Management Update

By Staff -- Logistics Management, 12/1/2006

Shippers have lost a true champion. Longtime Logistics Management contributor William J. Augello passed away last month at the age of 80. Bill practiced transportation law for more than five decades and was known throughout the transportation world as an authority on that subject. His many accomplishments included serving as executive director of the Transportation Consumer Protection Council and authoring several books, including Transportation, Logistics and the Law. Bill was best known for defending shippers against the practice of “undercharges,” where bankrupt motor carriers attempted to collect additional payments from shippers long after invoices had been settled. Donations to a scholarship established in Bill’s memory may be sent to: Law College Association—William J. Augello Scholarship for Transportation and Commercial Law Studies, James E. Rogers College of Law, The University of Arizona, P.O. Box 21076, Tucson, AZ 85721-0176.
The trucking industry’s future is bright enough to necessitate shades. According to the American Trucking Associations, trucking will continue to dominate freight movements in the United States into the next decade. In its report, U.S. Freight Transportation Forecast to 2017, the ATA forecasts that by 2017, the industry’s share of total freight tonnage will rise to 69.5 percent and trucking’s share of total freight revenue will hit 85.1 percent. The report additionally predicts that rail and water transportation will also make steady gains between now and 2017.
If you ship oversized or bulky, lightweight parcels, watch out. Effective January 1, UPS will change the way it calculates charges for many oversized packages. For the first time, Big Brown will apply dimensional weight (density-based) charges to ground shipments. FedEx Ground will follow suit with similar rules on February 5; DHL says it will do the same sometime in the first quarter. Those changes will have a substantial impact on shippers’ costs and “could change the way you do business,” according to Dale Wade of the transportation consulting firm AFMS. Speaking at the Council of Supply Chain Management Professionals’ conference in October, Wade said that a few shippers will see a reduction in rates but most will pay more. He also advised shippers to expect more supplemental billings while the new rules are being implemented.
Two-thirds of domestic Fortune 500 companies use at least one third-party logistics (3PL) service provider, according to Armstrong & Associates’ recently-released report, Trends in 3PL/Customer Relationships. The report suggests that the larger a company is, the more likely it will be to have at least one 3PL relationship. Of the 100 largest companies on the Fortune list, Armstrong’s research found, 81 percent use at least one 3PL. Some corporate giants employ dozens: WalMart and General Motors, for example, use 32 and 39 third-party providers, respectively. For more information about the report, go to www.3PLogistics.com.
How can you ensure high service standards in Eastern Europe while retaining the region’s cost and time advantages? Eastern Europe’s low labor, manufacturing, and real estate costs are attractive, but inadequate infrastructure and unreliable service sometimes undermine those benefits. One U.S.-based manufacturer has found an effective solution: Working with its third-party logistics (3PL) company, the manufacturer brings materials destined for a plant in Romania into Hungary under customs bond. Materials are ordered under a vendor-managed inventory (VMI) system, and shipments clear customs when they arrive at the plant. According to a 3PL executive, this approach, which takes advantage of Hungary’s ties to the European Union and its more-developed infrastructure, has resulted in service quality that is comparable to that in the United States.
Swift Transportation Co. says “thanks but no thanks” to its former chairman and CEO. Jerry Moyes, Swift’s largest shareholder, made an offer last month to buy the truckload carrier. But his $2.2 billion proposal of $29 per share was rejected by the company’s board of directors, which said the offer was “inadequate.” Moyes resigned in October of 2005 while under fire for insider trading. According to wire reports, Moyes may not give up so easily: The reports indicate that he may up the ante and make another offer for the company he co-founded in 1966.
PWC Logistics re-brands as Agility. Global logistics services provider PWC Logistics recently unveiled a new name: Agility. The re-branding reflects the integration of four previously separate organizations—PWC Logistics, GeoLogistics, Transoceanic, and Trans-Link. The transition to a single identity is expected to be completed by 2008. Kuwait-based Agility has 20,000 employees in 450 offices in 100 countries.
L.A. and Long Beach look to maglev technology to cut pollution. The West Coast ports are considering using magnetic-levitation (“maglev”) trains to ferry containers around the port complex, a move that could help ease congestion and reduce air pollution. Maglevs are propelled along magnetic fields produced by guide rails on the ground. Traveling up to 90 mph, the trains would run on elevated guideways built in highway medians or along utility rights of way. Spurs would extend from the main line to port terminals, where equipment would shuttle containers from ships and storage yards to rail cars. The L.A. and Long Beach port authorities stepped up their search for environmentally-sound practices in November after they approved a $2 billion plan to turn the harbors into model clean-air operations.
With the holidays fast approaching, FedEx and UPS have their work cut out for them. December 18 and December 20 look to be the big days for FedEx and UPS, respectively. FedEx says it expects to move approximately 9.8 million packages through its FedEx Express and FedEx Ground networks on December 18, which would surpass the previous record of 8.9 million packages set on Dec. 19, 2005. Meanwhile, UPS expects its daily package volume will soar from an average 15 million packages a day to more than 21 million on December 20. UPS estimates that on that day it will deliver 240 packages every second through its worldwide air and ground network.
So that’s how an iPod grooves through the supply chain? U.K.-based freight forwarder Woodland International Transport Company Ltd. recently kicked off a program designed to educate high school students about international trade and the profession of freight forwarding. Using Apple Computer’s iPod as an example, the program gave students a detailed understanding of how raw materials move through the supply chain. Students also learned the intricacies of supply chain management by working on teams, writing reports, and giving presentations on how the iPod’s various parts and materials move from the sourcing and production stages to retail-store shelves.
LM’s 2007 Salary Survey and Outlook webcasts are just around the corner. Be sure to watch your in-box when you get back to work following your New Year revelry. During the week of January 15, we’ll be sending out 2007 Salary Survey questionnaires via e-mail. Last year nearly 1,700 readers participated in this highly anticipated study, giving the market a clear picture of average logistics salaries around the country as well as which titles rake in the biggest bucks. During the week of January 22, we’ll announce the launch date and time of the 2007 Logistics Outlook webcast, the popular event that offers shippers a snapshot of where the U.S. economy is headed and, more importantly, what kind of rates they can expect to pay in the coming year. During this interactive event, shippers will be able to ask industry experts questions in real time. We’re starting 2007 out with a bang, so we’ll see you online.
Read this year's salary survey article - Salaries come back to Earth
View this year's Outlook webcast - Logistics Outlook 2006