Management Update

An executive summary of industry news

By Staff -- Logistics Management, 8/1/2007

LM’s 16th Annual Masters of Logistics study goes live on September 19th. Group Editorial Director Michael Levans, Dr. Mary Holcomb of the University of Tennessee, and Dr. Karl Manrodt of Georgia Southern University will put the findings of this annual research project into perspective in a live webcast. The study, which benchmarks distribution costs and logistics practices, found that the difference between the “masters of logisitics” and their counterparts has started to re-emerge. The masters of logistics have better oganizational structure and rely on best of breed software packages. LM sponsored the study, which was conducted by Georgia Southern University, the University of Tennessee, and consultancy Capgemini. An overview of the results will appear in LM’s September issue, but for more on what the findings mean for shippers, tune in on September 19th. To register, visit logisticsmgmt.com.

Railroad reconciliation. Five more rail labor unions reached a tentative agreement with freight railroads in late July. This latest agreement means 96,000 Class 1 railroad employees—or two-thirds of all Class I railroad employees—are now covered in national bargaining. Like the previous agreements, the new accords will provide rail employees with a generous package of wages and benefits that will keep them among the nation’s best compensated industrial workers. More than 30 railroads including BNSF Railway, CSX Transportation, Kansas City Southern, Norfolk Southern, and Union Pacific have been engaged in national bargaining with the rail unions since the current round of negotiations began in November 2004.

Out with the old, in with the new. The Vancouver Port Authority (VPA) has introduced what it describes as the most demanding container truck safety and environmental licensing standards in North America. Called the Truck Licensing System (TLS), the environmentally-focused initiative will require cleaner and more modern technology, which the VPA says it will accomplish by phasing-out the use of older container trucks. By January 1, 2008, the Port of Vancouver will no longer allow access to container trucks older than 1989. By January 1, 2009, the port says it will prohibit trucks older than 1994.

The case of the cross-border pilot…part three. The DOT’s proposed cross-border trucking pilot program, a project geared to expand cross-border trucking operations with Mexico, has stalled for the third time this year. The latest setback is an amendment to remove funding that was recently introduced by the U.S. House of Representatives. A Bloomberg report said the amendment also calls for Mexican trucks to be barred from traveling beyond U.S. borders for a year. The first setback to the pilot program, which planned to allow 100 screened Mexican trucking companies into the U.S. for international deliveries beyond the 20-to 25-mile commercial zones along the U.S. southwest border, was an amendment introduced in March by the U.S. Senate Appropriations Committee that refused to grant the funds needed to launch the program. The second setback caused further delay when, in April, a lawsuit was filed by various transportation and labor organizations alleging that federal laws were violated regarding public notice and comment required before opening the U.S. border to Mexican-based trucking companies.

FedEx Freight lowers fuel surcharge by 25 percent. Yes, you read that right. Douglas G. Duncan, FedEx Freight president and CEO, told LM that this move is an “absolute first” and is designed to improve market share and help the carrier differentiate itself in a crowded LTL marketplace. Duncan said this initiative will help shippers who say that rising fuel surcharges are hurting business. This surcharge reduction, added Duncan, will be an asset to the U.S. trucking economy, which has been less than stellar over the past few months.

GAO examines intermodal barriers. A recent report from the United States Government Accounting Office (GAO) says that three key barriers are inhibiting intermodal transportation: limited federal funding targeted to intermodal projects; limited collaboration among the various entities and jurisdictions involved; and limited ability to evaluate the benefits of intermodal projects. An example of these barriers cited in the report: Officials in one state had difficulty securing funds to repair roads connecting port and rail facilities to local highways because the benefits of increasing freight mobility nationwide were hard to quantify. Examples like this, the report said, explain why the Department of Transportation struggles to execute Congress’ goal of a national intermodal transportation system.

A supply chain Geek Squad? Supply chain software vendors, consultants, and 3PLs are converging on a business model that bundles together software, domain expertise, and live bodies as resources (a Supply Chain Geek Squad?) that will come into an existing operation and execute supply chain improvement initiatives. According to Adrian Gonzalez of ARC Advisory Group, many manufacturers and retailers are overwhelmed by the complexity of their supply chain and are beginning to realize that their real challenge is finding experienced supply chain experts who can connect the dots to create business value. Helping companies by sending in a team of supply chain geeks is quite an opportunity for supply chain software vendors, Gonzalez says.

Watching out for whales. For the first time in United States history, shipping lanes will be reconfigured to protect wildlife, reports the Boston Globe. The busy shipping lanes that feed into the Boston Harbor will be shifted in an effort to protect the population of right whales (the estimated population in the North Atlantic is roughly 300) by reducing the number of whales that are hit. The lane shift will add nearly four nautical miles for shipping vessels.

The not-forgotten congestion toll. After a series of stops and starts regarding New York Mayor Michael Bloomberg’s proposal to charge a congestion fee for drivers ($8 for cars and $21 for trucks) who come into Manhattan south of 86th Street between 6 a.m. and 6 p.m. on weekdays, The New York Times reported that New York Governor Eliot Spitzer signed legislation late last month to create a 17-member commission to “consider different plans for reducing traffic congestion.” Bloomberg’s plan is one possibility. But any plan recommended by Governor Spitzer’s Commission needs to be approved by the state’s legislature. With a congestion plan still alive, New York is still in the race with nine other U.S. cities to receive $500 million in federal aid for a pilot program designed to strengthen mass transit, reduce traffic congestion, and improve air quality.

Wal-Mart Canada’s green scorecard. Keeping in line with its ambitious green goals, the retail giant will roll out a Supply Chain Sustainability Scorecard this fall to assess its network of service providers in term of environmental impact, efforts, and improvement. Wal-Mart Canada will also use the scorecard to measure and reduce the environmental footprint of its product shipping process and logistics network. Lesley Smith, Wal-Mart Canada vice president of supply chain, said the scorecard will help the company give its service providers—including Canada-based trucking, rail, storage, and distribution suppliers—standards that will cover fuel use, facilities and equipment, and overall environmental commitment demonstrated.

L.A./Long Beach sidestep strike. After weeks of contentious negotiations between the clerical unit of Local 63, a division of the International Longshore and Warehouse Union (ILWU), 14 shipping lines and terminal operators serving the Ports of Los Angeles and Long Beach, an agreement on a three-year labor contract was reached. The outlook for a settlement appeared bleak, as talks had reached an impasse and union leaders suggested a strike was imminent. A strike could have wreaked havoc on the global supply chain, as roughly $1 billion worth of consumer goods pass through the ports on a daily basis. The proposed contract now goes to the clerical workers for a ratification vote.

Con-way adds CFI to its trucking portfolio. The $4.2 billion freight transportation and logistics services provider announced it is buying privately-held truckload carrier Contract Freighters Inc. (CFI) for $750 million. In industry circles, this acquisition is being hailed as a strong move by Con-way to boost its truckload presence. With CFI joining Con-way’s existing $90 million truckload business, Con-way has created a business unit with more than $500 million in annual truckload freight revenue. In addition to expanding truckload revenue and operations, other benefits the acquisition is expected to bring include a larger network footprint and an increased presence in Mexico, as CFI is recognized as one of Mexico’s leading transportation providers.

All hands on deck for port education. “We cannot afford to let politicians continue to make uneducated policy that affects the maritime industry, our international trade, and our standing in the world,” says C. Thomas Burke, special advisor to the president at “K” Line America Inc. According to Burke, politicians that regulate the maritime industry need a better education on industry specifics. Freight transportation organizations, including the American Association of Port Authorities (AAPA), the National Industrial Transportation League (NITL), and others, he says, ought to establish an educational program for legislators that includes spending half a day in a local port to learn how ports function and listening to ocean carrier professionals explain the effects of regulations from a maritime perspective.

Air cargo growth has a slow first half. According to the International Air Transport Association (IATA), international freight traffic for the first six months of 2007 was “sluggish,” with growth up only 2.7 percent compared to the first six months of 2006. A busy second half of 2007 will be needed to even match the 4.6 percent growth rate seen for all of 2006. But despite this slow year-to-date growth, things may be looking up as the IATA reported that June’s cargo demand increased 4.9 percent, which marked the second consecutive month of improved freight demand. The IATA noted that this recent growth could be an indication that the air cargo market may be returning to its historic growth levels in the 5 percent to 6 percent range.

Wanted: Innovative transportation thinkers. New dynamics and strategies are imperative to the future of transportation, says a new report jointly released last month by 17 transportation organizations, including the Association of American Railroads (AAR) and the American Association of State Highway and Transportation Officials (AASHTO). The report, Highlights of Transportation: Invest in Our Future—A New Vision for the 21st century, cites global economic congestion, metropolitan congestion, and global climate change as some of the issues that require new thinking. The report was submitted to the National Surface Transportation Policy and Revenue Study Commission to analyze and recommend ways to best equip the U.S. to meet future needs. The report included optimistic goals that would significantly benefit shippers: reduce 50 percent of congestion caused by lack of capacity; increase interstate capacity by 80 percent; and fix the 100 worst bottlenecks in the country by 2015.