Logistic Management: Management Update

An executive summary of industry news

By Staff -- Logistics Management, 5/1/2007

The case of the cross-border pilot. A lawsuit filed against the Department of Transportation’s (DOT) Federal Motor Carrier Safety Administration (FMCSA) in late April calls for the DOT’s cross-border trucking pilot program to be stopped—before it even started. The lawsuit was filed in California federal court by the Teamsters Union, Public Citizen, the Sierra Club, the Environmental Law Foundation, and the Owner-Operator Independent Drivers Association (OOIDA). Their reasons include a contention that federal laws regarding public notice and comment required before opening the U.S. border to Mexican-based trucking companies were violated, and that the pilot was presented in a “secretive” manner. This lawsuit comes on the heels of an amendment introduced in March by the U.S. Senate Appropriations Committee that refuses to finance the funds needed to launch the pilot program.

Fill 'er up on chicken fat and check the oil, please. Tyson Foods and ConocoPhillips, the nation’s third-largest oil company, have gone to work on an initiative in which diesel fuel will be made from pork, chicken, and beef fat. Production is expected to reach 175 million gallons by 2009, or about 3 percent of all diesel produced by ConocoPhillips domestically. The technology behind this “renewable diesel,” which is not yet approved by the Environmental Protection Agency (EPA), is relatively simple. Unlike biodiesel, which requires special factories, renewable diesel can be produced at existing oil refineries through the same process that refines crude oil into traditional motor fuel. It can also be distributed through existing pipelines.

Stellar year for freight forwarders, says Transport Intelligence. The global freight forwarding market saw another year of superb growth in 2006, according to a recent report published by Transport Intelligence. The report, Global Freight Forwarding 2007, says that although the rate of growth was not as fast as 2005, it surpassed many experts’ expectations. Driving forces for the growth include strong intra-Asian trade, steady economic growth in Europe that supported Asia-Pacific trade, and the fact that the U.S. economy has not decelerated as much as feared.

New York congestion? Fuhgetaboutit! New York City Mayor Michael Bloomberg made Earth Day proposals to improve the environment of New York City that include a new congestion fee for drivers who come into parts of Manhattan during peak hours on weekdays, reported The New York Times. The $8 congestion fee would be imposed between 6 a.m. and 6 p.m. Motorists and truckers driving the major highways along Manhattan’s east and west sides would not be fined. The fee would be deducted from the tolls commuters already pay to come into Manhattan via the bridges or tunnels. With no toll booths, a network of cameras would capture license plate numbers and either charge a driver’s existing commuter account or generate a bill. According to American Trucking Associations’ CEO Bill Graves, “Congestion pricing increases cargo transportation costs and hurts the economy. Higher manufacturers’ and retailers’ operating costs mean higher costs to consumers for everything from gasoline and clothing to food. Fuel taxes are a much more efficient way to fund new infrastructure that effectively reduces congestion.” U.S. Secretary of Transportation Mary E. Peters, however, issued support saying, “This plan is the kind of bold thinking leaders across the country need to embrace if we hope to win the battle against traffic congestion.”

Air hub deal for UPS and Shanghai Airport Authority. The UPS International Air Hub, scheduled to open next year, will be the first constructed by a U.S. carrier and will link all of China via Shanghai to UPS’s international network with direct service to the Americas, Europe, and Asia. It will also connect points served in China by UPS through a dedicated service provided by Yangtze River Express, a Chinese all-cargo airline. These agreements are a direct result of the Agreement on Sino-U.S. Civil Aviation Transportation Air Services signed by the Chinese and U.S. governments in July 2004.

DHL is MLB’s MVP. Major League Baseball Properties, Major League Baseball Advanced Media, and DHL announced a sponsorship agreement that extends DHL’s business partnership with Major League Baseball through the 2010 season. The agreement includes rights as the “Official Express Delivery and Logistics Provider of Major League Baseball and MLB.com” and sponsorship of MLB All-Star FanFest, a baseball theme park and part of Major League Baseball All-Star Week. At the All-Star FanFest, the new DHL Shipping Zone will be available for fans who want to ship souvenirs and memorabilia.

AAR plans to beef up 2007 spending. U.S. Class I freight railroads will invest $9.4 billion this year for initiatives designed to increase capacity, improve service for shippers and rail customers, and augment existing track and equipment said Edward R. Hamberger, president and CEO of the Association of American Railroads (AAR). Speaking at the Surface Transportation Board hearing for Ex Parte 671, Rail Capacity and Infrastructure requirements in April, Hamberger said this investment trumps last year’s $8.6 billion and is a new spending record. He also said that the huge investments made by railroads reflect their “extreme capital intensity,” noting that in the past 10 years railroads have spent an average of 17.2 percent of revenues on capital expenditures compared to an average of 3.4 percent for manufacturing.

A retail revolution in Russia? The retail sector is driving supply chain development in Russia, says a study by global consultancy Capgemini. The retail market, actively expanding from Moscow and the Central Region deeper into the country, is responsible for churning logistics development in Siberian cities. Novosibirsk and Yekaterinburg, Siberia’s two largest cities, are rapidly developing their logistics and transport infrastructure to accommodate the growing needs of retail chains. Russia’s logistics development goal: to become a gateway to Europe for product flowing from Asia.

U.S. is second to China in world maritime container traffic. According to The Bureau of Transportation Statistics (BTS) report America’s Container Ports: Delivering the Goods, one in nine maritime containers in the world was either bound for or coming from the United States in 2005. Last year saw more than double the trade volume from a decade earlier—an estimated 46.3 million 20-foot equivalent units (TEUs) passed through domestic ports in 2006, dwarfing the 22.6 million in 1996. The report also notes that container traffic in the U.S. is becoming more concentrated as larger, faster, and more specialized vessels call at the limited number of ports capable of handling them. The U.S. has been second to China in world container trade volume since 1998. To see the report, visit www.bts.gov.

Want to establish a supply chain into China? Read LM’s new China Logistics Blog and let our China experts, Andy Mulkerin and Barrett Comiskey of Nicobar Group, demystify this daunting task. Comiskey is based in Shanghai and has spent the last five years building working relationships with manufacturing and finance organizations throughout Asia. Mulkerin is based in New York and has 10 years of experience in U.S. manufacturing operations. He developed supply chain strategy for Sony Corporation in Tokyo for the introduction of the Blu-ray optical disc technology in the PlayStation 3. The two will weigh in with news/trends analysis, Q&A sessions, and tips designed help shippers establish an effective logistics and supply chain strategy into China.