Management Update

An executive summary of industry news

By Staff -- Logistics Management, 2/1/2007

• Importers and exporters need to play the numbers game this month. February 3 was the effective date for major revisions to the Harmonized System (HS), the global system for numerically identifying items moving in international trade. All told, customs authorities in 169 countries are updating their tariffs to reflect the changes, so importers and exporters should be sure to run the new numbers wherever they conduct business. The United States’ own Harmonized Tariff Schedule (HTS) has been revised to reflect hundreds of revisions to 83 chapters. Details of the HTS updates are on the U.S. International Trade Commission’s website, www.usitc.gov.
• Moyes makes a Swift move. After an unsuccessful attempt to buy truckload carrier Swift Transportation Co. in November, former chairman and CEO Jerry Moyes (Swift’s co-founder and largest shareholder) upped the ante to acquire Swift in an all-cash transaction worth roughly $2.74 billion. That trumped Moyes’ earlier $2.2 billion offer, which Swift’s board of directors called inadequate.
• Steady growth ahead for the materials handling industry. The outlook was upbeat at the ProMat 2007 show in Chicago last month. Show sponsor Material Handling Industry of America (MHIA) reported that U.S shipments of materials handling equipment rose by 14.7 percent to $25.8 billion in 2006. Growth is expected to continue in 2007 but at a slower 6.5–8 percent pace. MHIA Executive Chairman Brian McNamara said he did not foresee a “hard landing” for the industry because of its cyclical nature.
• Money-wise carriers and 3PLs make the Best Big Companies list. Shippers who want stability from their service providers will be glad to know that 17 transportation and third-party logistics companies (3PLs) have been recognized by Forbes magazine as some of the country’s most successful businesses. Those earning the coveted honor included FedEx and UPS; rail and intermodal companies Union Pacific, Norfolk Southern, BNSF, Hub Group, and Pacer International; motor carriers YRC Worldwide, U.S. Xpress, Swift, Old Dominion, and Landstar; 3PLs EGL, Expeditors International, and C.H. Robinson Worldwide; and SkyWest and Southwest Airlines. The magazine’s editors judged more than 1,000 public companies with more than $1 billion in revenue on corporate governance, long-term and short-term sales, earnings growth, and stock market performance. The entire list is online at www.forbes.com/lists
• Freight tonnage was strong at year’s end. After a nearly 9 percent year-over-year decrease and a 4 percent monthly decline in November, the American Trucking Associations’ (ATA) Truck Tonnage Index rebounded to edge up 3.9 percent in December. That was the index’s largest monthly increase since a 7.3 percent hike in January 2005. Still, the index for the full year was down 5.5 percent compared to 2005. According to ATA Chief Economist Bob Costello, more shipments occurring late in the fall freight season drove much of the monthly growth. The tonnage index is considered to be a good indicator of the overall strength of the U.S. economy.
• YRC Worldwide shifts management gears. With an eye on business growth and operational improvements, YRCW will merge the management teams of its largest units, Yellow Transportation and Roadway. Company executives were careful to stress that although the two carriers will be under the same management group—dubbed YRC National Transportation—they will continue to function as two distinct brands. Mike Smid, the newly appointed president and CEO of YRC National Transportation, told LM that the restructuring will allow YRCW to transport freight more efficiently and price its products and services more aggressively. Other expected benefits of the reorganization include administrative cost savings, the creation of a single sales force, and growth resulting from the development of new products and services.
• FMCSA pushes for EOBRs. A rule proposed by the Federal Motor Carrier Safety Administration (FMCSA) would require trucking and bus companies with a past record of hours-of-service (HOS) violations to install electronic on-board recorders (EOBRs) in all of their vehicles for a minimum of two years. The devices would track a driver’s duty status by recording the driver’s identity, date, time, location of the commercial vehicle, and distance traveled. The proposal would also require the use of vehicle-tracking technology, which the agency says would reduce the likelihood of data falsification. The American Trucking Associations supports the proposal, saying that it would improve highway safety and the reliability of commercial vehicles. The Owner-Operator Independent Drivers Association, which gave the rule a thumbs-down, called it a “misdirected attempt to deal with the root causes of HOS violations.”
• Horizon points north with RFID tracking. Ocean carrier Horizon Lines is rolling out a radio frequency identification (RFID) program that promises to give shippers real-time visibility for containerized shipments to Alaska. The carrier is in the process of placing RFID tags on all of its containers in the Alaskan trade. The program will also include the installation of RFID readers at distribution centers, terminals, and along major highways in that state. Grocery retailer Safeway is participating in the pilot tests. For more information, go to www.horizonservicesgroup.com.
• How smart is your business mail? Smart enough to compete with private-sector express carriers, if the United States Postal Service has its way. The USPS is working on a service called Intelligent Mail, which will deploy bar codes and continuous mail-tracking technology for letters, flats, and mail containers. The system will electronically provide advance shipment notification and address verification. It will also communicate information about such problems as bad addresses and improper pre-sorts back to shippers for correction. A pilot program for Intelligent Mail is now under way, and the USPS expects to have the system in place in 2009.
• A man. A plan. A corn plant? In his State of the Union address last month, President Bush called for cutting gasoline usage by 20 percent over the next 10 years. His plan: dramatically increase the production of alternative fuels such as ethanol (a corn derivative) and hike fuel-efficiency standards for vehicles. According to the National Environmental Trust, an advocacy group in Washington, Bush’s plan would require the production of 35 billion gallons of alternative fuel (most of it ethanol) per year by 2017—a huge jump from the 4.4 billion gallons produced in 2006.
• Playing with pallets. An exhibit at Boston’s Museum of Science introduces youngsters to one of the most common challenges in distribution: how to maximize the number of cartons on a pallet or in a crate. At one station in the “Making Models” exhibit, visitors are invited to build an efficient palletload or fill a crate using scale models made from wood. Sad to say, this writer failed both tests but is hoping the activity will inspire some future warehouse or logistics managers.
• Do you have a great logistics tale to tell? If so, we want to hear about it. Logistics Management is accepting entries for our 2007 Best Practices Awards contest from shippers who want to share their success stories. Three winners will be chosen from among entries that demonstrate how an innovative logistics strategy has cut costs and improved efficiency. All three will be profiled in the June issue of the magazine; the Gold Award winner will also walk away with an iPod nano and will be featured on the cover. Submissions are due by March 1. For rules and an entry form, go to www.logisticsmgmt.com/bestpractices.