Management Update

An executive summary of industry news

By Staff -- Logistics Management, 4/1/2005

• BNSF will become the first U.S. railroad to assess fuel surcharges on a mileage basis. The BNSF Railway Co. will institute the new fuel surcharge method starting January 1, 2006. At present, railroads assess fuel surcharges as a percentage of a customer's freight bill. John Lanigan, BNSF's executive vice president, cited tight capacity, rapidly rising fuel prices, and pricing volatility as prompting the change. A mileage-based surcharge, he said, will be the most direct and accurate method of reflecting the impact of fuel price changes on both the railroad and its customers. The surcharge will apply to movements that both originate and terminate on BNSF as well as to BNSF's portion of separately billed interline movements. (For more about fuel surcharges, turn to Page 19.)
• Intermec's parent company has fired back at Symbol Technologies in a dispute over patents for some radio frequency identification (RFID) technologies. Last month Unova, which owns Intermec, announced that it had countersued Symbol for patent infringement in RFID-related wireless access, terminal, and software technologies. The legal tussle began in June 2004 when Unova sued Matrics for patent infringement. After Symbol acquired Matrics and couldn't resolve the outstanding lawsuits, Symbol sued Intermec. That, in turn, prompted last month's response. Many worry that the lawsuits could hinder the adoption of new RFID technologies because the patent infringements involve technology used in the latest generation of electronic product codes.
• Hazmat shipments will have to bypass big cities if Rep. Edward Markey has his way. The Massachusetts congressman has introduced "The Extremely Hazardous Materials Transportation Security Act of 2005," which would require the Department of Homeland Security to reroute some dangerous shipments around densely populated or sensitive areas when a safer route is available. Hazmat shipment routing received national attention recently when the Washington, D.C., City Council passed a regulation that would force CSX Transportation to re-route hazardous materials shipments around the nation's capital. The railroad has challenged the city council's ruling in court on the grounds that it interferes with interstate commerce.
• Do Mexican trucks meet U.S. air quality standards? That's what the U.S. Environmental Protection Agency is hoping to find out. The EPA is collaborating with the Arizona Department of Environmental Quality to test emissions of Mexican trucks entering Arizona at the border town of Nogales. The agencies will use the three-week pilot program to measure gas and particulate emissions. The ultimate aim is to determine how many of the Mexican trucks entering the United States exceed EPA emissions standards. Opponents of the North American Free Trade Agreement provision allowing Mexican motor carriers into the United States have long tried to derail it on the grounds that Mexican trucks don't meet U.S. emissions standards and therefore should be barred from entry.
• The very latest supply chain software and RFID technologies will be on display at the Distribution/Computer Expo. That event kicks off at the Navy Pier in Chicago with educational seminars on May 17; the exhibit hall will be open May 18 and 19. ESYNC principal John Hill and TrenStar CEO Greg Cronin will deliver keynote addresses. More than 200 exhibitors will showcase their wares while 40 seminars on software and RFID will be offered. Editors from Logistics Management and its sister publication Modern Materials Handling will be on hand at Booth No. 1229. For more information about the trade show and seminars, go to www.logistar.com.
• Third-party logistics providers had another banner year in 2004. Armstrong & Associates, publishers of a well-known guide to the third-party logistics (3PL) market, said U.S. revenues reached $89.4 billion, an increase of 16.3 percent over the previous year. Armstrong said growth in global sourcing, particularly from China, was a factor in the revenue hike. Tight capacity in the transportation market also allowed 3PLs to command higher prices for their services, according to President Richard Armstrong.
• The U.S. warehousing market also did well last year, as occupancy rates picked up in the second half of 2004, according to the ProLogis Research Group. A survey of the top 30 markets found that the average vacancy rate declined from 10.3 percent in 2003 to 9.6 at the end of 2004. A surge in demand during the closing months of last year resulted in the absorption of 111 million square feet of warehousing space during 2004, a 2.7 percent increase from the previous year. Construction of warehouse and distribution facilities added 95 million square feet of new space.
• A hydrogen-powered forklift truck is a step closer to commercial reality after a recent test at a General Motors plant in Canada. The test was spearheaded by Hydrogenics, a consortium that's promoting the development of industrial trucks that are powered by hydrogen fuel cells. Partial funding for the pilot came from the Canadian government. Hydrogen-powered forklifts are considered to be ideal for indoor facilities because they produce no exhaust emissions.
• The China trade boom continues, as evidenced by the launch of a new all-cargo service from China to the United States. Hong Kong's Dragon Airlines will soon begin thrice-weekly service to New York's JFK International Airport. The carrier initially will lease equipment and crew from Taiwan's China Airlines, but plans to introduce its own aircraft next year when it takes delivery of the first of five Boeing 747 passenger aircraft that will be converted to freighter configurations.
• If you're looking for the Air Courier Conference of America, you'll have to search under a new name. The trade group now calls itself "The Express Delivery & Logistics Association" to better reflect the scope of its members' activities. The non-profit association, which will go by the acronym "XLA," will also move its offices from Silver Spring, Md., to Falls Church, Va.
• Shippers nationwide will experience freight bottlenecks this year, say analysts at Kiplinger Business Forecasts. In particular, shippers should be prepared for continuing congestion at the ports of Los Angeles and Long Beach due to strained truck and rail capacity. Other expected problem areas include Washington state, Oregon, Arizona, Texas, most East Coast cities, and Midwest hubs such as Chicago, Cleveland, and Kansas City, Mo. Kiplinger predicts average freight rates may climb by as much as 15 percent this year.
• Exponential growth in sales of RFID equipment is in store if forecasts by British consulting firm IDTechEx are correct. A new market research report predicts that RFID technology sales will rise from $1.94 billion this year to $7.26 billion in 2008. Ten years from now, the report says, sales could hit $26.9 billion. Although tagging of pallets and cases has gotten the most attention so far, output for item-level tagging, particularly of drugs, is expected to rival that of supply chain applications this year. The firm's analysts doubt that the price of RFID chip tags will fall to one cent, but they believe five-cent chip tags are "a certainty."
• Comedian David Spade may not want to receive any express packages after portraying a UPS driver in a skit on the March 21 episode of Saturday Night Live. In the skit, Spade, garbed in the familiar brown uniform, delivers packages daily to a receptionist he is courting. When he loses the lady's affections to a FedEx delivery man, he blows up the office building in retaliation. Don't expect to see Spade featured in commercials for express carriers anytime soon.