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Transportation News Bulletins - Logistics

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Storms Slamming Surface Transport
Monday, 08 February 2010 00:00
Norfolk Southern invokes force majeure, warns of rail delays

Three days after a massive winter storm struck the mid-Atlantic region, freight transportation systems were still trying to recover to normal operating levels.

Norfolk Southern Railway declared force majeure in effect starting Feb. 6, a statement that invokes forces outside its control to lift its delivery or other service guarantees. NS had also used force majeure after a huge storm struck its main operating area in the week before Christmas.

The states of Pennsylvania, Maryland, West Virginia and Virginia all had significant snowfalls starting Feb. 5 that left two or three feet of snow in many areas. Those states spent most of the weekend digging out interstate highways and other major arteries.

Long-haul trucking operations began moving slowly on Feb. 7, but with numerous regular roads still covered in ice and snow the access to local delivery docks remained a problem as the regular workweek began.

Airports had to cancel a number of weekend flights as well. The federal government and numerous businesses around Washington, D.C., remained closed on Feb. 8.

NS said the storms affected “operations in critical traffic areas in the Midwest, Mid-Atlantic and Northeast.” It cited traffic problems in Pennsylvania, Ohio, Maryland, Virginia, New York, New Jersey and the Carolinas, and said customers “should expect delays of at least 48 hours.”

Meanwhile, the nation’s largest rail hub, Chicago, was bracing for a new storm that could hit that area with a foot of snow starting the afternoon of Feb. 8 and continuing into the next day. For the East, that same storm front was expected to move into the region on Tuesday afternoon, dumping more snow on roads and tracks.

When such winter storms hit a railway, the company can push plow-equipped locomotives to clear its tracks. However, local access road conditions can hinder rail workers getting to and from their jobs, icing can freeze up track switches and complicate building railcars into train sets and can clog key open-topped cargoes such as coal and rock to slow their loading and unloading.

The Journal of Commerce Online, 2/8/2010

 
Obama champions exports in overture to business
Friday, 05 February 2010 14:39

WASHINGTON—President Barack Obama on Wednesday launched a drive to double U.S. exports over the next five years in a move that reaches out to business groups and Republicans who have criticized his inaction on trade.

"We need to export more of our goods. Because the more products we make and sell to other countries, the more jobs we support right here in America," Obama said.

"So tonight, we set a new goal: We will double our exports over the next five years, an increase that will support two million jobs in America," Obama said. 

The U.S. Chamber of Commerce, which has locked horns with Obama on healthcare and a number of other issues during his first year in office, has been urging him for months to set a national goal to double exports.

To accomplish that goal, Obama announced a "national export initiative" to help farmers and small businesses sell more of their goods overseas, and also promised to reform export controls that high-tech manufacturers say are out of date.

A recent study for the National Association of Manufacturers estimated modernizing the controls could boost U.S. exports by $56 billion annually within the next 10 years without jeopardizing national security.

Obama said he also wanted closer trade ties with Panama, Colombia and South Korea. Those three countries have signed trade deals with the United States. But the pacts have been stalled for years because of Democratic Party opposition.

His reference to the trade deals is an olive branch to Republicans, who have fought Obama on his big initiatives like healthcare reform and last year's economic stimulus law.

But Daniel Price, a lawyer at Sidley Austin and former White House adviser to George W. Bush, said many would be "puzzled" by Obama's failure to explicitly urge approval of the deals and instead only call for stronger trade ties.

A spokeswoman for U.S. Trade Representative Ron Kirk replied that Obama has given clear orders not to lose any chance to create jobs in the United States.

"President Obama has directed USTR to work to resolve outstanding issues in order to find ways forward on these agreements, and USTR is doing that work," the aide said.

DEMOCRATS DIVIDED

Republicans have argued that if Obama is serious about boosting exports, he should push for approval of the three trade deals negotiated by the Bush administration.

That risks badly dividing Democrats, many of whom blame the North American Free Trade Agreement of the early 1990s and China's entry into the World Trade Organization in 2001 for millions of lost U.S. manufacturing jobs.

Obama said the United States would lose jobs if it "sits on the sidelines" while other countries are busy negotiating trade agreements to open markets. At the same time, the United States must rigorously enforce its trade deals to make sure other countries play by rules, he said.

Obama promised to push for closer trade ties in Asia, an apparent reference to his administration's plan to negotiate a regional trade deal in the Asia Pacific.

He also said the United States would continue to push for a deal in the Doha round of world trade talks that opens up global markets.

The Doha round was launched in November 2001 with the goal of helping poor countries prosper through trade.

But negotiators missed their original goal of getting a deal by January 2005 and the talks remain bogged down.

A senior European Union trade official recently blamed the United States for the bleak state of the negotiations, saying other countries still do not know after more than eight years of talks what Washington needed to reach a deal.

U.S. trade officials say they have been clear that advanced developing countries like China, India and Brazil must offer bigger market openings in exchange for cuts in farm subsidies and in agricultural and manufacturing tariffs that the United States is being asked to make.

Reuters.com, 1/27/2010

 
Trade Economist Urges U.S. Infrastructure Investment
Monday, 01 February 2010 00:00
Global trade poised for rebound; investment needed now, says Walter Kemmsies

The United States should expand its goods movement infrastructure with a sense of urgency because global trade is poised for a rebound, said a trade and transportation economist who addressed the Georgia Foreign Trade Conference Monday.

"Now is the time to make the investment. Don't wait for two years when everything is fine," Walter Kemmsies, chief economist at Moffatt & Nichol Engineers, told the annual trade event in Sea Island, Ga.

Although the United States last year experienced an unprecedented decline in containerized imports and a softening in exports, the U.S. and world economies today are showing signs of growth. The U.S. container trade could return to its 2007 peak level by 2012, Kemmsies said.

Stabilizing the financial system will be a key precursor of growth. "The financial system is not yet stable, but we will see loan expansion in the second quarter," he said. This will have a positive effect on U.S. business, which is already stabilizing.

Exports, which began to pick up last fall, will help lead the U.S. economy into a new growth phase. U.S. export growth would be enhanced if China did not maintain its currency at an artificially low level in order to boost its own exports, Kemmsies said.

U.S. imports will pick up again as the employment situation improves and consumers start spending again. New claims for unemployment are already going down, and this will translate to increased trade and transportation in the next few months.

Since consumer spending accounts for 70 percent of U.S. gross domestic product and 18 percent of the world's GDP, the return of the American consumer will have a profound global impact on trade and transportation.

As China and other developing nations expand production, they will require more raw materials and agricultural commodities, both of which are sourced in the United States. Therefore, U.S. export growth will accelerate, and it will be weighted heavily toward bulk commodities. "What we trade through our ports will shift," Kemmsies said.

Some of these exports will move in bulk vessels, but an increasing share of the commodity trade is also moving in containers.

These developments indicate that significant investments in port, marine terminal and inland transportation infrastructure will be required because today's over-capacity situation could change, and infrastructure could quickly become a trade bottleneck.

"The world really wants to trade. That's the long-term trend. Transportation will grow," he said.

Journal of Commerce Online, 2/1/2010

 
TMS: Your key to the new economy
Monday, 01 February 2010 00:00

Research shows that shippers that have invested in TMS are seeing cost reductions, improved delivery reliability, and inventory reduction. Over the next few pages we’ll establish why TMS can no longer be ignored.

It’s hard to imagine a link in the supply chain that doesn’t involve a software application. However, according to recent research from ARC Advisory Group and AMR Research, there’s still plenty of room for more automation within the freight transportation market where more than half of the shippers surveyed say they’re still relying on manual management systems.

“Only about 38 percent of companies are using a TMS right now,” says Greg Aimi, research director for supply chain at AMR Research in Boston. Of those firms with over $5 billion in annual sales, the numbers increase to about 60 percent, Aimi adds, while those with less than $5 million in revenues are much less likely to be using a TMS.

Adrian Gonzalez, director of ARC Advisory’s Logistics Executive Council, has seen similar adoption numbers, and estimates that roughly 40 percent of shippers have a TMS in place. “A lot of shippers are still using the spreadsheet, fax machine, and telephone route to manage the transportation component,” says Gonzalez. “Aside from the company that ships one truckload a week and can get by without a TMS, there are many firms out there that should be streamlining their operations, but aren’t.”

But that doesn’t mean that the TMS sector isn’t making inroads. According to Aimi, it has grown by 11 percent annually, and is up from 30 percent penetration just three years ago. He credits fuel volatility, fuel surcharges, and a challenging economy with helping to drive shippers to find ways to work smarter, better, and faster. In return for those TMS investments, shippers are seeing freight budget cost reductions, more competitive delivery reliability, improved customer service, and inventory reduction.

If those results sound enticing, and if your company has yet to purchase a TMS—or fully utilize an existing system—then you’ve come to the right place. Over the next few pages we’ll make a case for why TMS can no longer be ignored as a key component heading into the new economy.

No excuses

TMS may rank as one of the most mature and fastest-growing segments within the supply chain software market yet not all shippers are taking advantage of it. Some companies ignore the TMS route completely, while others implement the systems and never tap the full potential.

Even with the on-demand model removing some of the barriers to entry for smaller companies—namely in the way of lower startup fees, infrastructure requirements, and implementation time—adoption hovers below 40 percent.

“There’s no excuse not to have a TMS, what with the various deployment and pricing options that are out there on the market,” says Gonzalez. “The solutions range from those suitable for large, international enterprises to those developed for single-location firms that want to get away from spreadsheets and faxes, and everything in between.”

Gonzalez says TMS is particularly important for firms that want to maximize the savings presented at the procurement engagement level. “If you don’t have a TMS, and if you’re using spreadsheets and fax machines to handle the routing and shipping, then a large portion of the savings identified at procurement will evaporate and never materialize,” he explains.

A quick walk through the warehouse will reveal whether or not those cost savings are being realized at your firm, says Gonzalez. “Spend some time in your transportation operation and see if a lot of people are on the phone and/or feeding paper into fax machines,” he says. “If they are, then you’re leaving profits on the table.”

Aimi says companies that don’t have an automated transportation process are missing the boat by running on what he calls a “somehow, some way” mentality that won’t cut it in the new economy. By implementing a centralized, automated transportation function, companies can begin to break out of that mode and create more productive transportation operations.

“In a completely manual environment, a logistics planner can handle 10 to 12 loads per day,” says Aimi. “With automation, that same person can handle anywhere from 100 to 120 loads per day, with most of that person’s effort focused on handling the exceptions, while the TMS takes care of the work.”

Dwight Klappich, research vice president for Gartner says the reputation TMS has for producing high payback within a short period of time also makes it a “can’t miss” application for shippers in the new economy. “In this business environment, projects that don’t produce good returns don’t get funded,” says Klappich, who pinpoints the typical payback from a TMS at 12 months or less.

Carrier selection and management also becomes easier when technology is introduced to the transportation component, says Klappich. The entire process becomes more consistent and disciplined, he says, and helps shippers break out of the “pick the carrier who gave the best Christmas gift last year” mentality.

The company that writes $10 million in checks every year to an outside freight provider, says Klappich, would save $500,000 annually by simply cutting freight costs by 5 percent. “The corporation that wants to always pick the lowest-cost carrier can rely on a TMS to make that happen every time,” says Klappich “That translates into real money for the bottom line.”

Maximize existing technology

Even among the 40 percent of companies that have a TMS in place, not all are using the applications to their fullest potential. Many TMS users shoot for the “low-hanging fruit” such as route optimization, carrier connectivity, and electronic communication with carriers, says Aimi, and wind up missing out on other valuable aspects of the software such as metrics reporting and asset tracking.

“They try to tackle the stuff that they believe will give their company the most benefit as quickly as possible,” says Aimi, who advises firms to maximize their TMS by using multi-phase implementations supported by benchmarks. “The goal should be to get to the stage where you’re utilizing TMS to its fullest degree.”

Gonzalez says companies looking to maximize their TMS investment should look at the application as a “living, breathing solution” that operates in an environment where rates, networks, carriers, and locations change constantly. “Treat your TMS like an automobile by making sure rates are accurate, constraints make sense, and other dynamic elements are maintained and updated regularly,” says Gonzalez. “By maintaining your TMS you’ll not only be able to drive continuous improvement but you’ll also be able to see which lanes are problematic from a service or cost standpoint—and tackle the problem before you lose a lot of money over it.”

And remember, says Klappich, that those dollars saved by a TMS can be sent right to the company’s bottom line, particularly for those firms that are using carriers as opposed to their own fleets. “There are a lot of applications with the same ROI as a TMS, but for companies using carriers to haul their goods, every dollar saved is a dollar that can be kept inside the company,” he says.

Out in the cold

With the TMS sector expected to grow at a steady rate of 8 percent to 10 percent annually over the next few years, according to Aimi, there are sure to be more shippers realizing the fast and significant ROI associated with such systems.

On-demand options that require lower up-front costs and implementation times continue to grow in popularity within the transportation sector, where keywords like “centralization” and “automation” will be top-of-mind for shippers in the new economy.

Aimi, who says the average shipper can slash 10 percent to 25 percent from its annual freight budget within six to 12 months of implementation, believes that there’s a lot of room for adoption in the new economy. “For the second half of 2009, TMS vendors saw a resurgence of interest in their systems,” he adds. “I expect that to continue and to result in steady growth for the TMS sector in 2010.”

Klappich is also bullish on the future of TMS adoption, and notes that on-demand options will be of particular interest to shippers. “Over the last 18 months, and largely due to economic conditions, we’ve seen on-demand become a preference rather than an option,” says Klappich.

Also driving growth within the TMS sector will be the need to replace antiquated or “partial” solutions in preparation for the economic recovery and the business growth—and transportation challenges—that will come as a result. Add in the return of fuel volatility and tighter capacity, says Aimi, and the case for a solid TMS that can handle multiple tasks in a fast-paced environment is clear.

“If the economy picks up at any pace at all, we’re going to run out of capacity for trucks,” says Aimi, who points out that trucking firms have significantly slashed capacity and the number of drivers in order to “stay afloat” during the recession. Now, he says, there’s simply “not enough credit to go around” to help those carriers ramp back up quickly to meet the demand.

That’s where a TMS will come in. “If you’re not using a TMS to be the first shipper to tender to your carriers,” says Aimi, “there’s a good chance that you won’t be getting the trucks you need.”

Logistics Management, 2/1/2010

 
DOT Stimulus Spending Tops $8 Billion
Tuesday, 19 January 2010 00:00
Payments for projects under way increased $1.3 billion in one month

Payments by the Department of Transportation to reimburse states for stimulus projects reached $8.101 billion as of Jan. 8, DOT said, up about $1.3 billion in the past month.

DOT, in the latest tally of federal agencies on the Recovery.gov Web site, also said it has approved stimulus projects worth $32.926 billion. It is authorized to spend up to $48.1 billion under the 11-monthold American Recovery and Reinvestment Act.

The department ended 2009 having sent out stimulus checks totaling $7.955 billion. The latest total is up from $6.818 billion as of Dec. 4.

Most DOT spending under the stimulus measure is for road and bridge projects through the Federal Highway Administration, which has paid out $5.5 billion.

Other DOT funds go to airport repairs and transit system infrastructure or equipment needs. DOT is also expected soon to award $8 billion for passenger rail system expansion and $1.5 billion in discretionary grants for projects deemed of national importance.

The entire stimulus package is projected to put $787 billion into the economy through construction projects, entitlement spending, aid to states to cover some of their agency jobs and through tax reduction.

The government said stimulus spending by all agencies as of Jan. 8 totaled $167 billion, and tax cuts had injected more than $90 billion.

Journal of Commerce Online, 1/19/2010

 
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