Logistics Management.pdf

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JUNE 2009

WWW.LOGISTICSMGMT.COM

K-C’S TRIUMPHANT TRACKING

GOLD AWARD WINNER

Scott Buss, research

manager of corporate

research and engineering,

Kimberly-Clark

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Get your daily fix of industry news on logisticsmgmt.com and supplychaindaily.com

AN EXECUTIVE SUMMARY OF INDUSTRY NEWS

A year for the ages. According to Jon

Langenfeld, senior research analyst at Rob-

ert W. Baird & Co., “2009 is a freight year for

the ages.” Speaking at the recent National

Shippers Strategic Council (NASSTRAC)

annual conference, Langenfeld said that it

is not likely freight rates will see a meaning-

ful uptick later this year. But when freight

volumes do eventually recover, he said it

could be by 5 percent to 10 percent or more.

In the interim, though, he said that the first

half of 2009 could be the worst period for the

transportation industry since deregulation.

Going forward, he said that once a freight

recovery occurs, it could take anywhere from

1 year to 3 years, with a meaningful recovery

unlikely before the second half of 2010.

A possible solution to risk? In a move

promising to bring more transparency to

sourcing from China, U.S.-based Panjiva

announced that it will partner with an

overseas credit specialist. Panjiva, which

gathers objective information on global

manufacturers, and Sinosure, a provider of

credit information on companies in China,

announced an exclusive relationship to

provide U.S. companies with information

that will help them mitigate the risks of

doing business overseas. Panjiva CEO

Josh Green said that given the level of

“macroeconomic uncertainty,” this can be

a microeconomic solution. “Sinosure has

been the only provider of export insurance

to Chinese manufacturers, which makes it

a strong source of business intelligence,”

he said. “They know which companies are

financially stable and which ones are in

trouble.

Risky business. Sourcing from low-wage

countries like China seemed like such a logical

idea before the world’s economy went south,

said C.J. Wehlage, research director at AMR

Research. But with demand continuing to

slacken, logistics decision makers are now

more concerned with maintaining the integrity

of their pipeline. “The failure of some suppliers

in China has become an issue,” he added dur-

ing a conference in San Francisco last month.

“And having the low-wage option is not such

an advantage if quality and reliability suffer.”

Wehlage was among the featured speakers at

last month’s “High-Tech Forecasting & Plan-

ning Summit” organized by the London-based

IE Group. His presentation mirrored a study

done by AMR Research last year, ﬁ nding that

volatile fuel, energy, and commodity prices

rank highest in areas of global risk.

Is the economy slowing down the

mail? That appears to be the case as evi-

denced by the recent United States Postal

Service (USPS) report that it suffered a

net loss of $1.9 billion for the fiscal second

quarter.The USPS cited the recession,

coupled with the diversion of letter mail to

electronic alternatives, as playing a large

role in the ongoing reduction of mail volume

and revenue.The USPS will likely face a

$1.5 billion cash shortfall by the end of the

year. It has also experienced operational

net losses in 10 of the last 11 quarters, with

continued, page 2 >>

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June 2009 | WWW.LOGISTICSMGMT.COM

LOGISTICS MANAGEMENT 1

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Get your daily fix of industry news on logisticsmgmt.com and supplychaindaily.com

continued

a year-to-date net loss of $2.3 billion. The

USPS Postmaster General said the agency

has its sights on the future by realigning

costs to match lower mail volumes and tak-

ing various steps to grow revenue.

(AfA). “This really could not have come at

a worse time for our business.” Numbers

released byThe International AirTransport

Association (IATA) last month confirmed

this observation. According to the Geneva-

based organization, scheduled international

traffic demand fell to 11.1 percent below

2008 levels. Airlines cut international pas-

senger capacity by 4.4 percent resulting in

an average load factor of 72.1 percent.This

is 5.4 percentage points below the average

load factor recorded in 2008.

Intermodal volumes are down now

too. Citing low consumer spending and

high inventories, the Intermodal Associa-

tion of North America (IANA) reported

that total intermodal container and trailer

loadings—at 2,786,465—were down 16.3

percent in the first quarter. While domestic

intermodal performance has been a bright

spot during the recession, economic condi-

tions caught up in the first quarter, with a

mere 0.1 percent gain at 893,506 containers.

International containers remained in the red

at 1,485,753 for the quarter, which was down

22.7 percent year-over-year.

Brokers want a break. Shippers and

freight intermediaries posed a legal chal-

lenge to an action by Customs and Border

Protection (CPB).The National Customs

Brokers & Forwarders Association of Amer-

ica, Inc. (NCBFAA) filed an Amicus brief

in the Court of InternationalTrade contest-

ing CPB’s authority to revoke a customs

broker’s entry filer code without affording

the broker due process.The NCBFAA brief

argued that deactivation of the entry filer

code is tantamount to suspension or revoca-

tion of the customs broker’s license.

Savannah’s surge. The Port of Savan-

nah, which receives 22 all-water Asian

services transiting both the Panama and

Suez Canals, gained China Ocean Shipping

(Group) Company (COSCO) as a new cus-

tomer last month.The first COSCO vessel

to call on the port, M/V Zhen He, arrived

at the GPA’s Garden CityTerminal. Prior

to the Zhen He’s arrival, COSCO moved

cargo through Savannah on alliance carrier

vessels. “By adding Savannah as a port of

call for our vessels, we have enhanced our

customers’ ability to reach the consumer

markets faster and at a lower cost,” said

Howard Finkel, the carrier’s vice president

of trade. He added that the growing number

of distribution facilities in proximity to the

port represents a new market opportunity to

expand COSCO’s business.

Tough to top these industry reputations.

Of the world’s 600 most reputable compa-

nies, four of the top 139 are in the freight

transportation and logistics sectors,

according to the Reputation Institute’s 2009

Global Reputation Pulse. Leading the way

at number 12 was UPS, followed by FedEx

(16), A.P.Moller Maersk (31), and Union

Pacific Railroad (139).The Global Reputa-

tion Pulse measures the corporate reputa-

tions of the world’s 600 largest companies

and is based on consumers’ trust, esteem,

admiration, and good feeling about a com-

pany across seven dimensions of reputation

in 32 countries.

Swine flu flew. While the force of the

Swine Flu epidemic touched every mode of

transportation, the air cargo industry has

taken the hardest hit. “Fewer passengers

means less lift for existing flights, and

a reduction in schedules for shippers to

adhere to,” said Brandon Fried, executive

director of the Airforwarders Association

Logistics Management is all a-“Twitter.”

Along with everybody else, we have become

disciples ofTwitter. Check out our daily

news postings, print items, blogs, and more

at www. twitter.com/LogisticsMgmt . Don’t

be left out. Come and join us!

LOGISTICS MANAGEMENT

WWW.LOGISTICSMGMT.COM | June 2009

■

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