Management Update

An Executive Summary of Industry News

By Staff -- Logistics Management, 10/1/2007

• Truck driver turnover is down. Seriously. Data from the American Trucking Associations (ATA) revealed that annualized turnover rates for truckload line-haul drivers in the second quarter dropped for the first time in a year. The ATA reports that driver turnover for large truckload carriers—or fleets with at least $30 million in annual revenue—was 116 percent, an 11 percent decline from the first quarter. ATA Chief Economist Bob Costello said this decline can be attributed to soft volumes and looser capacity. However, Costello also points out that driver turnover is still high and has not dipped below 100 percent since the fourth quarter of 2002. Costello told LM in an interview earlier this year that this situation is not getting better and more progress is needed to lower the turnover rate on a regular basis.
• TWIC it. TWIC it good. While shippers may be wary of yet more red tape being introduced at our ocean gateways, spokesmen for the nation’s ports say they’re glad that the Department of Homeland Security (DHS) is moving ahead with its plans for more security. DHS will begin enrolling port workers in its Transportation Worker Identification Credential (TWIC) program this month at the Port of Wilmington, Del., with the goal of enrolling all U.S. port workers by Sept. 25, 2008. “We are partnering in a way that enables freight movements to continue to move efficiently,” said Kurt Nagle, president and chief executive officer of The American Association of Port Authorities. The TWIC program comprises criminal background, immigrant status, and terrorist watch-list screening of longshoremen, truckers, and other port workers.
• Cold hard cash. A report recently released from Drewry Shipping Consultants confirms what many ocean shippers have been telling us for months: Reefer volume and profitability is rising, despite a decrease in the size of the dedicated ocean reefer fleet. “Profits in the reefer sector are on the upswing reflecting a trend in overall seaborne trade,” said Drewry managing director Nigel Gardiner. “However, the specialized reefer fleet continues to decline in numbers since its peak in 1999. Yet owners and operators still enjoy healthy profits as time charter rates reach record levels.” Drewry’s report outlines how world reefer trade has grown from 84.6 million tons in 1995 to 132.7 million tons in 2005, a compound annual growth of 4.6 percent.
• Unfortunately, global warming may create a new option for shippers. While making a choice between moving goods through the Panama or Suez Canals continues to be a conundrum for many shippers, an “inconvenient truth” may be presenting them with an alternative. According to the European Space Agency, the most direct shipping route from Europe to Asia—the fabled Northwest Passage—is fully clear of ice for the first time since scientists began keeping records on the region. Global warming is being cited for the sudden meltdown of the arctic circle, which has opened a potential trade lane linking the Atlantic and Pacific Oceans. Shipping analysts, however, believe there may be some international disputes over rights to the passage. Canada, for one, insists that it controls the territory. Russia is also holding claim to the region; however, U.S. and EU statesmen contend that this may represent an international strait, open to all vessels.
• U.S. trade with China gets a boost. Fretful economists worried about the continuing trade imbalance may take heart in a new forecast by one of America’s manufacturing giants. According to the Boeing Current Market, an annual report for the commercial airline market, China will require 3,400 new planes to meet future demand. Not surprisingly, China remains the world’s fastest-growing market for this commodity, with economists predicting a five-fold growth in passenger traffic in the region over the same period. U.S. shippers may find this news encouraging, too, as it means a surge in capacity to and from China. Boeing says Chinese air carriers will add about 300 freighter airplanes by 2026, bumping its fleet by more than four times its present size.
• UPS to boost air presence in Japan. The U.S. Department of State and Transportation recently reached an agreement that will allow UPS to expand air operations to and from Japan. This agreement provides UPS with the authority to operate six daily flights between the U.S. and Nagoya, Japan—the country’s fourth-largest city—along with its daily service to Tokyo and Osaka. The company added that having air access to Nagoya offers UPS various opportunities to expand in Asia. Company spokesman Malcolm Berkley told LM that this initiative will enable UPS to provide shippers looking to grow global business with improved access into Japan.
• Bridge improvements on the horizon. The U.S. Senate added and approved a $1 billion amendment last month that would fund the replacement and rehabilitation of structurally deficient bridges across the country. The proposed funding, which was introduced by U.S. Senator Patty Murray (D-Wash.), would go toward the Federal Highway Administration’s Bridge Replacement and Rehabilitation Program. Over the past five years, an average of $5.3 billion has been spent annually on bridge rehabilitation and replacement, and this amendment would add to this level by approximately 20 percent. While this additional funding would increase federal money for bridge repair and replacement, an Associated Press report noted that these additional funds would not make a dent in the $65 billion nationwide backlog of bridge repairs identified by the Department of Transportation (DOT).
• Supply chain execution market expected to grow 10 percent. According to a report from supply chain consultancy ARC Advisory Group, the SCE market will exceed $7.4 billion by 2011—a healthy increase from $4.6 billion in 2006. Even with this projected growth, ARC analyst and author of the report Steve Banker says the SCE market is still highly fragmented with more than 250 suppliers and nary a change in the top ten supplier’s total market shares since 2003. Why such growth? Banker explains that it’s largely due to a positive world economy, globalization, and new compliance regulations.
• Lufthansa Cargo and DHL Express team up. Shippers doing business in the EU-Asia market will have a new option when Lufthansa Cargo and DHL Express launch a joint flight operation from Leipzig/Halle Airport in April 2009. News of the new cargo carrier operation comes in the wake of a similar partnership made by Schenker and BAX last year. The new venture, based in Leipzig, will take the form of a private limited company (GmbH) and will focus on transporting airfreight and express shipments into and out of Asia.
• Go west intermodal shippers. At the beginning of October, Class I railroads Union Pacific (UP) and Norfolk Southern (NS) announced that they’ve rolled out a new westbound intermodal service from the Southeast region of the U.S. to Los Angeles. The carriers said this new service will shorten transit times from the Southeast to Los Angeles by a day. Union Pacific spokesman James Barnes told Logistics Management that this joint UP and NS endeavor is a “full-service” intermodal offering geared to build westbound business. “On average, we have approximately 139 eastbound railcars per train [as of September] originating in Los Angeles and going back west we have approximately 114 railcars per train.”
• Go green or else? Going green will be more than a buzz word for logistics managers in the coming years, said leading decision-makers meeting in San Francisco last month. Indeed, eyefortransport’s “Green Transportation & Logistics Summit” featured a number of speakers who gave rather dire warnings about the risks of non-compliance. “International standards are quickly being put in place, and universal enforcement of new regulations is going to have an impact on everyone participating in the movement of goods,” said Fanta Kamakaté, senior scientist at the International Council on Clean Transportation. “It’s no longer a question of if, but rather when.” According to Kamakaté, even the most recalcitrant countries are being forced to come into the fold. And U.S. multinationals had better pay close attention to new rules governing air quality and climate change. “It’s not about being a good world citizen,” she said. “It will also affect your bottom line.” (See News Capsule Page 21.)
• We’re enabling your daily news addiction!All of our latest reader surveys and hourly online traffic reports tell us that LM readers simply can’t get enough relevant industry news online. As a matter of fact, the daily news posts that Senior Editor Jeff Berman and Executive Editor Patrick Burnson are putting up on logisticsmgmt.com have quickly become some of the best read editorial we have on the site. While we have an extremely loyal online readership base, we know that some of our print readers are still a little shy about getting into the loop. Now’s the time to take the plunge: If you’ve yet to experience the reporting Jeff and Patrick are doing daily, go to logisticsmgmt.com and get connected. We’ll even make it easier for you. Go to supplychaindaily.com and we’ll deliver the most relevant logistics and transportation news from around the web into your inbox every morning. It’s time to step out of the dark.
• NITL, industry, say goodbye to a dear friend. On Saturday, September 8, The National Industrial Transportation League (NITL) and the entire logistics, transportation, and supply chain community lost a terrific friend and industry champion with the passing of former NITL Chairman Michael (Mick) J. Barr. Mick became active in the NITL in the mid 90s, and as Chairman of the Ocean Transportation Committee helped push through the passage of the Ocean Shipping Reform Act (OSRA) that allowed shippers and carriers to enter into confidential contracts. As Chairman, Mick’s tireless contributions helped to continue the League’s worldwide influence on the rapidly changing transportation industry. In commenting on Mick’s passing, League Chairman Curt Warfel said: “Our industry has lost a leader, the League has lost a champion, and I have lost a friend.” According to League President, John Ficker, “He was the best boss I ever had. He was always available to lend his expertise and insight on any issue before us. He always listened with a patient ear and supportive attitude for even the most stressful and difficult issues, whether political or operational, the League faced.”
• The 2007 Global Supply Chain Conference is ready to launch. For the fifth year, Logistics Management and sister publication Supply Chain Management Review have teamed up to offer logistics professionals the most comprehensive online conference of its kind: The 2007 Global Supply Chain Conference. Thought leaders and practitioners from around the world will present a series of sessions on supply chain management best practices and technology on Oct. 30 and 31. The conference will be available on demand after the launch dates, so shippers can listen at any time. This year’s conference will explore the full spectrum of supply chain management—from setting and executing global supply chain strategies to excelling at logistics management.