bright Dairy. WHO China representative Hans Troedsson said that quality issues could occur anywhere from the farm to the retail outlet; as a result, thousands of tons of the tainted milk powder have been recalled.
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DHL/UPS deal facing scrutiny. Months after DHL and UPS unveiled the specifics of a pending 10-year, $10-billion contract in which UPS would provide airlift services for DHL Express, the proposed deal is under fire from Ohio-based politicians and ABX Air and ASTAR Air Cargo, DHL's current airlift partners. The main concern revolves around pending job losses at the Wilmington, Ohio, Air Park which hosts DHL's domestic air and ground hub. At a House hearing held last month, potential anti-trust law violation questions were raised, with opponents saying that this potential alliance would enhance the likelihood of higher prices and weaker services. David Balto, an antitrust attorney, testified that if DHL were removed from the competitive playing field UPS and FedEx would not have to compete as aggressively and could follow each other's lead on raising rates.
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Dead air. Despite a fall-off in fuel prices recently, The International Air Transport Association (IATA) expects the global airline industry to post losses of $5.2 billion in 2008. “The situation remains bleak,” said Giovanni Bisignani, IATA's director general and CEO. “The toxic combination of high oil prices and falling demand continues to poison the industry's profitability.” Fuel is expected to rise to 36 percent of operating costs, up from 13 percent in 2002. IATA also announced industry traffic data for July which showed a continued slowing of cargo demand by 1.9 percent compared to 2007. Asia-Pacific carriers—the largest players in the cargo market—were hit hard with a 6.5 percent decline in cargo. As a result of the weaker economic outlook, IATA significantly revised downward its traffic forecast for domestic and international markets combined.
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Jacksonville is indeed hot. Another indication that the Port of Jacksonville is becoming a significant U.S. alternative was made clear last month with the announcement that a major logistics player is investing in the region's future. Spectrum Logistics LLC, the wholly owned subsidiary of Sea Star Line LLC, has formed an agreement to lease a truck terminal and warehouse at 1302-B Eastport Road in Jacksonville. The facility is located in close proximity to the port's Blount Island ocean terminal. The 20,000-square-foot warehouse has a two-acre truck terminal which can accommodate trailers, containers, out-of-gauge equipment, and all types of cargo that require covered storage or cross-dock handling. It is also close to Jacksonville's burgeoning international airport.
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Come together, right now... In an effort to streamline operations, LTL services provider YRC Worldwide (YRCW) plans to hasten the integration strategy of its two largest subsidiaries—Yellow Transportation and Roadway. YRCW said this integration will mesh its local sales and provide shippers with a comprehensive service portfolio through one operating network entitled Yellow Roadway—with the Yellow and Roadway brands maintaining their own brands and presence in the LTL sector. By operating one national network, YRCW said it expects to increase its network density, resulting in lower fixed-costs and service improvements. The integration is expected to last through 2009 and result in more than $200 million in annual operating savings.
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Lufthansa is secure on screening. Air cargo shippers mindful of the U.S. congressional mandate for 50 percent screening early next year have been clamoring for a solution. Well, at least one carrier seems to have heard their plea. Lufthansa Cargo said it will install explosives detectors in all U.S. destinations it serves. The airline has transformed its bases in Chicago and Los Angeles into “security hubs” by installing physical access barriers, comprehensive video surveillance, explosive detection equipment, biometric checks, and security guard patrols. At the beginning of 2009, Lufthansa Cargo will also take over responsibility for the business activities of its wholly owned subsidiary—Cargo Counts—which has operated as an independent company since September 2003.
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Logistics makes the list. Twenty-six logistics providers and freight transportation companies were recently recognized as some of the nation's most innovative companies by the technology trade magazine InformationWeek. The publication's InformationWeek 500 examines business technology strategies, investments, and practices of some of America's best-known companies. FedEx was the highest ranking logistics and transportation company, coming in at number 18 on the list.
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Holistic logistics. In what may signal a trend for integrated logistics providers, SSI Schäfer opened its new technology center in Giebelstadt, Germany last month. The center features case picking demonstrations designed to provide shippers with examples of “interlinked” work stations. The opening of the center was in conjunction with its conference “Retail Forum08” that attracted 130 logistics management professionals. “This company has made an effort to be holistic in its approach to logistics,” said Alexander Heubes, retail market officer for Prologis in Dusseldorf. Indeed, some of the presentations on packaging and distribution resembled those usually given at premium user-group events for the personal computer industry. Most of the invited speakers adhered to the theme, “Think Globally, Act Locally.”
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GSF hosts largest meeting to date. The Global Shippers' Forum (GSF) convened at its 15th annual meeting last month in Montreal to discuss the needs and goals of freight shippers around the world. The gathering was the largest meeting in the group's history, with more than 40 delegates from over 20 countries representing every trade region across the globe. Since its founding (originally named the Tripartite Shippers' Group) in 1994, the GSF today represents shippers from North America, Africa, Oceania, Asia, and Europe. The GSF emphasized this year that shippers require advancement of policies that foster customized economic partnerships between liner carriers and shippers and that surcharges and ancillary charges be reexamined.
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The 2008 Global Supply Chain Conference is ready to launch! For the sixth year, Logistics Management and sister publication Supply Chain Management Review have teamed up to offer logistics professionals the most comprehensive online conference of its kind: The 2008 Global Supply Chain Conference. Thought leaders and practitioners from around the world will present a series of sessions and workshops on supply chain management best practices and technology on October 29th and 30th. The conference will be available on demand after the launch dates, so shippers can listen at any time. This year's conference will explore the full spectrum of supply chain management—from setting and executing global supply chain strategies to excelling at logistics management.
View All On-Demand WebcastsThe Next Generation Supply Chain
10/11/2009
