Management Update

An executive summary of industry news

By Staff -- Logistics Management, 9/1/2007

• Is 100 percent cargo scanning really 100 percent? Maybe not, says a Boston Globe article. After signing “H.R. 1: Implementing Recommendations of the 9/11 Commission Act of 2007” in August—part of which calls for the scanning of all cargo on passenger planes within the next three years—it appears the Bush administration may have a different take on the legislation. The Globe said cargo packed by approved shippers to be loaded onto passenger planes will be allowed by the Bush administration without any further inspection for bombs, seemingly a contradiction to H.R. 1.
• Price fixing plea. British Airways, Britain’s largest airline, and Korean Air, South Korea’s largest carrier, plead guilty to antitrust conspiracy charges in late August. The airlines said that they had colluded with rivals over cargo rates and fuel surcharges (added in response to rising oil prices), resulting in higher costs for international shippers. Each airline was fined $300 million—fines that could have been much more severe, but the Justice Department credited the companies with cooperating in the case.
• The year of RFID. This year, for the first time, China is the world’s largest market for RFID. A new report, RFID in China 2007–2017, by consultancy IDTechEx, says that spend on RFID in China is $1.9 billion—38 percent by value of the $4.96 billion global market in 2007. The main reason behind China’s top spot: a peak in delivery of contactless national identification cards prior to the 2008 Olympics. As the deliveries of the national ID cards saturate, however, the report predicts that China will sink below the U.S. and probably Japan in value of its RFID market, but the market in China will continue to grow quickly.
• We can share the ride. New York, Miami, Minneapolis, San Francisco, and Seattle are the five winners that will divvy up $1.1 billion in federal aid to take part in the Department of Transportation’s (DOT) federal initiative to fight traffic gridlock. These areas were among 26 that applied for the DOT’s Urban Partnership Program. The awarded funding will go to initiatives designed to reduce congestion. When submitting bids, all the winning regions proposed some form of congestion pricing—such as New York’s proposal to charge a congestion fee for drivers coming into Manhattan south of 86th Street between 6 a.m. and 6 p.m. on weekdays. DOT Secretary Mary E. Peters said that direct user vehicle fees, like the one proposed for New York, can reduce the congestion-related costs, effectively raise funds better than the current gas tax does, and will help states and cities build and maintain critical transportation infrastructure—a benefit to shippers.
• Teamsters try to muscle their way in. Organized West Coast dockside labor has a long and storied legacy of using devious tactics to achieve their ends. This time around, however, the usual suspects comprise truckers, not longshoremen. A recent study, commissioned by the Los Angeles Alliance for a New Economy (LANNE), advocating a shift in current drayage policies that would shut out independent owner-operators, was embraced by the Teamsters when it became clear that political leverage to grab control of the gates could be gained. While owner-operators are replacing their older vehicles with newer “cleaner” ones when they can afford to do so, the Teamsters provide their drivers with new models when they become union members. Among the first to spot the ruse was the California Independent Truckers’ Association, which said the study is politically motivated and meant to eliminate jobs currently held by owner-operators who work independently. These drivers work for lower wages, thereby saving shippers money. While “The “Clean Truck Program” has the support of the Ports of Los Angeles and Long Beach, shippers are aware that private sector monies are being spent to introduce cleaner vehicles into the supply chain. Shipper skepticism may also be due to the alignment of the Teamsters with environmental action groups, like the Sierra Club, to consolidate union power.
• YRCW ready to make a deal. Global transportation services provider YRC Worldwide Inc. (YRCW) recently said that its Transportation Management Inc. member subsidiaries—Yellow Transportation and Roadway, among others—will begin contract negotiations with the International Brotherhood of Teamsters (IBT) for the new National Master Freight Agreement (NMFTA) as early as September. The NMFTA contract currently in place expires April 1, 2008. Mike Smid, president and CEO of YRC National Transportation, said that initiating negotiations in an expedited time frame is a good move because time is of the essence in what is an increasingly complex industry environment.
• The cross-border pilot saga continues. Late last month, a federal appeals court turned down a request from the Teamsters Union and other organizations to block the DOT’s proposed cross-border trucking pilot program, which would expand U.S. cross-border trucking operations with Mexico. At press time, the Teamsters were told by the DOT’s Federal Motor Carrier Safety Administration (FMCSA) officials that Mexican trucks would be coming across the U.S. border in early September. Teamsters President James Hoffa blasted this decision saying it was “a slap in the face to American workers opening the highways to dangerous trucks on Labor Day weekend, one of the busiest driving weekends of the year.” But the FMCSA said the decision was “welcome news for U.S. truck drivers looking to compete south of the border and for U.S. customers eager to realize the savings of more efficient shipments with our largest trading partners.”
• No more playing nice? Not so long ago, U.S. seaports were insisting that regional cooperation was a “win-win.” West Coast gateways in San Pedro, Puget Sound, and the San Francisco Bay area began collaborating to attract aggregate cargo rather than continuing with head-to-head competition for direct liner calls. But those days may be over, say industry analysts, who have noted recent shifts in deployments and terminal contracting. Capt. Harry Bolton, a senior partner with Maritime Consultants of the Pacific, told LM that ports are now willing to build-to-suit if it means attracting business away from a neighboring port. The most recent example of this trend surfaced late last month as Port of Long Beach spokesmen announced that Norasia Lines of Hong Kong, Sinotrans Container Lines of Shanghai, and Wan Hai Lines of Taipei will be leaving Los Angeles to use a terminal. A few months earlier, Tacoma lured NYK away from Seattle.
• Air cargo rate rigor. Robust demand and new capacity may mean higher air cargo rates for shippers. According to Giovanni Bisignani, director general and CEO of the International Air Transport Association (IATA), the pick-up in freight—led by Asia—could be the first sign of strengthening demand. He also observed that average air cargo load factors have remained strong at 73.7 percent so far in 2007, up 0.1 percent year-to-date. Escalating airline salaries, fuel, and operating costs are a big reason shippers (and consumers) will feel the pinch soon, said analysts, but they also suggested that the pricing trend could be reversed if an increase in plane orders makes efficient aircraft more expensive and harder to obtain.
• LM’s 16th Annual Masters of Logistics study goes live on September 19th. LM’s 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 Logistics and their counterparts has started to re-emerge. The Masters of Logistics have better organizational 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 the consultancy Capgemini. An overview of the results begins on page 24, but for more on what the findings mean for shippers, tune in on September 19th. To register, visit logisticsmgmt.com.