Management Update

An executive summary of industry news

By Staff -- Logistics Management, 7/1/2006

• Mineta is moving on. After more than five years of service, Norman Y. Mineta resigned his post as United States Secretary of Transportation. Widely respected in the logistics community for his understanding of freight-related issues, Mineta can take credit for such accomplishments as the signing of SAFETEA-LU, the legislation that reauthorizes transportation-infrastructure spending, and helping to develop a national strategy to reduce transportation congestion. Mineta also earned distinction as the only Democrat in President George W. Bush's cabinet.
• Is that wood up to snuff? As of July 5, it had better be. That's when the U.S. Department of Agriculture's Animal and Plant Health Inspection Service (APHIS) and U.S. Customs and Border Protection began enforcing the final phase of USDA's wood packaging material (WPM) regulation. Under that rule, pallets, crates, boxes, and other wooden items used to support or brace cargo must be free of timber pests before entering or moving through the United States. All WPM items must be either heat-treated or fumigated with methyl bromide in accordance with the International Standards for Phytosanitary Measures: Guidelines for Regulating Wood Packaging Material in International Trade (ISPM Standard 15). They also must be marked with an approved international logo certifying that they have been appropriately treated. WPM that is not in compliance, and materials that are properly marked but are found to be infested with wood-boring pests, will be immediately re-exported. For details, go to www.aphis.usda.gov or to www.cbp.gov.
• GM wants to buy out Vector SCM. On June 29 Con-way Inc. received word from General Motors that the struggling auto giant was interested in buying out Con-way's stake in Vector SCM LLC. That's the joint venture formed back in 2000 by GM and Menlo Worldwide, Con-way's contract-logistics subsidiary. Con-way's stock quickly rose that morning on the news. GM told Con-way that it wants to gain more direct control of its logistics operations as part of its turnaround plan. Whether the change in management for Vector SCM will make a difference in GM's situation is debatable; in late June, the Detroit Free Press reported that GM's sales figures for June and July would be "brutal." Con-way and GM said they would immediately move forward with discussions concerning valuation and buyout terms for the venture. Vector SCM's contracts with non-GM clients will be transitioned to Menlo Worldwide.
• The votes are in, and PierPASS gets a big "thumbs up" from truck drivers servicing the marine terminals at the ports of Los Angeles and Long Beach. According to the results of a poll of 480 drivers conducted in May, most drivers hold a positive opinion of the PierPass/OffPeak program, which uses various incentives to encourage container moves during off-peak hours. Of respondents who were familiar with the program, 71 percent said it had reduced overall traffic, and 66 percent viewed the addition of night gates and Saturday operations as a positive development. Just over two-thirds said OffPeak had reduced traffic and congestion outside of the terminal, while 55 percent credited the program with improving operations inside the gates. In addition, one-third of drivers surveyed reported that their earnings have increased and that they are making more trips per shift since the program was introduced.
• Here's proof that competitors can also be collaborators. UPS and the United States Postal Service have inked a deal under which UPS will transport First Class and Priority mail to and from 98 U.S. cities. Before the three-year contract went into effect July 1, UPS had provided that service to and from 16 cities. According to the Wall Street Journal, the new pact is expected to generate more than $100 million per year for UPS. That pales in comparison to FedEx's $1.3 billion contract with the postal service, but it might open the way for UPS to pick up more postal business when FedEx's contract comes up for renewal next year, the WSJsuggested.
• There's good news and bad news about the driver shortage. First, the good news: During the first quarter of 2006, large truckload carriers experienced the largest quarterly decrease in driver turnover in 10 years. According to the American Trucking Associations, the annual turnover rate during the first three months of the year was 116 percent—20 percentage points below the 136 percent rate seen during the fourth quarter of 2005. Now for the bad news: Trucking capacity is forecast to remain tight throughout 2006 and 2007, say analysts at the Nashville, Ind.-based transportation research firm FTR Associates. The continued strength in manufacturing and freight-producing sectors of the economy has caused Class 8 capacity usage to exceed 90 percent for the last 9 quarters; FTR expects that situation to continue for some time.
• When it comes to port security, haste makes waste, says American Association of Port Authorities (AAPA) President and CEO Kurt Nagle in recent comments on the Department of Homeland Security's proposed rules for the Transportation Worker Identification Credential (TWIC), which is designed to prevent individuals who pose a security threat from gaining access to U.S. ports. Nagle said the AAPA "strongly supports" TWIC as an important enhancement to the United States' current security system. But he cautioned that a slow, phased-in approach to implementing the program at port facilities will be needed to avoid bottlenecks that could negatively impact cargo movements through U.S. ports.
• The ports of Los Angeles and Long Beach are trying to clear the air. The two Southern California ports have introduced the San Pedro Bay Ports Clean Air Action plan, which aims to reduce the health risks posed by air pollution generated by port-related ships, trains, trucks, yard equipment, and harbor craft. Under the plan, particulate matter from those sources would be reduced by more than 50 percent over the next five years, and smog-producing nitrogen oxide would be reduced by more than 45 percent. The International Longshore and Warehouse Union (ILWU), which says its members are the first to be affected by on-dock pollution, has applauded the plan. The ILWU is calling for the ports of Oakland, Seattle, Tacoma, and Portland to adopt similar programs, says spokesman Steve Stallone.
• Intermec goes back to the mat. Everett, Wash.-based Intermec Inc., the maker of radio frequency identification (RFID) products and the holder of more than 150 RFID patents, said that it's suing Morgan Hill, Calif.-based Alien Technology, a maker of RFID tags and readers. Intermec alleges that Alien's Generation 2 products infringe 10 of its patents, and the company is seeking an injunction prohibiting Alien from selling those products. According to the Puget Sound Business Journal, at the end of June Alien officials said they had yet to see the lawsuit and therefore could not comment on it. Intermec is certainly no stranger to court battles: Late last year the company settled an intellectual-property dispute with Symbol Technologies when the two competitors agreed to cooperate in cross-licensing programs.
• Hewlett-Packard is reshuffling the deck in a bid to streamline its logistics and procurement operations. The company will push responsibility for supply chain, procurement, logistics, order-fulfillment, and some marketing functions, which are now carried out by its Global Operations organization, back to its three main business groups: Imaging and Printing, Personal Systems, and Technology Solutions. Each unit will have greater accountability for its own operations and will also "host" a companywide function. For example, the Imaging and Printing Group will manage logistics procurement, freight-cost management, and customs operations for all three units. According to HP, the restructuring is part of an effort to simplify corporate structure, reduce costs, and strengthen HP's focus on customers.
• A new broker-carrier contract offers carriers more protections. The Model Broker-Carrier Contract was developed by the Transportation Intermediaries Association (TIA) to promote best practices between brokers and carriers. The contract addresses some frequent points of contention between the two parties. For example, it obligates brokers to pay carriers even if they don't collect from shippers; allows carriers recourse to the shipper if the broker doesn't pay with an agreed time frame; prohibits unauthorized rebrokering; and provides a mechanism for resolving disputes through arbitration. A copy of the contract is available at www.tianet.org.
• Are you ready to tackle the China challenge? That's an important question for logistics and supply chain managers who want to succeed in this era of global sourcing. To help them meet that challenge, Logistics Management and Supply Chain Management Review will launch the 2006 China Logistics Conference, an online event designed to help U.S. companies take advantage of the opportunities—and avoid the pitfalls—of doing business in China. Shippers will get a detailed overview of the current logistics infrastructure in China and learn about the importance of building transportation partnerships in that region. The conference will go live on July 26, so go to www.logisticsmgmt.com for more details.
• A new tracking system can help truck fleets of all sizes get "smarter" and save on labor, time, and money, says Ryder System Inc. Through a partnership with Teletrac and Cingular Wireless, the company is launching its "RydeSmart" onboard vehicle and performance data tracking device. RydeSmart marries Teletrac's global positioning system (GPS) and Cingular's wireless data network in an onboard unit that is connected to a vehicle's existing computer and diagnostics systems. The unit continuously monitors the vehicle and communicates data via a dedicated, secure connection in Cingular's network. The system is now in pilot status and will be introduced in phases throughout 2007.
• Satire on the docks. The Dubai Ports World controversy isn't quite dead yet. LM readers may have caught the recent National Public Radio broadcast of the Capitol Steps, a musical troupe of mostly ex-Senate staffers who satirize the people and places that used to employ them. During the broadcast, the Steps performed a number of tunes from their 26th album, I'm So Indicted. Among the highlights: "What a Difference Delay Makes," "How Do You Solve a Problem Like Korea?," and our favorite, a takeoff on Frank Sinatra's "Strangers in the Night": Strangers in the dock ... Dubai Dubai du.
• NITL Members: It's time to vote. The National Industrial Transportation League (NITL) and Logistics Management are now accepting nominations for the 2006 McCullough Award, which honors the Logistics Executive of the Year. The award, named after John T. McCullough, a former editor of the magazine, is given in recognition of outstanding contributions in the field of transportation and logistics. The award recipient will be selected by the organization's board of directors from nominees submitted by NITL members and affiliates. The Logistics Executive of the Year will be featured on the cover of the November issue of Logistics Management, and the award will be presented during NITL's 99th Annual Meeting, scheduled for November 10–15 in Fort Lauderdale, Fla. NITL members should send their nominations to League President John Ficker by e-mail to ficker@nitl.org. Nominations, which should explain why you believe the nominee deserves the award, should be in John's inbox by the close of business on Friday, July 21.