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Transportation News Bulletins - Logistics

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Cap-and-trade battle finds new momentum
Friday, 09 October 2009 00:00

Several major American utility companies and retailers have thrown down the gauntlet before the U.S. Chamber of Commerce—saying they would support cap-and-trade legislation and oppose the Chamber’s efforts to defeat climate change proposals.

Cap and trade would establish limits for several business sectors. A credit system would allow businesses that operate above limits to purchase credits and businesses with leftover credits to sell on the open market.

The House narrowly approved a cap-and-trade bill in July, and Sens. Barbara Boxer, D-CA, and John Kerry, D-MA, introduced companion legislation in the Senate last week.

Climate change legislation seeks to reduce U.S. emissions by using a market-based investment approach known as cap and trade.

Mike Joyce, OOIDA director of legislative affairs, said the split shows a major shift among U.S. business leaders that could bring new life to the cap-and-trade push that’s already supported by President Obama.

Powerful utility companies such as Excelon Corp. and retailers Apple and Nike recently announced they have left the Chamber over the chamber’s opposition to cap and trade.

“This creates a new dynamic,” Joyce told Land Line. “You’ve got these large, well-known names—Nike, Apple, Exelon—that have resources of their own and don’t necessarily need to rely on the Chamber of Commerce to advance their agenda. They’re now advocating a position that is more closely aligned with the president and with leadership in Congress that wants to create climate change legislation.”

A former executive of the American Trucking Associations has made headlines because of the corporate cap-and-trade debate.

U.S. Chamber President Tom Donohue is reportedly being pressured to resign from the board of Union Pacific Railroad or leave his position as head of the Chamber.

The railroad reportedly prohibits its board members from taking action that conflicts with Union Pacific’s interests.

Donahue previously served 13 years as president and CEO of the ATA.

Several Democrats have recently expressed doubts that cap-and-trade legislation will be completed this year. Hearings and mark-up sessions for the Boxer-Kerry cap and trade bill are expected to begin this month.

OOIDA opposed the House cap-and-trade bill, and is closely monitoring specifics of Senate proposals as they’re worked out this fall, Joyce said.

Joyce said the U.S. Chamber’s recent division over cap and trade has likely created new supporters of such a proposed climate change system.

“It’s certainly a welcome addition to the pro-climate change members of congress,” Joyce said. “I’m sure they’re welcoming these companies with open arms. And as more and more companies join those supporting climate change, you’re likely to see other well-known organizations jump the fence as well.

“And I would imagine these companies are going to have a say in proposals that may be more beneficial to their industry,” Joyce said.

Land Line Magazine, 10/9/2009

 
ProLogis Warehouse Report Shows Declines in Activity
Wednesday, 07 October 2009 00:00

Vacancy rates have increased while utilization and new construction of distribution facilities have fallen in the past year, according to a Sept. 21 report on industrial property trends by warehouse operator ProLogis.

Vacancy rates hit 10% in the second quarter, compared with 7.6% in that period of last year. New construction fell to just 5 million square feet in the first half of 2009 from 92 million in that period of last year. The amount of warehouse space being used fell by 33 million square feet, declining for a third consecutive quarter.

“As the U.S. economic recession has continued to deepen, so has the cyclical downswing in the distribution property leasing markets,” said Len Sahling, first vice president of ProLogis’ research group. “The good news is that the rate of decline moderated during the second quarter of 2009, and the U.S. economy appears to be poised for recovery beginning in the third or fourth quarter of 2009.”

At this time last year, the amount of warehouse space in use was still rising, increasing by 7 million square feet in the third quarter, or about 2.3 million square feet a month. During 2007, the amount of space in use grew by nearly 12 million square feet a month.

“Since the real estate cycle typically lags behind the economic cycle by a few months, property market conditions are unlikely to exhibit material improvements until next year,” he said in the statement.

“Whether demand for distribution space stabilizes at the current level or shrinks further will depend critically on how well the U.S. economy performs,” the report said.

The report includes 31 of the largest markets in the United States and Canada, and compares activity in the first half of 2009 with the same period of last year. In a statement, ProLogis said the report was based on information from its own workers and sources such as brokers and information services.

On average, the rental rates requested nationwide fell by 9.3%, with Tampa, Fla., showing the biggest decline at 21% and Houston showing the biggest increase at 3.7%. Rates fell in all but three areas.

ProLogis’ report cautioned that new starts at the current rate of 10 million square feet for 2009 fall well short of the pace needed to replace obsolescent facilities.

Credit worries were part of the picture.

“Developers have sharply curtailed groundbreaking for new facilities,” the report said. “Credit markets have eased a bit in recent months, but lenders remain extremely tight-fisted.”

Transport Topics, 10/7/2009

 
Recession Spurs Shippers to Reduce Costs, Improve Operations, Prepare for Recovery
Tuesday, 29 September 2009 00:00

CHICAGO—The economic downturn presents an opportunity for shippers to pare costs and strengthen transportation and distribution operations, industry experts said here at the Council of Supply Chain Management Professionals’ annual conference.

“The pendulum has swung in favor of shippers,” said Matthew Menner, senior vice president of Transplace Inc., a transportation management firm in Plano, Texas.

He and other officials said shippers are taking advantage of excess capacity to negotiate lower rates, cut jobs and explore ways to work more closely with suppliers to reduce supply-chain costs.

Besides seeking rate reductions, Menner said, shippers are considering pooling shipments and adjusting delivery schedules to make transportation networks operate more efficiently.

“There’s a heightened level of collaboration between business and customers,” Menner said.

John Ferguson, a vice president of Schneider Logistics Inc., said falling ocean shipping rates have led to a revival of transloading activity at West Coast ports.

The National Retail Federation estimates that import cargo volume at all major U.S. ports in 2009 will be the lowest since 2003.

Revenue growth for logistics companies, based on a survey of logistics executives in North America, Europe and Asia, is expected to slow sharply this year, compared with 2008.

Robert Lieb, a professor of supply chain management at Northeastern University, said the survey results “underscore the caution and anticipation felt by logistics executives as they wait for signs of a global economic recovery.”

“Despite the bearish growth projections and acknowledgment that consolidation, pricing pressures and operational reductions were, and may continue to be, necessary adjustments, the opportunities for improved collaboration with customers, expansion into emerging markets and the possible addition of new management talent have many excited about the next several years.”

Joseph Gallick, senior vice president of sales at Penske Logistics, Reading, Pa., said the downturn has heightened interest in outsourcing transportation and distribution services by companies, such as food processors, pharmaceutical suppliers and chemical firms that have not outsourced logistics services to the same degree as large manufacturers and retailers.

“I am cautiously optimistic,” Gallick said of the outlook for the economy. “We are planning for the recovery to be long and slow as long as unemployment remains high and questions remain about whether credit markets are really unfrozen.”

Companies that can improve their supply chains now will have a competitive advantage when business recovers, said Bruce Tompkins of Tompkins Associates Inc., a Raleigh, N.C., consulting firm that helps retailers, manufacturers and distribution firms benchmark logistics performance.

“The smartest companies are shifting to recovery mode before their rivals by developing and implementing a strategic plan that anticipates the end of the recession and positions them for future growth,” Tompkins said.

The timing of the recovery will depend on the sector, he said.

“Food and beverage is already seeing some growth,” Tompkins said, “but high-tech and retail will need to wait awhile before their industries experience more positive results.”

Arthur Mesher, chief executive officer of Descartes Systems Group Inc., a transportation software firm based in Waterloo, Ontario, said the current environment of rising costs and lower shipping volumes creates a need for what he calls “federated networks,” in which companies can share data to better manage the flow of goods.

“The need for immediate cost-reduction and productivity improvements is radically changing how systems are sold, delivered and deployed,” Mesher said in a presentation.

A focus on cost cutting by shippers, however, could make it more difficult for firms to invest in technologies that would allow such cross-enterprise collaboration. Such investments were “ruthlessly trimmed” during the previous recession of 2001, said Mary Holcomb, an associate professor at the University of Tennessee. Holcomb and Karl Manrodt of Georgia Southern University conduct an annual study of trends in transportation and logistics.

The focus on controlling inventory also quickly faded after the 2001 recession, said Belinda Griffin, a senior manager at Capgemini Consulting, with U.S. headquarters in New York, and a sponsor of the trend study.

Dawn Salvucci-Favier, a senior director of JDA Software Group Inc., Scottsdale, Ariz., said firms do appear to be spending money to expand technology systems already in place, with more shippers acquiring software as a service to avoid paying large licensing fees associated with the acquisition of systems.

JDA Software announced on Sept. 21 that it would make its transportation management software available to companies as a managed service.

Transport Topics, 9/28/2009

 
Calif. loses classification case
Monday, 28 September 2009 00:00

A California Superior Court ruled against State Attorney General Jerry Brown Jr. in one of a handful of cases where he sued port trucking companies on charges its owner-operators should have been classified as employees.

On Sept. 22, Los Angeles Superior Court Judge Elizabeth Allen White ruled in favor of Pac Anchor Transportation and truck owner Alfredo Barajas.

Defense attorney Neil Lerner said his case was similar to the American Trucking Associations’ on-going suit against the Port of Los Angeles. A federal court will hear the ATA case in coming months after that court granted the association a preliminary injunction to prevent the port from requiring carriers hire drivers as employees only. A hearing is scheduled for later.

"This case should never have been brought, as it was clearly preempted by federal law, and since at least one California Appellate Court had previously so held,” Lerner said.

“Given that the AG has gubernatorial ambitions, and given that the support of the Teamsters, in votes and donations, will be needed for him to succeed and given the Teamsters near obsession with the port driver issues, connecting the dots is not that difficult,” Lerner said.

The Federal Aviation Administration Authorization Act protects motor carriers from state regulation and preempts claims against motor carriers brought under California's Unfair Competition Law, Lerner said.

FAAAA prohibits states from enacting and enforcing laws related to motor carrier prices, routes, or services to maximize competitive forces in the trucking industry.

In 2008, Brown announced a crack-down on port trucking companies incorrectly classifying owneroperators as independent contractors instead of employees. One of the companies he sued was Pac Anchor, along with Barajas, its manager and truck dispatcher. At that time, Barajas also owned 75 trucks, which he leased to Pac Anchor.

Nationwide, several ports, including the Port of Oakland, have expressed interest in obtaining an FAAA exemption from Congress for port operations related to trucking. Motor carriers and shippers vigorously oppose this effort.

eTrucker.com, 9/28/2009

 
Logistics Experts See Manufacturing Shift
Monday, 28 September 2009 00:00

CHICAGO—An increase in manufacturing activity in Mexico along with a pullback in outsourcing to China could lead to “fundamental change” in the flow of freight in North America, a logistics industry researcher said here.

“We will see more south-to-north movement and less west-to-east moves,” Theodore Stank, a professor of logistics at the University of Tennessee, said in a presentation at the Council of Supply Chain Management Professionals’ annual conference on Sept. 21. However, other logistics executives at the meeting said that although some firms have shifted production to Mexico, they do not expect the transfers to have a major effect on China’s status as a global manufacturing center.

Mexico plans to spend $7 billion to expand 12 existing ports and open four new ports, Stank said. Much of that freight would travel by rail across the border into the United States.

From Dallas, U.S. railroads could run special intermodal trains to Atlanta, Harrisburg, Pa., Chicago and other major freight hubs, dropping off shipments from Mexico and picking up goods for a return trip across the border into Mexico.

Despite “a lot of talk” among rail carriers about the potential for such a “closed loop” rail network, Stank said, more money is needed to pay for new rail lines and expanded terminal facilities.

“Railroad capital spending is nowhere near where it needs to be to do the kinds of things we’re talking about,” he said. “Some kind of public support may be necessary.”

Other logistics executives said they didn’t think China’s status in world manufacturing would diminish.

Alex Thompson, vice president of market strategy for TradeBeam Inc., a company that supplies software to help automate import and export processes, said he sees “no downward trend” in trade between the United States and China.

“It would be catastrophic for either side,” Thompson said. China needs to create jobs for hundreds of millions of people and the United States relies on China’s purchases of U.S. currency to fund the growing national debt.

China also has enough manufacturing expertise that it has what Thompson calls a “positive network effect,” a condition in which competitive advantages could last for decades.

Still, Mexico shows evidence of benefiting from a shift in sourcing strategies.

In a survey conducted in mid-2009, nearly 60% of the shippers responding said the slumping economy had forced them to rethink their supply chains, as well as their relationships with third-party logistics companies.

“Rising labor costs in previously low-cost countries and fuel and currency volatility were already challenging the notion of long, thin supply chains,” said the authors of the study on the state of logistics outsourcing.

Pete Montaño, vice president of sales for Con-way Truckload, said Mexico’s proximity to the United States is an advantage when demand for freight shipping is down, because it is easier to ship goods in smaller quantities, if needed.

“If a customer is promised delivery within seven days, you can’t do it from China,” Montaño said.

Larry Monaghan, director of transportation and logistics for LG Electronics, a company that makes flatscreen televisions, refrigerators and other appliances in Mexico, said retailers are reducing the amount of inventory they keep in stores, which means he has to have a way to restock quickly.

Jon Lagenfeld, a logistics industry analyst for R.W. Baird & Co., said much of the outsourcing to China initially was based solely on savings from labor and materials and didn’t take into account the effect on other supply chain costs, such as the cost of fuel.

“Companies started to rethink what it means to the supply chain,” he said.

Transport Topics, 9/28/2009

 
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