Management Update

An Executive Summary of Industry News

-- Logistics Management, 3/1/2008

White House lays out transportation budget. Although President George W. Bush’s Fiscal Year 2009 budget allocates $68 billion for the Department of Transportation (DOT) and places an emphasis on congestion-relief issues for roads and airways, a Wall Street Journal report notes that transportation funding will actually be cut. It also points out that this budget is devoid of any “wholesale changes or improvements.” Some freight-focused DOT groups taking possible financial steps back are the Federal Railroad Association and the Federal Highway Association. But the Federal Motor Carrier Safety Administration received some (potential) good news, its annual funding is slated to increase.

A tale of two ports. Free market advocates won a significant victory at the Port of Long Beach last month as port commissioners opted for a “non-union” solution for cleaning the air. Unlike the plan being implemented at the Port of Los Angeles, truckers will not be required to be employees, they can be independent-owners as well—a mandate opposed by the Teamsters. The commission’s unanimous vote against including the employment status of drivers in the clean air plan was partly driven by concern that a law suit might slow down efforts to reduce diesel emissions. Legal experts have expressed concern over whether the Port of Los Angeles has the legal authority to enforce its current “employee-only” plan. The financial program also calls for a procurement strategy to help negotiate a volume discount for new truck buyers and sets criteria for full and partial exemptions from the $35-per-container clean truck fee, now due to take effect Oct. 1.

Workforce reductions in effect. Difficult market conditions and an uncertain economy forced various transportation service providers to make changes last month. DHL Express USA trimmed its staff by approximately 600 management, back-office, and administrative positions. YRC Worldwide said it would shut down operations at 27 service centers for its USF Holland and USF Reddaway subsidiaries and lay off roughly 1,100 employees. And non-asset based air and ocean freight services provider UTi Worldwide announced it is reducing its global workforce by approximately seven percent.

CSX rolls out a carbon calculator. Unlike a typical calculator used to solve math problems, the Class I rail carrier’s online calculator provides shippers with the opportunity to make the optimal environmental decision when it comes to transportation options. It does this, says CSX, by calculating carbon dioxide emissions savings of specific rail shipments and offering up comparative data among transportation choices. To use the Carbon Calculator, shippers submit the weight of their shipment and miles shipped, and the calculator replies with the estimated CO2 savings provided by CSX.

GAO, ATA see eye-to-eye on PPPs. The American Trucking Associations recently threw its support behind a recent report from the Government Accountability Office, which said that public-private partnerships (PPPs) can create “costly highway monopolies.” Things like privatization and tolling existing highway infrastructure will ultimately result in Americans paying a much higher price to access the highway system, while receiving less in terms of safe, efficient, and reliable roadways, noted ATA President and CEO Bill Graves. There is no free money in PPPs, the GAO said, and it added that any benefits PPPs offer come with trade-offs that overlook public interest and are costly to the public sector.

Seattle-Sino air cargo en route. Nonstop flights from Seattle to Beijing will launch in June, providing shippers in the Pacific Northwest with more capacity in an overheated trade lane. Sea-Tac Airport will be the first United States destination served by Hainan Airlines. “The Puget Sound region is a key trading partner with China,” said Port of Seattle Commission President John Creighton. “Hainan Airlines’ nonstop service to Beijing will continue to promote our region’s business to the world’s fastest growing economy.” This is the fifth airline to announce new international service to Sea-Tac in the last year. Hainan Airlines will initially offer nonstop service aboard an Airbus A330-200, and the airline has ordered Boeing 787s and will begin flying that aircraft on this route as soon as it is available.

Reverse logistics pays. Shippers attending the Reverse Logistics Association’s Conference and Expo in Las Vegas were told that hidden profits can be squeezed out of the supply chain while providing a “green solution” embraced by the industry. “Reverse logistics cost manufacturers $1 billion annually,” said Joe Warren, vice president & general manager for customer support operations, Canon USA. “Furthermore, it represents four percent of total logistics costs,” he added. The major shippers, however, are leading the way toward recovering much of that now. “Efficient management of reverse logistics can save a company 3-to-5 percent per year,” he said. “And with international standards coming into play, most major corporations will begin to pay closer attention to this aspect of their supply chain.”

Peak season solutions? Sourcing full container loads from Asia may become easier and more reliable during the peak season, APL Logistics is telling shippers. Introducing what it calls “APL Guaranteed Continental,” the new service connects the ports of Shanghai, Hong Kong, Chiwan, and Yantian with virtually any ZIP code in the continental U.S. The service guarantees delivery of full-containerload cargo on a specified date, or shippers receive a 20 percent refund. Meanwhile, parent company NOL announced that it will establish a new container terminal business unit—APL Terminals. In North America, APL Terminals operates facilities at Los Angeles, Seattle, Oakland, and Dutch Harbor. In Asia, APL Terminals operates facilities in Kaohsiung, Yokohama, and Kobe and has investments in facilities at Ho Chi Minh City, Vietnam, and Laem Chabang, Thailand.

FedEx provides a new shipping “Outlook.” For those who use Microsoft’s ubiquitous electronic application for things like keeping your calendar and sending e-mail, there is another component you can add to the tool: shipping services. Dubbed FedEx QuickShip, this downloadable add-on feature enables shippers to generate labels, track packages, check rates, schedule pickups, and find FedEx drop-off locations straight from Microsoft Outlook.

Project cargo concerns. Shippers of project cargo are facing escalating rates due to shortages of specialized vessels and experienced personnel, said Michael Ruediger, project chartering director, UTC Overseas Inc. “With marine gas oil alone rising from $650 to $800 per ton in the last three months, the ripple impact of fuel costs on maritime transport is obvious,” he said. “Less visible are the ways today’s tight vessel market are also impacting costs and customer service.” According to Ruediger, investment in new project cargo vessels is shifting to larger and more specialized tonnage, and owners are steadily cutting out the old brokerage system through which they used to charter these services. “In some cases we estimate, today’s charter rates represent a 50 percent markup over actual costs,” he said. “At the same time, the quality of many services has declined.”

2008 Salary Survey webcast is coming! Join Senior Editor Jeff Berman for our annual Salary Survey webcast on Thursday, March 27. Berman will share what industries pay the most, which titles command the highest salaries, and how having a logistics or supply chain degree actually pays off. Recruiters David Thomas from North American Findings Ltd. and Jim Rohan of JP Canon Associates will also offer their analyses of this year’s findings and comment on the major trends of the logistics and supply chain employment marketplace.