Management Update

An Executive Summary of Industry News

-- Logistics Management, 6/1/2008

Quake aid response is commendable. In a massive show of strength and cooperation, shippers and carriers worldwide were using their logistical know-how to bring humanitarian aid to earthquake victims in China’s southwestern Sichuan province. “Apart from what the companies themselves are doing, we see a lot of individual initiative in relief efforts,” said Dennis Bohm, president of the Pacific Transportation Association. The NYK Group, AP Moller Maersk Group, and The Dow Chemical Company were cited by Chinese government officials as being among the scores of generous contributors to relief efforts. The day after the earthquake struck, Dow made a $285,000 donation to the China Red Cross, which went to support rescuers in Sichuan.

DHS drydocks TWIC deadline. The U.S. Department of Homeland Security (DHS) has extended the deadline for Transportation Worker Identification Credential (TWIC) compliance to April 15, 2009 from its original September 25, 2008 date. According to the DHS, extending the deadline was due to low pre-enrollment numbers. As of press time, 103,216 TWIC cards had been issued and only 371,318 port workers have pre-enrolled. DHS expects that close to 1.5 million workers will eventually enroll.

The air is getting greener. The Air Transport Association of America (ATA), the trade organization for leading U.S. airlines, recently echoed the call of the Consumer Energy Alliance to secure a balanced and comprehensive U.S. energy policy that increases U.S. energy independence and results in a stable energy supply and more predictable costs. According to ATA President and CEO James May, unless serious bipartisan attention is focused on solving the energy problem, the consequences on the nation’s air transportation system “will be long lasting.” He said U.S. airlines are projected to spend nearly $60 billion on fuel in 2008, $18 billion more than in 2007. The increase in fuel is the equivalent of employing 244,000 airline workers or purchasing 261 narrow-body jets.

New sustainability program hits the road. Focused on the environment and a more sustainable future, The American Trucking Associations (ATA) has rolled out its “Trucks Deliver a Cleaner Tomorrow” initiative to help reduce fuel consumption by 86 million gallons and cut CO² emissions by 900 million tons for all vehicles over the next 10 years. Sounds terrific, but how exactly will it happen? The ATA’s Sustainability Task Force proposed some core recommendations as part of the program, including: setting governors on new trucks to limit speeds to no more than 68 mph; reducing the national speed limit to 65 mph for all vehicles; reducing engine idling; reducing congestion by improving the conditions of highways; and supporting national fuel economy standards for trucks.

Is the “freight recession” over? Robert W. Baird & Company transportation analyst Jon Langenfeld told shippers and carriers at the National Shippers Strategic Transportation Council’s (NASSTRAC) annual conference that the answer to that question could very well be “yes.” There is a catch, however: When the U.S. economy rebounds, a “freight pricing renaissance” is likely to take hold, which is likely to provide both opportunity and risk for carriers and shippers. In either event, however, Langenfeld said pricing is likely to go up in the next five years by six to eight percent in order for carriers to justify investments and build capacity. And due to that increase, Langenfeld said shippers should prepare for higher rates now, because it will “shape profitability for all companies in the next three to five years.”

Economic stimulus trickles down. When President George W. Bush initially signed off on the $168 billion economic stimulus package earlier this year, many felt it would be a boon to the nation’s ailing economy and serve as a catalyst for increased freight volumes across all modes of transportation. But a recent National Retail Federation (NRF) survey indicates that rising gas and food costs will likely dig into the original projections, as more consumers are spending that money on necessities rather than discretionary items like electronics, apparel, automobiles, and furniture. While spending on these more lavish items may be down, NRF said consumers will spend 39.9 percent of the tax rebate checks, providing a $42.2 billion economic lift.

Legless in LA. “We will definitely be taking this case to court,” declared Curtis Whalen, executive director of The American Trucking Association’s (ATA) Intermodal Conference, shortly before the Port of Los Angeles Harbor Commission voted to ban independent truck drivers by the end of 2013. “The Port of LA hasn’t a legal leg to stand on,” he said. In open defiance to protests made by a variety of shipper groups prior to last month’s meeting, the decision was unanimous. Shipper lobbying groups as diverse as the National Industrial Transportation League (NITL), The West Coast Waterfront Coalition, and the Agricultural Transportation Coalition have opposed such a move, but the litigious reach of the ATA will probably be the first bared.

McCain’s Navy. U.S. naval hero Senator John McCain enlisted more maritime policy and world trade expertise when Christopher Koch agreed to join his presidential campaign. Taking a temporary leave of absence as president and CEO of the World Shipping Council (WSC), Koch will help the presumptive Republican Party nominee shape his position on diplomatic and foreign trade issues. Prior to taking charge of the WSC, Koch served as Federal Maritime Commission (FMC) chairman as an appointee of President George H. W. Bush. He came to the FMC after a decade of work in the U.S. Senate, where he held positions as counsel to the Senate Commerce, Science, and Transportation Committee and the National Ocean Policy Study, and served as chief of staff to Senator McCain.

DHS increases domestic security grants. As part of its fiscal year 2008, $852 million in Infrastructure Protection Activities (IPA) will be divvied up among various modes of freight transportation to “prevent, protect against, respond to, and recover from terrorist attacks, major disasters, and other emergencies,” according to the U.S. Department of Homeland Security (DHS). Some of the grants included: $388.6 million for the Port Security Grant Program; $15.5 million for the Trucking Security Grant Program; and $4.9 million for the Freight Rail Security Grant Program. The DHS notes that this round of funding represents a 29 percent increase over Fiscal Year 2007.

Cargo chase is on. The Port of San Francisco, which long ago ceded its position as a Bay Area container entrepot to the neighboring Port of Oakland, is nonetheless chasing cargo of a different sort: bulk/break-bulk. “We see a real opportunity to capture discretionary goods from West Coast gateways like Portland, Sacramento, and Stockton,” said Jim Maloney, maritime marketing manager for the port. Among the commodities passing through Pier 80 today are rebar, structural steel, pipes, and coils. Plans are afoot to attract more auto traffic (roll-on/roll-off) at piers 90 and 94 when land is cleared for staging. Meanwhile, the port is working with regional transit and international rail lines to provide on-dock rail access for more exotic goods. “Project cargo like this is going to be needed for alternative energy demands in the Central Valley,” said Maloney.

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