Logistics  and Supply Chain Management Update

An Executive Summary of Industry News

By Staff -- Logistics Management, 11/1/2007

• Finally time to TWIC it. After a delay, the enrollment of port workers in the Department of Homeland Security’s (DHS) Transportation Worker Identification Credential (TWIC) at the Port of Wilmington, Del., is underway. The DHS began enrolling workers at the Delaware port last month and said it will continue at 11 more ports this month. Plans also include enrolling workers at all U.S. ports by September 25, 2008. The TWIC program includes criminal background checks, immigrant status checks, and terrorist watch-list screening of longshoremen, truckers, and other port workers.
• Beer can reduce logistics costs? Apparently it can, at least according to the plans SABMiller PLC and Molson Coors Brewing Co. have in the works to combine operations. Media reports indicate that collaboration between the brewers will bring about $500 million in costs savings over three years. The reports say that the savings will come from reduced shipping distances and optimized production, among others. Bottoms up to an improved bottom line.
• Connecting all of the dots is essential. At least when it comes to understanding supply chain security, says Ann Grackin, CEO of ChainLink Research. At the recent RFID World conference in Boston, she stated that despite the spike in outsourcing and manufacturing in a post 9/11 world, many companies have yet to find a “new way” to manage security. Part of the “new way,” she explained, is taking a more proactive approach to understanding how freight is moving throughout the supply chain. She added that to connect the first dots, company executives should visit ports to see how freight movements originate in order to better identify potential supply chain risks.
• Golden State “greenest”? Shippers wishing to anticipate new state regulatory laws related to the environment should keep their eyes on California, say logistics industry thought leaders. “It’s where all the newest legislation is coming from,” noted Diane A. Mollenkopf, assistant professor, University of Tennessee, “and it will have an impact on the entire nation in the coming years.” As one of the more prominent speakers featured at the Council of Supply Chain Management Professionals’ (CSCMP) annual conference last month, Mollenkopf noted that compliance can be costly and complicated. “But the consequences of not doing so, can be worse,” she said. According to Mollenkopf, shippers would prefer national standards to be put in place rather than deal with state-by-state laws. “What’s happening on the West Coast scares shippers,” she said, “but the precedent must be acknowledged and dealt with.” Environmental sustainability is a journey, she added, and the key thing shippers must remember is that while moving ahead, they do not cede away control of the chain of custody.
• New train technology puts the breaks on derailment. The Federal Railroad Administration (FRA) announced last month that the first train with electronically controlled pneumatic (ECP) braking technology has hit the tracks. The train, which is operated by Norfolk Southern, recently began hauling coal in Southwestern Pennsylvania. ECP technology, according to the FRA, applies train brakes uniformly and instantaneously on every rail car in a train, which result in better train control, shorter stopping distances, and a lower risk of derailments.
• UPS’ Eskew to step down. UPS said last month that Chairman and CEO Mike Eskew will retire at the end of the year and will be replaced by UPS Vice Chairman and Chief Financial Officer Scott Davis. Eskew has been in his current position since January 2002. Since that time, he has led UPS in expanding services for shippers into new business areas that complemented the company’s global package delivery operations. And since he has been at the helm, revenues have grown by nearly 57 percent to $47.5 billion, and net income has risen more than 75 percent. The company’s international package returns have more than doubled to $9 billion under Eskew’s watch and supply chain and freight revenues nearly quadrupled to $8 billion by the end of 2006. Not a bad run.
• The stock market will survive declining transportation stocks. A recent Wall Street Journal column suggests the lull in the domestic transportation market may not have a negative effect on the stock market’s overall health. Despite troubling signs such as reduced earnings expectations of publicly-traded transportation services companies, the ongoing housing downturn, a consumer spending slowdown, railroad volumes continuing decline, and what the American Trucking Associations described as “softness in the trucking industry,” the Journal said the overall domestic economy may persevere thanks to the narrowing of the U.S. trade deficit and the “prodigious paced” growth of exports.
• M&A deals hit record level. According to a Transport Intelligence report, Global Logistics Strategies 2007, the total disclosed value of mergers and acquisition (M&A) deals transacted in the global transport and logistics industry last year rose to $73.4 billion—an increase of 8.6 percent over the previous year. The majority of these funds were invested in ports, airports, and other transport infrastructure operations. The contract logistics, freight forwarding, and express sectors accounted for just 8 percent of the total. John Manners-Bell, TI’s chief analyst said, “Acquisitions are being driven by the ambitious growth plans of large and small companies alike. This will ensure that M&A activity remains at a high rate for the foreseeable future…Despite an uncertain economic outlook, we expect many more deals in the near future.”
• HOS holding pattern. Shortly after the U.S. Court of Appeals for the District of Columbia issued a 90-day stay regarding the mandate to eliminate the 11-hour daily driving limit and 34-hour restart provisions from the truck driver hours-of-service (HOS) regulations last month, an Associated Press report said that trucking companies think federal regulators will maintain the existing limits on drivers hours, rather than re-setting the HOS clock to 10 hours per day with no 34-hour restart. American Trucking Associations (ATA) President Bill Graves said that the 90-day stay should give federal regulators enough time to issue an interim rule maintaining the 11-hour limit. Trucking industry executives have said in the past that eliminating the current HOS provisions could cost the trucking industry as much 9 percent in productivity and would require the hiring of thousands more drivers in an industry already strapped for legal, qualified drivers. Stay tuned.
• “Unlike golf, supply chain management is a team sport,” said NYK Line (North America) President Peter Keller at a CSCMP Annual Conference panel last month. He pressed that the only way for a supply chain to be effective is to establish partnerships at all levels so that all stakeholders—shippers and carriers—can positively collaborate on top-level issues. “We need the supply chain to take a leadership position for a healthy economic future in the United States,” he added.
• Talk about an evolution! According to the results of our 2nd Annual Warehouse Operations Survey, the U.S. warehouse is evolving faster than you might think. Join LM’s Michael Levans as he hosts the 2nd Annual Warehouse Operations Survey Live Webcast on November 28 at 2 p.m. EDT. Levans will be joined by report author, Maida Napolitano, Don Derewecki, president of logistics consulting firm Gross & Associates, and Geoff Sisko, vice-president of Gross & Associates. Attendees will learn that the warehouse is no longer a four-walled beast intended to store “mistakes” in forecasting—called inventory—but is now an entity morphing into a multi-faceted distribution center designed to better enable product flow, not storage. But that’s just the tip of the iceburg. Join our research team to get all of the details gleaned from more than 750 reader respondents—and bring your questions for our live Q&A. Visit logisticsmgmt.com for details.