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Transportation News Bulletins - Logistics

Our current transportation logistics news bulletins are powered by SMC3

Signs are afloat that freight economy is slowly recovering
Friday, 04 September 2009 00:00
Upswing in consumer spending and sustained growth needed for freight transportation to fully recover, say analysts

WALTHAM, Mass.—Some recent economic indicators point to the possibility of the recession coming to an end, but before that is made official, more needs to happen, according to freight transportation and logistics experts.

In the last two weeks there have been an abundance of signs signifying positive economic activity. Some examples include:

  • the Institute of Supply Management’s manufacturing index—the PMI—which covers the overall health of the manufacturing sector, rose four percentage points to 52.9 percent, marking the first time the index has climbed above 50 since the recession began—the 50 percent mark is typically viewed as the dividing line between “growth” and “contraction”;
  • the Department of Commerce’s recent report that durable goods orders were up by its largest amount in two years, with a 4.9 percent bump, that has seen the increase up in three of the last four months;
  • the Cass Information Systems Freight Index, which measures freight expenditures and payables, was up 1.3 percent in August compared to July.

Although these signs are encouraging, it by no means reflects a healthy and prosperous economy or freight transportation market. And they can easily be quelled by some less-than-rosy indicators, including: sluggish back-to-school retail sales, which typically signal increased consumer spending activity; improving but still down truck and railroad volumes; and low import totals at various U.S.-based ports, among others.

While the overall economic picture is blurred, one industry analyst told LM there are some things to be optimistic about.

“In general, things are positive, especially the ISM index which suggests manufacturing is picking back up,” said Eric Starks, president of freight transportation forecasting firm FTR Associates. “We have been looking for stabilization in the economy and have seen things stabilize in the last three months as the economy has hit the bottom.”

Starks added there are a lot of “positives” out there, with evidence that things may have slowly started to turn the corner. But he cautioned that it is premature to determine if enough has happened, adding that the dent the recession had made in the economy requires a lot to happen over the next six-to-nine months, as well as the fact that recent positive economic signs have yet to translate into a rebound in freight demand.

Stifel Nicolaus analyst John Larkin commented that some of the sequential uptick occurring with freight volumes portends too much optimism at this point, explaining they are more seasonally-based and creating a “temporary hope” that things are better over September and October.

For things to truly improve, Larkin said, consumer spending needs to recover. But as things stand, consumers still face too many obstacles, such as high unemployment, increased savings to off-set lost funds due to wage cuts and the recession.

“Consumers are coming up on Labor Day and are still in the bunker waiting for the economy to feel better,” said Larkin., 9/04/2009

Carbon To Cost Five Percent Of EBITA
Monday, 31 August 2009 12:30

A new study of the carbon risks for S&P 500 companies says over 90 percent of emissions originate from supply chains and the cost of carbon may be as high as five percent of EBITA for manufacturers.

Produced by NSF International, a public health and safety organization, and Trucost Plc, a global provider of environmental data and analysis, the report says many U.S. companies will soon have to pay for greenhouse gas (GHG) emissions under proposed cap-and-trade legislation.

Trucost says the average major U.S. automobile/parts manufacturer emits 1.3 million metric tonnes of GHGs annually.

“Carbon-intensive companies will be most exposed to carbon costs under the cap-and-trade program to be introduced in 2012 under the draft American Clean Energy and Security Act of 2009 (Waxman-Markey Bill),” said Koen Bontinck, Vice President of NSF Sustainability Services. “The goal of this report is to not only provide companies with an affordable analysis of their current operations and exposure to carbon costs, but also to help them implement sustainable business practices and verify their GHG emissions data in preparation for the new regulations.”

The report provides carbon benchmarking to assess a company’s carbon emissions relative to its sector peers; calculates carbon costs relative to earnings to identify potential profit risk; determins environmental costs based on the financial value of damages caused by each sector impact and discusses the strategic implications for companies with more energy-efficient supply chains to attract investors and increase market share.

Air Cargo World, 8/2009

Smaller GDP Drop Positive Sign
Sunday, 30 August 2009 00:00

Real Gross Domestic Product, the output of goods and services produced by labor and property in the U.S., dropped at an annual rate of 1 percent in the second quarter of 2009, a much smaller decrease from the first quarter's fall of 6.4 percent. This is a broad indicator that the economy is slowly getting better.

According to a report released by the U.S. Department of Commerce's Bureau of Economy Analysis, the smaller decrease in GDP is a result of smaller contractions in nonresidential fixed investment, in exports, in private inventory investment and residential fixed investment. The improvement from the first quarter is also due to an upturn in federal government spending, as well as in state and local government spending that were partly offset by a much smaller decline in imports and a downturn in personal consumption expenditures.

A monthly survey of 51 economists published earlier this month by Blue Chip Economic Indicators say the GDP will turn positive in the third quarter. Although 2009 overall will still show negative growth, 2010 will see a positive GDP growth, they predict. The bureau reported a decrease of 5 percent in exports of goods and services during the second quarter, compared with a drop of 29.9 percent in the first quarter. In addition, imports slipped 15.1 percent, versus a decrease of 36.4 percent in the first quarter.

Real Gross National Product, which measures the goods and services produced by the labor and property supplied by U.S. residents, was down 0.8 percent in the quarter, compared with being down 6.6 percent in the first., 8/30/2009

Ending traffic congestion would boost DFW economy by $17 billion, report says
Friday, 28 August 2009 00:00

North Texas would benefit from a huge economic boost by alleviating traffic congestion, the free-market Reason Foundation says in a national report released this week

The study focused on 11 metro areas, calculating the extra productivity from better movement of people and goods around the regions. Overall, it says:

  • Most major cities will find that wise infrastructure investments that eliminate gridlock and produce freeflowing road conditions will more than pay for themselves by boosting the region's economy, and thus tax revenues.
  • The study shows that reducing congestion and increasing travel speeds enough to improve access by 10 percent to key employment, retail, education and population centers increases regional production of goods and services by 1 percent. While seemingly small in percentage terms, this leads to tens of billions of dollars for a region's employers and workers due to productivity and efficiency benefits.

Excerpt from an individual report on our area:

  • The Reason Foundation report examines the impact that population growth and longer commute times will have on five areas across Dallas-Fort Worth by 2030: downtown, the University of Texas at Dallas, North East Mall, Duncanville, and Dallas-Fort Worth International Airport.
  • Of those locations, the Reason study says the biggest economic gains would come from eliminating severe congestion around universities like UT-Dallas, which could add $46 billion a year to the regional economy and over $3 billion in annual tax revenues.

I'm surprised that Duncanville was singled out in the study. Local congestion maps don't include SW Dallas County as a high-problem area. But, as you can see, everywhere will become a huge a problem area if congestion needs aren't addressed.

DFW is a natural place to single out for study, owing to our poor showing in congestion indexes. The Texas Transportation Institute's annual mobility study ranked Dallas miserably in many indexes. 

The TTI report addresses the cost of congestion in different ways, like the hours wasted in rush hour traffic (53 hours in Dallas, 6th worst in nation) and extra gallons of gasoline burned (36 gallons, 8th worst).

The traffic forecasting outfit INRIX has its own scorecard that put D-FW at fourth worst earlier this year.

Dallas Morning News, 8/28/2009

USPS takes further steps to reduce costs
Wednesday, 26 August 2009 00:00
Thousands of USPS employees offered a financial incentive to retire or resign before the end of the fiscal year

WASHINGTON—Facing myriad financial obstacles, the United States Postal Service (USPS) announced yesterday it has offered thousands of employees a financial incentive—or early buyout—to retire or resign before September 30, the end of the fiscal year.

The USPS said this decision could save it $500 million in labor-related costs next year—with up to 30,000 employees possibly accepting the buyout—and is the result of an agreement the USPS negotiated with two of its employee unions. It added that this “one-time offer” is a strategic move to accelerate targeted staffing reductions for employees represented by either the American Postal Workers Union (APWU) or the National Postal Mail Handlers Union (NPMHU).

Under the terms of the buyout, participating USPS employees would receive $10,000 over the first three months of Fiscal Year 2010 and a second payment of $5,000 in Fiscal Year 2011. The USPS said that the majority of employees eligible for the buyout work in mail processing facilities, whereas letter carriers are not eligible due to the fact that the number of addresses increases by 1.5 million per year.

This announcement comes at a time when the USPS has taken various steps to remedy its financial condition that are expected to save more than $6 billion, including: cutting more than 100 million work hours—the equivalent of 57,000 positions; closing six district offices; a hiring freeze, including USPS officers and executives; and adjusting Post Office hours “to better reflect customer use,” among others. Even through the USPS says it is on track to hit its 2009 goal of $6 billion in total cost reductions, it is projecting a net loss of more than $7 billion by the end of the fiscal year.

The USPS suffered a $2.4 billion net loss for the fiscal third quarter (it 11th operational net loss in the last 12 fiscal quarters), as well as a significant drop-off in volume due to a shift from traditional mail delivery to electronic communication alternatives, including e-mailing business documents and online purchasing orders, as well as other electronic mailing processes.

In the fiscal third quarter, USPS mail volume totaled 41.6 million pieces, a decrease of 7 billion pieces, or a 14.3 percent year-over-year decline. And total mail volume for the first three fiscal quarters, which has decreased by nearly 20 million pieces, is its largest consecutive three-quarter decline in total volume since 1971.

“The extraordinary decline in mail volumes requires a significant reduction in man hours,” said Jerry Hempstead, president of Orlando-based Hempstead Consulting. “Postmaster General Jack Potter and Deputy Postmaster General and Chief Operating Officer Pat Donahoe have done an incredible job considering the political and contractual constraints they have to operate within of rapidly bringing down man hours worked…[but] not as rapid as the top line revenue requires to remain healthy.”

Hempstead added that the USPS has more bodies than it needs for the current volume it processes, and this agreement with the bargaining units allows the USPS to align hours with work in a more efficient and urgent manner.

“The USPS can always staff up as volumes returns, but its current economic situation really needs this program to move people off the payroll and onto retirement programs,” said Hempstead.

Logistics Management, 8/26/2009

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