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OPPORTUNITY
ABOUNDS Page 18
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Consolidation continues, but at
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State of Ocean Cargo: Carriers cope
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management
UPDATE A N E X E C U T I V E S U M M A RY O F I N D U S T RY N E W S
IBM subsidiary rolls out weather-related dashboard. long period. The report includes ACMGs prediction for
A new offering from The Weather Company (TWC), a the freighter fleet make-up by aircraft type through 2036,
subsidiary of IBM, called the Operations Dashboard taking into account the assessment of new-build freighter
for Ground Transportation is geared toward optimizing production, passenger-to-freighter conversion activity and
workforce productivity and route selection for freight and the retirement of freighters from the existing freighter fleet.
logistics companies. The dashboard is comprised of vari- Analysts expect demand for freighter aircraft to continue
ous weather-related data sources, including precipitation, trending higher, albeit not at the same rate as before the
wind, fog, ice and pooling water and integrates real-time Great Recession.
traffic flow and incident data. According to TWC, the
timing for the dashboard is good, considering weather- Amazon sets sights on home furnishings market.
related delays cost the freight sector roughly $8.7 billion While its no secret that Amazon is building up its logistics
per year, according to the Department of Transportations and transportation playbook, The Wall Street Journal (WSJ)
Bureau of Transportation Statistics. Users can access reported that the e-commerce giant intends to build four
dashboard information, designed as an IOS app, through massive warehouses to help it deliver bulky appliances and
tablets or cell phones to get needed information in a furniture as part of a strategy to expand furniture offerings
timely manner. Dispatchers have the ability to set up indi- and speed up delivery times. As to why its entering this
vidualized alerts of approaching hazards delivered via API segment, Amazon told WSJ that furniture is one of its fast-
to an in-cab or mobile device, TWC said. est-growing retail categories. This will surely be worrisome
news for furniture and home furnishing shippers, while also
Cost of congestion on the rise. Data from the likely leading to a need for more outsourced logistics part-
American Transportation Research Institute (ATRI) shows ners to ship large items like couches and dressers. Whats
that traffic congestion on the U.S. National Highway Sys- more, the report explained that retailers are still figuring out
tem (NHS) added over $63.4 billion in operational costs to how best to go about certain aspects of selling furniture
the trucking industry in 2015. According to ATRI, the data online, such as what variety to offer, coupled with the best
indicate that traffic congestion tended to be most severe approaches for delivery to customers at home. Amazon is
in urban areas, with 88% of the congestion costs concen- now focused on expanding product selection, as well as
trated on only 17% of the network mileage, and 91% of increasing delivery to 1 day or 2 days in certain cities, the
the total congestion cost occurring in metropolitan areas. report added.
ATRI said that its analysis also demonstrates the impact
of congestion costs on a per-truck basis, with an average DOT Secretary says vision for U.S. infrastructure
increased cost of $22,676 for trucks that travel 100,000 plan to be unveiled. In kicking off last months Infrastruc-
miles annually. ture Week, Department of Transportation (DOT) Secretary
Elaine Chao said that the White House would soon share its
Freighter aircraft demand trending up. A new vision of what its national infrastructure plan would look like.
forecast and independent assessment of freighter aircraft Chao explained that DOT has started an initial regulatory
demand has been released by the air cargo consultancy review process, citing how the Federal Highway Administra-
Air Cargo Management Group (ACMG). The robust activ- tion, as an example, has started to reduce the regulatory
ity in freighter conversion of narrow body types over the burden in an effort to quicken the pace of productivity. Per-
past four years has led to an increase in the quantity of haps the most telling part of Chaos speech was her expla-
narrow body freighters in the global fleet, said Robert nation of how a new paradigm would be created to shift
Dahl, managing director of ACMG. This increase reverses the focus beyond whats being builtto how projects are
a trend that began in 2000, through which the narrow being funded and financed. For example, states and locali-
body freighter fleet decreased about 40% over a decade- ties that have secured some funding or financing of their
Continued, page 2
management
UPDATE A N E X E C U T I V E S U M M A RY O F I N D U S T RY N E W S
own for infrastructure projects will be given higher priority and volume. And, for us to continue to add value to our
access to new federal funds, she said. The goal is to use customers, it was a natural step for Werner to expand
federal funds as an incentive to get projects underway and into this part of the supply chain.
built more quickly, with greater participation by state, local
and private partners. Legendary leaders celebrated. Achieving Womens
Excellence in Supply Chain Operations, Management
Financing squeeze on U.S. ports? Proposed cuts and Educationa group better known in the industry as
to an existing grant program would force U.S. ports to AWESOMEhas presented its Legendary Leadership
choose between issuing debt to keep capital improve- award to two highly accomplished supply chain leaders:
ments on schedule or delaying capital programs to allow Francesca DeBiase, chief supply chain and sustainabil-
cash from operations to accumulate, Fitch Ratings says. ity officer, McDonalds Corporation; and Kristin French,
However, recent partnerships between regional ports retired brigadier general, U.S. Army, and principal deputy
could lower capital expenses in the long run for some assistant secretary of defense, U.S. Department of
entities, partially offsetting the cuts. The 2018 federal bud- Defense. The selection of these two outstanding lead-
get proposes eliminating funding for the Transportation ers is evidence of the impact women are having at the
Investment Generating Economic Recovery (TIGER) grant highest levels of supply chain leadership in dramatically
program, on which many seaports rely to fund a portion of different organizations, said Nancy Nix, executive direc-
their capital improvement programs. A new grant program tor of AWESOME. The Legendary Leadership award was
has been implemented, the Fostering Advancements in created in 2014 to recognize women supply chain leaders
Shipping and Transportation for the Long-term Achieve- who have achievedextraordinary professional excellence
ment of National Efficiencies (FASTLANE), which the fed- and success, addressed challenges impacting opportuni-
eral government noted should make up for the removal of ties for women and advanced the changing landscape of
TIGER grants. However, FASTLANE mainly targets larger womens supply chain leadership.
projects costing more than $100 million.
Working to close the gender gap. APICS, along
Werner makes entrance into last-mile market. with The Manufacturing Institute and Deloitte, recently
Werner Enterprises is the latest company to get on released a study that addresses the gender gap in
board in the e-commerce-driven last-mile sector, with todays logistics marketplace. Women in Manufactur-
the introduction of Werner Final Mile. Company officials ing is the result of more than 600 survey responses
said that this service will provide nationwide delivery from women professionals in the manufacturing industry,
and related services to residentialand business loca- along with nearly 20 manufacturing executive interviews.
tionsand leverage its expansive network of delivery The study examines how companies can effectively
teams with operations in nearly 200 locations. The recruit, retain and advance talented women in manufac-
company added that through this service, Werner would turing and illustrates ways that women in manufacturing
mainly deliver large or heavy goods and items with two are making an impact in the industry through programs
uniformed associates operating a 24- or 26-foot lift gate like Science, Technology, Engineering and Production
straight truck. Craig Stoffel, Werners vice president of (STEP) Ahead. This study confirms the importance of
global logistics, toldLogistics Management that there increasing the amount of women in the supply chain
were a few big drivers behind Werners decision to enter workforce and that many companies are missing a criti-
this market. Its a changing marketplace when it comes cal talent pool. This study is an important step in under-
to the buying habits in the U.S. and the global popula- standing how we as an industry can make supply chain
tion, said Stoffel. Nearly half of our revenue is touching careers more attractive to women, said Abe Eshkenazi,
retail and affecting a large amount of our customer base APICS chief executive officer.
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June 2017 logisticsmgmt.com
CONTENTS
VOL. 56, NO. 6
Logistics Management
Opportunity abounds
18 Here are five trends that every shipper
and potential shippermust watch as the
demand for experienced logistics and supply chain
professionals soars.
GLOBAL LOGISTICS
30 Cross-border Logistics:
NAFTA tune-up time
We take a deep dive into the 23-year-old NAFTA
agreement, the impact it has made on logistics
operations and hear what the experts suggest
Washington shouldand should notdo.
WAREHOUSE/DC MANAGEMENT
Logistics Management (ISSN 1540-3890) is published monthly by Peerless Media, LLC, a Division of EH Publishing, Inc., 111 Speen St, Suite 200, Framingham, MA 01701. Annual
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Women in Logistics
Sarah Petrie Executive Managing Editor
Jeff Berman Group News Editor
John Kerr Contributing Editor, According to the findings of Logistics Managements recent Salary Survey, the
Global Logistics
vital role women play in the logistics management community continues to gain
Bridget McCrea Editor at Large, traction every year. In this educational Webcast, executive editor Patrick Burnson
Technology will share our recent findings and will then be joined by a panel of women who are
Roberto Michel Contributing Editor, now leading top-level logistics and supply chain operations. The panel will share
Warehousing & DC their success stories as well as
John D. Schulz Contributing Editor, advice for women who are making
Transportation their way up the ladder.
Our featured panelists include:
Chris Lewis Creative Director
Tisha Danehl, vice president of
Wendy DelCampo Art Director
the executive recruiting
Kelly Jones Print/Online Production
firm Ajilon;
Manager
Ellen Voie, president and CEO
COLUMNISTS of the Women In Trucking
Derik Andreoli Oil + Fuel Association (WIT);
Elizabeth Baatz Price Trends Andrea Morriera, international
Kris Timmermans Excellence logistics manager for Orchard
Peter Moore Pricing Supply Hardware; and
Heather Sheehan, owner of
PEERLESS MEDIA, LLC Crispy Concepts LLC.
Brian Ceraolo President and
Group Publisher
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REPRINTS Join group editorial director Michael Levans and a panel of four supply chain technology
For reprints and licensing please
analysts as they demystify some of todays buzz terms and share practical insight into how
contact Brett Petillo, 877-652-5295
ext 118, peerless@wrightsmedia.com to better apply the existing technologies that will create a more intelligent logistics operation.
Bob Hood, principal, digital supply chain, Capgemini; Steve Banker, vice president,
supply chain management, ARC Advisory Group; Norm Saenz, managing director,
St. Onge; and Dwight Klappich, research vice president, Gartner set out to answer:
lynden.com | 1-888-596-3361
VIEWPOINT
When theres a trade show floor involved, I first walk literally endless for younger people looking to build
the perimeter to get an idea of the size of the floor. Then I life-long careers.
walk down the middle aisles to get a feel for the buzz at Starting on page 18, McCrea offers five emerging
that moment in time, keeping an eye on attendee engage- trends in logistics and supply chain education and career
ment with exhibitors. Are these business discussions? development. While the number of logistics-specific
Are they merely catching up? Or is it a little of both? educational offerings are taking off and becoming more
Its in those early observations that you start to get an popular at some of our most esteemed universities, she
idea of the general demographic makeup. Is it more of a cites some shortcomings and advises our base of veterans
veteran group? Or, is it younger and savvier? Or possibly to make sure Millennials are getting hands-on-training
a little of both? not just screen time.
When I roll up my many logistics and supply chain Were also seeing more women entering logistics and
trade show and conference experiences over the past few supply chain management positions. In fact, the findings
years, Im happy to report that Im starting to see a little of of our recent Salary Survey said that the role women
both in terms of engagement levels as well as a healthier play in the logistics management community continues
demographic mix. Im seeing our stalwart veterans mixing to gain traction every year.
and mingling with a growing number of younger attend- To further examine this, executive editor Patrick
eesboth male and female. Burnson put together a panel of three women who rep-
Back in 2004, when I first started working on resent three different areas of the marketa recruiter, a
Logistics Management (LM), that wasnt the case. In trucking executive and a shipperin our first Women in
fact, the lack of young professionals was notable; so Logistics Webcast happening on June 15.
much so that their absence drove editorials and feature These professionals share their success stories as
stories asking why we werent building a deeper bench well as offer advice for women who are making their way
for the future. up the ladder, says Burnson. And while theres still a
Its impossible to put a finger on the exact moment steep hill to climb, opportunities abound.
the tables turned, but I can be nearly certain that the
steady growth of e-commerce and the evolution of the
digital necessities that make it work are at the heart of
this currentand absolutely vitaldemographic shift.
Simply put, the demand for experienced logistics
and supply chain managers is increasing exponen-
Michael A. Levans, Group Editorial Director
tially, says contributing editor Bridget McCrea. And
Comments? E-mail me at
when you consider the growth of e-commerce and mlevans@peerlessmedia.com
its scalable, digital foundation, the opportunities are Follow me on Twitter: @MikeLeva
2 145
TRUCKING
1 143 Thanks to pressure from fuel costs, margin conditions in
0 141
the U.S. trucking industry have been deterioratingbut slowly.
In the first quarter of 2017, fuel costs increased 7.6%. In addi-
-1 139
tion, worker wages inched up 0.33% as overhead expenses
-2 137
Forecast grew 1%. Adding it all up, total costs increased 1.7%. Mean-
-3 135
2015 2016 2017 2018 while, average transaction prices for trucking services increased
% change (left scale) Index 2001=100 (right scale) only 0.6%. As a result, the industrys pre-tax gross operating
surplus in the first quarter stood at $28.94 per $100 of sales.
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago Thats down 50 cents from the previous quarter and down $1.32
General freight - local -0.1 0.2 -1.4 from the same quarter a year ago. Our trucking forecast call-
TL 0.2 0.1 0.6 ing for a 1.6% average annual price hike in 2017 looks modest
LTL 0.7 2.7 4.4
given these cost trends.
Tanker & other specialized freight 0.2 0.6 1.1
6 170
AIR
3 167 In the first three months of the year, wholesale jet fuel
prices increased 7.3%a sharp turnaround from the big price
0 164
cuts enjoyed a year earlier. Counteracting those cost hikes,
-3 161
worker wages were down 0.7%, although other salaries and
-6 158
Forecast benefits costs were up 0.6%. The good news for U.S. owned
-9 155
2015 2016 2017 2018 airliners: they were able to push through a 4.9% price hike for
% change (left scale) Index 2001=100 (right scale) services. Alas, all that price-hike success was due to increases in
passenger fares. In the three months ending April 2017, transac-
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
tion prices for airfreight on scheduled flights and on nonsched-
Air freight on scheduled flights -0.4 1.7 -1.6
uled flights were down 3.5% and 1.5%, respectively. Taking into
Air freight on chartered flights -2.2 -5.2 -3.2
account all the data, we estimate this industrys margins improved
Domestic air courier -0.5 5.3 7.3
by $2.61 for every $100 worth of sales.
International air courier 0.4 6.5 8.4
6 185
WATER
3 181 The global shipping crisis is reflected in our estimates
0 177
for margins in the U.S. water transportation industry. The latest
results from our U.S. industry cost model show the pre-tax oper-
-3 173
ating surplus sank to $10.89 per $100 of sales in March 2017.
-6 169
Forecast Thats down from a surplus of $14.02 last year and $20.45 in
-9 165
2015 2016 2017 2018 March 2015. The problem for margins in this industry has been
% change (left scale) Index 2001=100 (right scale) the inability to increase prices. In the three months ending April
2017, water transportation transaction prices declined 0.7% from
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago a year ago. However, that price drop was far better than the 6.6%
Deep sea freight 1.0 4.2 9.5 price cut reported in April 2016. With the price trend improving
Coastal & intercoastal freight 0.0 -3.9 -6.2 and margin pressures high, average industry prices are forecast to
Great Lakes - St. Lawrence Seaway na -0.6 1.0 rise 0.4% this year.
Inland water freight 0.0 -2.8 -2.2
4 175 RAIL
2 173 The recovery in rail operators ability to hike prices is continu-
0 171 ing apace with the carload market and intermodalboth trending in
-2 169 a direction that will soon challenge shippers. In the most recent sur-
-4 167
vey of transaction prices, carload operators reported monthly price
Forecast increases in 10 of the past 12 months. Now, in the first four months
-6 165
2015 2016 2017 2018 of this year, carload prices are up 2.3% from the same period a year
% change (left scale) Index 2001=100 (right scale) earlier. Likewise, intermodal rail prices are up 6.4% at the same
time. All together, and including the negligible addition of passenger
% CHANGE VS.: 1 month ago 6 mos. ago 1 yr. ago
rail service, it looks like the U.S. rail industry will finally emerge from
Rail freight 0.5 2.1 3.9
Intermodal -0.5 1.9 5.2
its pricing slump as we project a 2.4% price hike in 2017 and 1.1%
Carload 0.8 2.1 3.7 in 2018.
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status at a glance.
With features not typically found at this price point, the WS4 base model has:
WHILE ANTICIPATED for some time, its services to shippers, truck fleets and carriers based in the triangle between Dal-
ubiquitous ride-sharing service Uber said independent drivers, not just to outfit las, Houston and San Antonio.
last month it has officially entered the trucks with self-driving technology, but Going forward, Berdinis said that
freight transportation arena, specifically also to be a player in the highly com- Uber Freight will focus on independent
truckload brokerage, with the introduc- petitive $700-billion truckload brokerage drivers and small fleets, noting that own-
tion of Uber Freight. In a blog posting, arenawhich is replete with major play- er-operators may be viewed as a dying
Eric Berdinis, Uber Freight product man- breed these days due to the challenges in
ager, wrote that Uber Freight is an app finding consistent freight.
that matches trucking companies with Uber Freights initial focus is on the
loads to haultaking the guesswork out two most common freight types in the
of finding and booking freight, a stressor United States, dry van and refrigerated
for drivers. (reefer), which offers a lot of space to route
What used to take several hours and and optimize movements of these small
multiple phone calls can now be achieved fleets using the app. Going into this space
with the touch of a button, Berdinis and doubling down on small fleets and
explained. Vetted users download the creating a top-quality service for a shipper
Uber Freight app, search for a load and base offers room for growth, he said.
tap to book it. Rate confirmation comes According to Morgan Stanley ana-
within seconds, eliminating the common lyst Ravi Shanker, the move marks an
anxiety about confirmation. And, Berdinis escalation in the truck brokerage disrup-
said that rather than the common practice ers such as C.H. Robinson Worldwide, tion wars. Thus far, weve seen several
of a trucker waiting 30 days or more to get XPO Logistics, Echo Global Logistics startups vying to be the Uber of freight
paid, Uber Freight is committed to pay- among others. achieve scale in the past two years, but
ing within a few days, fee-free, for every Ubers Berdinis said in an interview Ubers launch marks the entry of the first
single load, and when things dont go that the company has been testing its tech giant into this space ahead of Ama-
as planned or drivers have to wait longer freight platform for several months. We zons impending launch this summer.
than expected, we pay for that, too, with firmly believe we can make a significant In the long-term, Shanker says his
accessorial rates published on the Uber impact in the future of trucking with a firm is seeing secular margin compres-
Freight blog and Website. new way of booking freight and a new sion at all of the 3PLs. This is due to
Uber has had its sights on the truck- way of connecting small fleets and owner- the threat of increased competition from
load brokerage market for some time, with operators with the large tail of capacity startups vying to crowd-source freight,
a September 2016 Reuters report noting out there to the community of shippers and they continue to raise meaningful
that it was keen on becoming a freight that dont traditionally have the resources amounts of private capital; insourcing at
hauler through its acquisition of Otto, a to go out and find capacity, he said. e-commerce and other logistics giants;
self-driving truck startup for $680 mil- Prior to this launch, Uber had been and vertical integration into the asset-
lion in August 2016, and a technology piloting a program with a handful of U.S.- light business by asset-heavy players
partner for trucking. Uber is now pitching based shippers as well as a number of small including, eventually, OEMs.
12 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM
NEWS analysis
INFRASTRUCTURE Molly Campbell, a director at the Port the growth in ports of Virginia, Savan-
Authority of New York and New Jersey, nah and Jacksonville and the millions
Its beyond time to added that infrastructure is our bread and that are being spend on improvements
modernize U.S. infra- butter. She said that their port is under-
going a major dredging program to help
in Baltimore and Miami. I cant place
enough emphasis on the need for U.S.
structure, U.S. Chamber accommodate larger, deeper ships. We ports to modernize.
would love to have infrastructure spending Those improvements at ports are wel-
of Commerce urges thats more flexible, but the government come news to manufacturers, who have
THE GENERAL MESSAGE SENT needs to invest in projects that make the talked about being hampered by an aging
during the recently held Infrastructure most economic sense, not just merely on U.S. infrastructure in an increasingly com-
Week was loud and clear: The lack of political will, she said. petitive worldwide market
U.S. infrastructure modernization is As always, truckers are in the vanguard We need infrastructure, said Judith
increasingly causing expensive bottle- of those calling for increased spending on Marks, CEO of Siemens USA. We need
necks at ports and around our cities infrastructure. FedEx and other truckers access to ports and airports. We are
that are responsible for have openly called for an at a unique junction in this country
expensive delays in an increase in the fuel tax to to double down on infrastructure and
ever-complex worldwide pay for improvements to double-down on public-private partner-
market. alleviate bottlenecks. ships. We need to think of infrastructure
Ive been playing Bill Sullivan, execu- with a capital I.
around with supply chain tive vice president of Chamber officials have long backed
issues since I was a young advocacy at the ATA, a comprehensive infrastructure invest-
manwhich is a long said that big investments ment program, and Trump administration
time ago, said Thomas are needed for the truck- has talked about a $1 trillion investment
Donohue, former head of ing industry, adding that for infrastructure, but so far details are
the American Trucking ATA officials recently sketchy. And we rolled up all the com-
Associations (ATA) and met face to face with ments from this recent event, there is no
for the past 20 years the President Trump and question: The need for modernizing U.S.
president and CEO of the Vice President Mike infrastructure is as great as its ever been
U.S. Chamber of Com- Pence to lobby for more in our nations history.
merce. Todays supply chain is not what I spending on highways. John D. Schulz, contributing editor
grew up with, and change is inevitable in Sullivan reiterated ATAs call for an
this business. increase in the fuel taxwhich, notably,
Donohue and others spoke during he called a user fee. Trucking interests SUSTAINABILITY
Infrastructure Week at the U.S. Cham- are vigorously opposed to tolling of existing
bers fifth annual Global Supply Chain
Summit in May. He added that this is
highways, although Sullivan left the door
open for tolls on newer highways.
Shippers make case
a once in a generation opportunity to The highway is our office, Sullivan for U.S. to remain in the
modernize the U.S. infrastructure to the said. And we believe that there has to
tune of $1 trillion in investment. be a sustainable funding mechanism Paris Agreement
The quest, as always, is how to pay for to find dedicated funding for highway
it. Fuel tax increases are apparently back investment, adding that a recent freight
on the table in Congress, and that was bottleneck survey showed that conges-
music to the ears for some in attendance. tion costs U.S. shippers $63 billion a
Ed Mortimer, executive director of the year in delaysan embarrassingly high
U.S. Chambers transportation initiative, figure for a country with the biggest
has backed the Chambers call for a grad- economy in the world.
ual increase in the federal fuels taxcur- Perhaps the United States could take
rently 18.4 cents a gallon on gasoline, 24.4 a page from smaller countries such as
cents on diesel, unchanged since 1993. Panama, which has invested mightily in
Its not just time to fix it, Mortimer infrastructure improvements. In fact, the
said. Its time to modernize it and improve newly expanded Panama Canal is mak- WHILE PRESIDENT TRUMP and
it, and that not only includes roads and ing a positive impact on worldwide trade, administration officials havent made
bridges. He added that intermodal access saidKarla Gonzalez, deputy chief of mis- their intentions clear in regards to the
to ports around the country is clogged due sion at the Embassy of Panama. United States remaining in the Paris
to the increase in foreign trade and water The East Coast ports are the most Agreement, a large faction of well-known
advocates dont want to be left out in any important beneficiaries of the Panama companies have made it apparent that
building boom. Canal expansion, said Gonzalez, noting they want to remain part of it.
LOGISTICSMGMT.COM JUNE 2017 | L O G I ST I C S MAN AG E ME N T 13
NEWS analysis
The Paris Agreement by the United or operating in the U.S. benefit from U.S. quarters of growth. Total first quarter
Nations Framework Convention on Cli- participation in the agreement in several volume movementsat 4,240,884
mate Change (UNFCCC) requires each of ways, including strengthening competi- were up 2% annually, ahead of the first
the 190 participating countries to strength- tiveness and reducing the risk of competi- quarters 1% increase.
en the global response to the threat of tive imbalance for U.S. companies. International containers led the
climate change by keeping a global tem- In a May 10 letter to the President, individual intermodal categories with
perature rise below 2 degrees Celsius above 30 U.S.-based CEOs, including large a 2.9% annual increase for its second
pre-industrial levels and to pursue efforts to shippers like Cargill, Johnson & Johnson, straight increase following two quarters
limit the temperature increase even further Unilver and Tesla, expressed their support of declines. Domestic containers rose
to 1.5 degrees Celsius. for the U.S. remaining in the agreement: 1.3%, while trailers eked out a slight
To reach these ambitious goals, appro- As CEOs of large American companies, annual gain, up 0.3%.
priate financial flows, a new technology or with significant operations in the Unit- IANA said in the report that this per-
framework and an enhanced capacity build- ed States, we are concerned about keeping formance is impressive in that it follows
ing framework will be put in place, thus the doors open for the global flow of Amer- a 2% gain from the first quarter of 2016,
supporting action by developing countries ican manufactured goods and products at which suggests that the first quarters
and the most vulnerable countries, in line this critical time when our manufacturing increase was real growthas opposed to
with their own national objectives as well. sector is starting to grow from our com- having an easier annual comparison.
The nonbinding agreement also provides petitive energy advantage. Looking at international volumes,
for enhanced transparency of action and Jason Mathers, Environmental IANA said that while first quarter vol-
support through a more robust transpar- Defense Fund senior manager for supply umes were up 2.9% and U.S. inter-
ency framework, the UNFCCC added. chain and logistics, said his organization national volumes were up 2.5%, U.S.
Reports stated that the Trump admin- sees the agreement as being incredibly container imports were lower, seeing
istration was hoping to make a decision important, because it has ambition, is a 1.6% gain. The report explained that
about remaining in the Paris Agreement global in scope and provides a very broad international growth and container
prior to the G-7 and G-20 summits that framework. import growth tend to be fairly close,
were held last month. A Wall Street Journal Jeff Berman, group news editor but that was not the case in 2016 and
report noted that, at those meetings, world into this year so far.
leaders were likely to pressure President INTERMODAL IANA president and CEO Joni Casey
Trump to remain in the agreement. The said that the first quarter international
report also noted that EPA Administrator IANA reports Q1 volumes were fueled by increased con-
Scott Pruitt is keen on the U.S. withdraw- sumer confidence and spending.
ing from it, with other people with close intermodal gains As for domestic containers, which
White House ties urging more tempered recorded less than half the growth rate
steps, such as pairing the U.S. carbon- of international and fell far short of the
emission reduction targets. fourth quarters 6.4% annual increase,
Whats more, while on the campaign IANA pointed to declines in the Mid-
trail, President Trump called the Paris west, Northeast and Southeast regions.
Agreement a bad deal for the U.S., while We would have expected gains to be
saying clean air and crystal clear water are a little higher, but there are still strong
important. As for how large U.S.-based headwinds particularly in the east, with
businesses feel about the agreement, its truck capacity relatively loose and cost of
clear that they want things to remain the fuel still low by comparison, Casey said.
same and not see the U.S. exit. First quarter intermodal marketing
In a letter sent to President Trump on companies (IMC) total first quarter loads
April 26, 16 companies, including Apple, rose 7.5%, with intermodal loads up 3.6%
DuPont, General Mills, Google, Intel and and highway loads up 11.6%.
Walmart pleaded their case for why the Intermodal revenue was up 5.6% and
U.S. should remain in the agreement. THE INTERMODAL ASSOCIATION highway revenue saw a 13.8% annual
Climate change presents U.S. com- OF NORTH AMERICA(IANA) report- gain. Total revenue saw an 8.4% annual
panies with both business risks and busi- ed last month in its Intermodal Market gain. Average intermodal and highway
ness opportunities, the letter stated. Trends and Statistics report that first revenue per load and each saw matching
U.S. business interests are best served quarter intermodal volumes saw annual 1.9% annual increases art $2,608 and
by a stable and practical framework, growth for the second straight quarter. $1,438, respectively.
facilitating an effective and balanced Prior to the last two quarters, vol- IANAs Casey said that over-the-road
response. We believe the Paris Network ume growth saw annual declines during volumes and loose truck capacity drove
provides such a framework. the second and third quarters of 2016, the total increase in IMC loads.
The letter added that companies based which were preceded by 25 consecutive Jeff Berman, group news editor
14 L OGISTICS MANA GEM ENT | JUNE 2017 LOGISTICSMGMT.COM
Sponsored by NEWCASTLE MAKING THE CASE REPORT
OPPORTUNITY
ABOUNDS
Here are five trends that every shipperand potential
shippermust watch as the demand for experienced
logistics and supply chain professionals soars.
1 Supply chain programs proliferate, but fall short on the transportation front.
Gail Rutkowski, executive director for the National Shippers Strategic Transportation Council
(NASSTRAC) in Chicago, says that shes seen a big uptick in the recent number of professionals
enrolled in masters supply chain programs.
When I was young, it was hard to even find any kind How would you rate your understanding
of education related to logistics or supply chain, says of e-commerce and e-fulfillment processes
Rutkowski. Today, I think the universities are doing a within your organization?
much better job of offering those kinds of courses to
students.
However, Rutkowski contends that while most of those Somewhat knowledgeable 53%
programs are focused on broader logistics and supply chain
management, many fall short when it comes to the all- Highly knowledgeable 37%
important transportation segment. Interestingly enough,
Penn States supply chain program, which has been around Not very/Not at all knowledgeable 10%
for years, just added transportation to its course offering
three years ago, she points out. Transportation was some- Salary by level of understanding
thing that most of these guys avoided, because you really of e-fulfillment processes
cant teach transportation in a classroomyouve got to
Average Median
get out and do it.
$128,245
Even with the current transportation gap in education, $105,000 $105,175
$90,000 $82,575
Rutkowski says universities are doing a good job at creating $73,500
current, relevant curriculums for todays budding and vet-
eran supply chain professionals.
There are some very strong programs out there, says Highly Somewhat Not very/Not at all
knowledgeable knowledgeable knowledgeable
Rutkowski, who points to Penn State, Brigham Young,
University of Tennessee, Georgia Tech and Auburn as a Source: Peerless Research Group (PRG)
association APICS, sees a sector thats ripe for change on the Are you planning to take any
human resources front. continuing education programs
We dont see a lot of women leaders, and as a result we or classes during the next 12 months?
also dont see too many women looking at opportunities for
46%
leadership; to us thats a huge issue, says Eshkenazi. On a
38%
positive note, he says that current supply chain grads tend to 34% 35%
30%
be split 50/50 on the gender front, and that some companies
are even offering higher pay to women in order to attract
them to the organization.
But theres still a steep hill to climb when it comes to 2013 2014 2015 2016 2017
women in logistics and supply chain management, and par-
Do you think this class or program
ticularly on the leadership front. Were still not seeing a high
will enable you to earn a better salary?
volume of individuals going to college to seek out opportuni-
2013 33% 18% 49%
ties in supply chain and logistics. Instead, theyre discovering
the opportunity during their third or fourth year in college, 2014 33% 18% 49%
says Eshkenazi. That leaves us with a huge opportunity to
turn that tide and get both men and women interested in our 2015 31% 25% 44%
Volumes stable,
business steady
While the overall economy is putting an emphasis on smaller
shipments, these two stalwart freight transportation markets continue
to chug along at a healthy clip. Our panel of leading rail/intermodal
experts helps shippers put the markets into perspective.
W
hile the overall economic outlook may be best described as
inconsistent, the railroad and intermodal market sectors have
both witnessed consistent growth for the most partespecially over
the last decade. In fact, in terms of volumes, these two vital freight transporta-
tion markets are ahead of where they were just a year ago at this time.
On the rail side, its clear that its no longer the bellwether that it once was,
but growth lost on the coal side has been made up for in other areas, such as
grain and chemicals. And on the intermodal side, domestic intermodal is not as
dominant as it had traditionally been; however, thats due to the international
movements swinging steadily upward. And while rail shippers are still clamoring
for regulatory changes in order to provide what they believe would be needed rate
relief, the railroads continue to allocate massive amounts of capital spending to
maintain and upgrade the nations private rail network in the name of safety,
upgraded track and technological advancementsall with an eye on the future.
To help put the current state of the nations rail and intermodal network into
better perspective, Logistics Management is joined by three of the nations fore-
most experts in the market. Our panelists include Larry Gross, senior partner at
freight transportation analyst firm FTR; Tony Hatch, rail analyst and principal of
ABH Consulting; and Bill Rennicke, partner at Oliver Wyman, a management
consultancy.
industry needs to discover a new growth modal is also affected on the interna- marginally increase driver payand also
catalyst to replace energy traffic, and tional side by the confusion over the because demand is stronger in shorter-
figure a way to reignite intermodal as a alliancesa net neutral short-term haul lanes where driver productivity is
growth area. effect that can still cause gyrations higher and railroads are less service and
Gross: Although volume is sub- and muted consumer spending. cost competitive.
stantially higher than a year ago, these Gross: Domestic intermodal move-
year-over-year comparisons dont provide ments were up less than 2% through the LM: How do you view the current rail-
a full, timely view. The current trend for first four months of 2017, as domestic road service levels compared to this
carloads in general is negative. Setting container activity grew only sluggishly. time a year ago?
aside the usual seasonal dip around the However, there has been strong growth Gross: The railroads are running as
holidays, total carloads have been trend- in the use of 28-foot pup trailers in fast as they choose to thus far in 2017.
ing flat to down since the middle of the intermodal, which I believe reflects In an economic response to lower vol-
fourth quarter of 2016. e-commerce related activity being han- umes, the railroads are running fewer,
For example, carloads of coal for dled by parcel and LTL carriers. longer trains in order to lower costs.
This results in longer waits between
The overall economy is putting an emphasis on departures, boosting yard dwell times.
These huge trains also tend to be slower,
smaller shipments; faster, more reliable service;
and the resulting average train speeds
and optimizing the supply chainespecially on are substantially down from prior year,
the consumer side of things. but in line with the long-term average.
Bill Rennicke, partner, Oliver Wyman Similarly, average yard dwell is
somewhat higher than it was last year,
the four weeks ending April 1 averaged Were expecting to see continued also standing above the 10-year aver-
86,400 per week, 14% below the recent acceleration in domestic intermodal age. Although the service statistics
peak achieved in November. However, activity as the year progresses, espe- are negative, I dont view these as
the picture is not all bad. Im seeing nice cially as the implementation date for indicative of major service issues. The
sequential growth in construction-related electronic logging devices on trucks network is running smoothly by all
commodities, including stone, sand and approaches. This will cause a tighten- accounts, just a bit slower than was
gravel and, importantly, lumber and wood ing of truck capacity, which will work to previously the case, and the situation is
products. The latter recently reached the intermodals benefit. much the same for intermodalspeeds
highest level since early 2016, providing Rennicke: The current state of are down, but barring weather interrup-
a tentative indication of improvement in intermodal is OK, but not great. A small tions and the like, service appears to be
new housing construction. but perceptible amount of international running smoothly.
traffic is shifting from the West Coast to Rennicke: Railroad service levels
LM: Shifting to intermodal, year- the East Coast, where the shorter haul are up marginally from a year ago, but
to-date volumes are also up, with puts it under extreme truck pressure. not enough to matter. A continuing
domestic continuing to lead the pack Possible future border tariffs may fur- focus on longer trains suggests that
and international starting to regain its ther hamper future international inter- overall railroad service is not going to
footing. That said, how do you view the modal growth. dramatically improve, and the weather
current state of intermodal? Domestically the industry is being woes on the West Coast this winter may
Hatch: General freight is doing challenged by improving truck fuel actually drag service numbers down for
fine, and intermodal is contributing. efficiency as well as by supply chains a month or so for the western carriers
Whats unusual is just thatintermo- that are getting shorter and more tightly until service equilibrium is restored.
dal is contributing but not leading. managed. Driver shortages, so far, dont Ultimately, to really drive strong
Truck capacity remains loose, though seem to be a problem for the trucking growth will require new lanes or a fresh
trucking earnings, unlike the robust industry, possibly because fuel effi- focus on service. We will be watching
results in rail, were quite poor. Inter- ciency gains have enabled truckers to CSX and the Hunter Harrison saga to see
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Transportation Best Practices/Trends: Rail/Intermodal
if new norms are set for eastern railroads. to costs like paper, and, of course, in LM: Is pricing where it needs to be in
Interestingly, in Canada, where both car- intermodal, where pricing is lagging light of the major capital expenditure
riers are highly service focused, railroads overall rail 2% to 3% annually in gains outlays made by the carriers?
seem to be gaining market share, with so far this year. Overall, rail intermo- Hatch: Pricing, of course, needs to
stronger gains in both carload and inter- dal can expect to see the winter/spring continue to growalong with shareto
justify the big capex spent developing
Intermodal makes so much sense from a shipper the domestic intermodal network
and public policy point of view, so I expect the next including corridors and gatewaysand
five years will be pretty good. the high cost of service.
Tony Hatch, rail analyst and principal, BH Consulting
Rennicke: Capital spending for
line capacity and for rolling stock was
modal traffic than we see in the United as the bottom of the pricing cycle, down last year and will be down further
States. as their service improves and truck this year, although because of posi-
Hatch: Rail service is stable, while capacity tightens due to some combi- tive train control (PTC), overall capital
down a bit annually according to the nation of regulations like electronic spending remains relatively strong.
metrics, but has been affected by the logging devices (ELDs) and economic Railroads have sufficient margins that
winter weather, which was normal to conditions. theyre not cutting back on maintenance
bad, compared to an easy winter a year Gross: When it comes to rail spending.
ago. Stable is not good enough, of carload pricing, the railroads are So yes, it seems that railroads are
course. It wasnt addressed enough by somewhat between a rock and a hard able to support their capital plans with
analysts in the first quarter earnings place. Normally, one might expect to current pricing. However, in the future,
calls. However, I expect it to continue see more aggressive pricing as a result railroads can expect pricing gains to
to improve over the course of the year, of challenges in rail volumes. On the moderate as trucks continually improve
given the focus and the big capital other hand, upward pressure on pricing their efficiency. Also growing market
expenditures of the previous five years. is the result of the industrys desire to share will have to come at the expense
maintain good financial results and low of margins if railroads want to better
LM: How are market conditions affect- operating ratios. penetrate shorter haul traffic markets.
ing capacity and rates for rail and The industry has limited ability to Gross: Were seeing some dial-
intermodal? increase volume through pricing activity ing back on capital expenditures, and
Rennicke: Overall capacity is not because most of the traffic moving in this makes sense in a time of stable or
tight in any of the major commodity truck is not susceptible to conversion declining volume. While it may prove
areas for railroads or trucks, so rates to rail carload no matter how its priced, difficult for the railroads to maintain
are likely to be flat. And with techno- due to service, location, lot size or a their current, rather lofty margins on
logical advances in trucking in accident host of other considerations. Therefore, lower volumes, their economics should
mitigation and fuel efficiency, truckers more aggressive pricing will only result still be sufficient to continue to support
will likely be able to keep reasonable in market share shifts between carri- the needed investments in the business
pressure on rail rates. Railcar supply ers, and that is typically a self-defeating as required.
is good for most car types and produc- exercise over the long run.
tion is keeping up with modest growth Because of that, I expect a steady- LM: While the Trump administration is
rates. There are huge surpluses, though, as-you-go approach to carload pric- very much in its early innings, how do
in tank cars and hopper cars, and still ing that will be a continuation of you view the current state of rail policy
some surpluses in centerbeam cars for the current trends. With regard to as it relates to things like the STBs
forest products. intermodal, there may be some room ongoing quest for reciprocal switching,
Hatch: Market conditions are for upward movement, particularly as the possibility of railroad re-regulation,
clearly affecting rail pricing overall, truckload capacity begins to tighten and PTC?
especially in select merchandise areas, toward the end of the year due to ELD Gross: I think the chances for
where trucks are pricing at or close implementation. significant re-regulation of the industry
have diminished, but not vanished. The big question mark is the timing of the
The STB is a semi-autonomous agency
introduction of autonomous or semi-autonomous
thats more capable of charting an
independent course than the Federal
trucks. When these begin to meaningfully enter
Railroad Administration (FRA), which the marketplace, they will put severe pressure
is a part of the executive branch. on intermodal because its likely they will trigger
FRA efforts such as the two-person significant reductions in trucking rates.
crew mandate are dead, but the PTC
Larry Gross, senior partner, FTR
requirement is already enshrined in
legislation and therefore is not subject the pace of change in technology and Longer term? I dont know if all of the
to potential delay. service levels to evolve and become talk on autonomous vehicle trucking
Rennicke: Its difficult to specu- more aggressive and competitive in the means that winter is coming, but
late, but regulatory changes are likely marketplace, or they will begin a slow certainly the race is on for the rails to
to be a mixed bag. PTC implementa- and inexorable decline. generate enough heat to stay hot over
tion is probably too far along to be To thrive, the industry needs to put the long haul.
pulled back. The real funding chal- a strong focus on getting back ahead of Gross: I think the industry will
lenges around PTC are more on the the technology curve instead of chas- look much the same as it does today.
passenger side than on the freight ing it. This will take some new capex to The carload side will be under con-
side, and public pressure after some pursue things such as integrating various tinuing volume pressure, and it would
relatively high profile passenger acci- technologies to get a driverless train, not surprise me if volume is lower five
dents in the Northeastern U.S. will LNG as a locomotive fuel, and hybrid years from now than it is today. Coal
likely keep the pressure on for PTC technology to improve raw fuel efficiency still accounts for one in four rail car-
implementation. We think reciprocal by capturing regenerative braking energy. loads. Coal consumption will continue
switching (EP-711) is too close to call, Further, railroads seem a long ways away to decline no matter what the Trump
but not likely to be resolved this year, from booking systems, dynamic pricing, administration does with regard to envi-
as filling vacancies on the STB tends and managing data interfaces to boost ronmental regulations because the major
to be a lower priority item for most capacity utilization, eliminate delays and issue is economics, not regulations.
incoming administrations. disruptions at interchange points, and There will be no change in the rela-
Hatch: I dont buy into the Trump maximize margin capture. tive standing of coal vs. natural gas,
infrastructure boost. Quite frankly, Hatch: Intermodal makes so much which is currently driving conversion.
you have to show me the money. And sense from a shipper and public policy Its difficult to see where the industry
remember, infrastructure in this case point of view, so I expect the next five will make up the carload volume that
includes schools, hospitals, internet, years will be pretty good. I continue to will be lost.
etc. So, I continue to think that the think that the North American rail net- Intermodal will also not look much
North American rail network will grow work will grow its infrastructure advan- different, although I expect good growth
its infrastructure advantage, perhaps tage, perhaps aided by reduced red that will likely exceed that of over-
aided by reduced red tape regulations tape regulations, and work with trucks the-road trucking in most years. The
and working with trucks to take share at to take share at good returns. big question mark is the timing of the
good returns. As for things that are concerning, introduction of autonomous or semi-
theres rail service improvements on autonomous trucks. When these begin to
LM: What will the rail and intermodal a consistent basis; rail capex, where meaningfully enter the marketplace they
markets look like five years from now? good returns will ensure positive will put severe pressure on intermodal
Rennicke: The rail industry is at a reinvestment; and Trump and trade, because its likely they will trigger signifi-
crossroads due to technological innova- not only the obvious parts related to cant reductions in trucking rates.
tion and disruptions in the energy and NAFTA, but to any trade wars impact
logistics businesses. Railroads and their on international container shipping, Jeff Berman is the group news editor
suppliers must either begin to step up on agriculture, plastics and exports. for the Supply Chain Group
CROSS-BORDER LOGISTICS:
NAFTA
TUNE-UP TIME
We take a deep dive into the 23-year-old NAFTA agreement, look at the impact it
has made on logistics operations in the United States, Mexico and Canada, and then
hear what the experts suggest Washington shouldand should notdo.
trade sanctions that he would like to The agreement is not trivial in its into the United States from Mexico.
apply on a company-by-company basis. impact and would be extremely diffi- Even though trucking hauled slightly
At this point, it appears that Trump cult to detangle or revoke, says Gibbs, less U.S. freight to Canada and Mexico
believes that his tax proposal would adding that whether it could be revised in 2016 than 2015, the Department of
essentially utilize a border tax as if it were in one easy-to-do swoop is probably Transportations Bureau of Transportation
a trade sanctionwhich its not. unlikely. As with Trumps non-existent Statistics own numbers show that still
Any way you consider it, NAFTA has repeal of the Affordable Care Act, its results in an enormous amount of freight
been a phenomenal advantage to both highly possible that the president would between the three NAFTA countries.
the United States just give up first before any hard revi- Value of U.S.-Canada freight flows
The agreement and Canada, says sionswhich is actually what most fell 5.4% to $544 billion in 2016. Trucks
is not trivial in its John Costanzo, logisticians are fearing most. carried 60.1% of the value of the freight
impact and WOULD president of Puro- The North American free trade mar- to and from Canada, followed by rail
BE EXTREMELY lator International, ket is working extraordinarily well, they at 16.2%. The top commodity trans-
DIFFICULT TO a subsidiary of say, and even a whisper of major change ported between the United States and
DETANGLE OR Purolator Inc. hurts the marketplace. As a rookie Canada in 2016 was vehicles and parts
REVOKE. Whether in Canada and president, Trump has shown intolerance at $106.1 billion, with trucks moving
it could be revised the largest parcel of delays and compromise, says Gibbs. 56.4% of the value.
in one easy-to-do delivery service And its highly likely that Trump will In the meantime, the value of U.S./
swoop is probably in the country. tire of renegotiation of NAFTA. Mexico freight fell 1.1% to $525.1 bil-
While noting some Now, lets take a deep dive into the lion last year. Trucks carried 71% of the
unlikely.
manufacturing 23-year-old NAFTA agreement, look at value of the freight to and from Mexico,
Julie Gibbs,
director, BPE Global jobs have left the the impact on logistics operations on all followed by rail at 14.7%. The top com-
United States, sides of the border, and then well hear modity transported between the United
they did not go to what the experts are saying Washington States and Mexico in 2016 was electri-
Canadamost went overseas because shouldand should notdo. cal machinery at $102.6 billion, with
of lower wages. trucks hauling 91.6% of the value.
NAFTAs elimination of tariffs has NAFTA: Size and scope However, its not just raw materials
enabled the United States to become First, lets look at the North American and finished goods coming to and from
more efficient in its exports, says market, NAFTAs impact on the U.S. this country. A sizeable chunk of the
Costanzo. And if we didnt have NAFTA, economy and its enormous scope. Total American economy depends on exports.
wed have to create something like it, value of cross-border freight among the And even if the nation runs a deficit in
otherwise were giving up manufacturing three NAFTA countries and carried on trade, no less an authority than the U.S.
to other countries. Its been a tremendous all modestruck, pipeline, vessel and Chamber of Commerce says thats not
asset to both the United States and Can- airfell 3.4% from 2015 to $1.069 tril- necessarily a bad thing.
ada, and I dont see it going away. lion in 2016. Trucks carried 65.5% of While trade deficits often dont tell
Whether Trump knows it or not, the U.S./NAFTA freight, the most heavily us much about the overall health of our
23-year-old NAFTA is an extremely utilized mode for moving goods. economy, it is a good time to examine
complex document that affects might- Mexico exports about $1 billion our various trading relationships to
ily the economies of three nations, is worth of goods per day to the United increase opportunities for American
politically and legally complicated, and States, making it the single largest companies to compete on a level play-
fraught with minutiae and fine print source of imports and its third-largest ing field, says the U.S. Chamber of
legalities that the president probably trading partner. According to the Wilson Commerce president and CEO Thomas
knows little or nothing about. Center, a Washington research center Donohue. It is worth remembering
Julie Gibbs, director of BPE Global, a and think tank, 25 cents out of every that some of our best years of economic
global trade compliance consulting firm, dollar of goods that are imported from growth have produced our largest trade
called NAFTA the largest free-trade Canada to the United States is actually deficits, while the Great Recession was
agreement in the world that has quadru- Made in USA content, as are 40 cents accompanied by a sharp reduction in
pled the trade among the three countries. out of every dollar for goods imported the trade deficit.
According to Donohue, the Chamber fundamentally reshaped North Ameri- Clause, only Congress may alter our tar-
is supporting strong enforcement of can economic relations, driving unprec- iff, tax and Customs laws.
trade rules and agreements as long as edented integration between Canada, According to Gibbs, U.S. companies
such enforcement is based on facts and the United States and Mexico, says should lobby Congress to protect them-
the proper interpretation of those facts BPE Globals Gibbs. selves from losing this benefit by quantify-
and not politics. But as in any healthy evolution, Gibbs ing what the loss of NAFTA savings would
According to the Department of says that there are always improvements mean to them in terms of tariff costs and
Commerce, U.S. exports of goods and to be made. Indeed, she believes that global supply chain modifications. Com-
services to Canada supported an esti- a 21st century overhaul to address data panies should also
mated 1.7 million jobs in 2014 (latest flow, a concept that wasnt around in share this data with PRE-NAFTA,
data available) with 1.3 million sup- the 1990s, would be an important tweak Congress to avoid a U.S. COMPANIES
ported by goods exports and 394,000 to the agreement as would a look at the devastating impact USED TO DREAD
supported by services exports. accounting for the online retail market to to the U.S. manu- SELLING TO
U.S. goods and services trade with ensure that the complex rules of origin facturing sector, CANADIAN
Canada totaled an estimated $662.7 bil- are fair across the three countries. she says. CUSTOMERS.
lion in 2015. Exports were $337.3 billion; The Trump administration shared Purolators And while theres
imports were $325.4 billion; and the U.S. their NAFTA draft proposal last month, Costanzo adds that still complexity,
goods and services trade surplus with and its much less forceful than what post-NAFTA trade if you do the
Canada was $11.9 billion in 2015. candidate Trump was offering. Fortu- harmonization
setup correctly,
Whatever the precise numbers, U.S. nately, theres no threat of withdrawal. rules have made
its seamless and
transport executives say that the export Included are specific provisions for exporting much
relatively easy.
market is a solid, growing, reliable part snapback, market opportunities spe- simpler. Its night
David Congdon,
of their businesses. Its a market that is cific toward domestic procurement, and day, he says. vice chairman and
to be cultivatednot curtailed by some and a leveling of the tax playing field. Pre-NAFTA, U.S. CEO, Old Dominion
arbitrarily written border tax. All in all, these are elements that companies used Freight Line
I believe whatever the taxing mecha- are in line with a much needed overhaul to dread selling to
nisms are, they ought to be fair and bal- to the program, says Gibbs. It will be Canadian customers. And while theres
anced, says Old Dominions Congdon. interesting to watch these provisions still complexity, if you do the setup cor-
Im for that. I know how much freight manifest against the administrations rectly, its seamless and relatively easy.
we haul to the Mexico border and how protectionist stance. The state of the fast-growing B2B
much we haul back and forth to Canada, Nevertheless, Gibbs adds that there and retail e-commerce is another chang-
and its good business. The North Ameri- will undoubtedly be changes. The level ing dynamic, adds Costanzo. E-com-
can markets are good to us, and I dont of impact will depend on what Trump merce economics are very different than
want to see our levels of business dis- can push through. NAFTA is a big con- brick-and-mortar business, but he adds
turbed. We have to be fair and rational. cern because of the immediate impact to that only further strengthens the case to
U.S. jobs and the economy, she says. fine-tunenot trashNAFTA.
So what should be done? President Trump has announced his Weve heard this rhetoric before,
Reminiscing on NAFTAs early days, intention to renegotiate at this point. says Costanzo. We had Buy America
many may recall 1992 presidential Some changes being mulled include: back in the 90s, and this too shall pass.
candidate Ross Perots reference to Temporarily reinstating tariffs if a flood of The United States relies so heavily on
NAFTA as a giant sucking sound going imports causes serious injury to domes- exports and imports. In fact, we sell
South. More than 20 years later, some tic industries; improving procedures to $300 billion of goods to Canada, so we
still argue that NAFTA drove U.S. resolve disputes; and employing tougher cant jeopardize those supply chain effi-
jobs south; but at the same time, oth- intellectual property enforcement. ciencies. Eventually, I think that cooler
ers argue that jobs lost over this period However, experts contend that the heads will prevail.
would probably have gone to China or logistics and transportation markets
elsewhere anyway. shouldnt panic over Trumps rhetoric. John D. Schulz, is a contributing editor
What we can say is that NAFTA Under the Constitutions Commerce to Logistics Management
The Evolving
T
HE FAMILIAR TECH- not every DC needs the same founda-
NOLOGY STACK OF tion, failure to grasp evolving areas could
BY ROBERTO MICHEL, warehouse management end up stacking the deck against omni-
EDITOR AT LARGE
systems (WMS) to man- channel success. Whats more, while
age transactions and automation hardwareincluding robotic
With the growth of inventory at the distribution center level goods-to-person systems, pick-to-light
e-commerce, the and then hand order requirements down systems and high-end sortationplay a
technology stack for to the automation layer is not as simple role in the tech stack for e-commerce,
distribution centers as it used to be. With the complexities even automation providers say the stack
is expanding. We of e-commerce fulfillment, the need to is software driven.
explore why WES/WCS orchestrate and optimize operations is The new types of automation hard-
driving the need for advanced execution ware are extremely important, but I think
software is gaining
software in the middle of the stack and its a matter of hardware and software as
prominence and share
for more optimization tools. a combined solution that give users the
how operations are
In short, the DC tech stack has advantages and throughput they are after,
expanding their use of
changed. Its no longer just WMS on especially when you have Amazon push-
data science.
top, warehouse control system (WCS) ing the same-day delivery model, and
software in the middle, and automated everyone is chasing and trying to achieve
materials handling systems at the floor that same panacea, says Michael Howes,
level. The stack has expanded, and while vice president of software and controls
for Swisslog Warehouse and Distribution Solu- stack for e-commerce has been the emergence
tions (WDS) Americas, which offers automated of warehouse execution system (WES) soft-
materials handling as well as software solutions. ware, an evolution of WCS. WES brings in
E-commerce means that DCs have a greater richer functionality around order releasing and
volume of small orders that make it more com- wave management, resource optimization and
plex to orchestrate systems, not only within the analytics, in addition to WCS solutions more
four walls of the DC, but with order fulfillment traditional role of coordinating automation
and transportation management decisions. and material flow.
Everyone is being pushed to ship smaller and
faster, says Joe Vernon, senior manager of The role of WES
North America supply chain technologies for WES solutions provide visibility and manage-
the consulting firm Capgemini. The demand/ ment capabilities around order requirements,
fulfill cycle has been cut from days to hours, inventory information, and equipment and labor
and freight costs are more often absorbed now, resources, observes Mike Dunn, group vice
rather than passed along to a customer. president with Fortna, a distribution consulting
Vernon sees distributed order management and engineering firm. The interesting technol-
(DOM) solutions, as well as new types of optimi- ogy questions inside the DC are: What systems
zation software that can synchronize pick sequenc- should I own to have visibility into those three
ing, staging and loading, as gaining in importance. components, and then, What software can I use
Perhaps the biggest shift in the DC tech to really optimize my processes? Dunn says.
ERP
Orders/procurement/financials/inventory
Automation
Inventory aware automation
Sorters PLCs
Shuttle systems
Conveyors Motion control
Goods-to-person robotics
Scales Sensors
AS/RS
Cameras Field devices
WES tends to be at the center of things in of work that are large enough to drive productivity,
todays tech stack, says Dunn, because with but small enough to react to and satisfy customer
its WCS roots, it has real-time knowledge of demands, says Dunn. And the optimal size for
equipment processes; it knows labor availabil- work may change every hour. In the morning, you
ity details; and it can take the order require- may be able to process a larger chunk of work effi-
ments from the enterprise level to manage ciently while still meeting demand, but later in the
the order pool and decide what should be day, you may need to use much smaller chunks of
processed next by the DCs resources. While work, which are suboptimal from a productivity
some WMS systems are getting better at standpoint, but are necessary to meet demand.
grouping orders into smaller waves for pro- While WES has gained in importance, it
cessing, most WMS systems tend to batch cant do everything, says Dunn. Omni-channel
work into large static waves, says Dunn, companies have often turned to DOM to man-
whereas WES excels at releasing chunks age where orders should be fulfilled from, and at
of work to the floor in the right size and many companies, a WMS handles overall inven-
sequence to satisfy orders while squeezing tory, says Dunn. Down at the automation level,
maximum efficiency from resources. he adds, DCs often have strong interest in tech-
When we think about how to really optimize nology such as goods-to-person systems or pick-
inside of a warehouse, its about creating chunks to-light systems that minimize or simplify the
confidence in the promised service level, this sensors, mobile computers, and voice-system
inventory visibility is a must. components that enable workers and pro-
The solution stack for DCs increasingly needs cesses. Much of the value from this hardware
to look beyond the four walls of a single site to comes from the ability to consolidate data
The future
optimally process and ship orders, says Cap- generated on the edge and make real-time
is to make geminis Vernon. Some sites might have multiple decisions with it, says Bruce Stubbs, direc-
this whole buildings within a campus, notes Vernon, which tor of supply chain marketing for Honeywell
ecosystem adds to the complexities of the DC-level inventory Safety and Productivity Solutions.
smart, moves, processing and staging. The whole pro- One enabler of these actionable insights is
optimized and cess constitutes a multi-tiered, multi-constraint Cloud-based gathering of data generated by sen-
predictive. optimization puzzle, says Vernon, to get the right sors in trucks or other supply chain locations,
goods to the right dock doors at the optimal time says Stubbs. Honeywell has already leveraged
Joe Vernon, senior
for pickup by carriers. its Cloud platform capability gained from its
manager of North
America supply chain To solve this challenge, says Vernon, DCs are acquisition of Movilizer to do things like gener-
technologies, adopting solutions for pick sequencing, staging ate Cloud-based insights into cold chain events
Capgemini and loading optimization with integration to robot- in sectors such as food and pharmaceuticals,
ics and automation. Vendors in the space such as according to Stubbs.
warehouse optimization can help DCs schedule Another tech stack evolution Honeywell
complex activities in a synchronous way to achieve is involved with is performance analytics of
flow and better use labor, according to Vernon. data generated by voice systems. Whereas
Capgemini is involved with pick sequencing, once the software component of voice systems
staging and loading optimization by offering was mainly about generating effective voice
data science services that assess actual perfor- prompts and integration to WMS, now there
mance in shipping orders against the model in also is analysis software that combs data gen-
the software, so that the model can be improved erated by voice-based processes to improve
for further efficiencies. performance.
Providers of robotic goods-to-person systems To this end, says Stubbs, Honeywell offers
and other warehouse automation systems also an operational intelligence software for its
employ data science to refine the effectiveness voice system that provides actionable insights
of their solutions, says Vernon. The data sci- for associates on the floor, such as slot skip-
ence for pick sequencing and loading will build ping that degrades efficiency, while also gener-
on data science from the automated equipment ating reports for managers on issues like how
providers, rather than replicate it, he adds. actual, current performance compares against
Expect to see more data science from solu- productivity standards, or to budget targets.
tion providers and consultants, says Vernon, According to Stubbs, such software is an
since some DCs are becoming highly auto- increasing part of the value proposition today.
mated and generate a constant data stream Weve transformed from a hardware-oriented
that can be analyzed to refine optimization company to a total solutions provider, and
engines. The future is to make this whole eco- that involves a lot this software on the edge
system smart, optimized and predictive, says to enable connected workers, says Stubbs.
Vernon. Weve enhanced our [operational intelligence]
platform to be able look at all the task-related
On the edge data that exists and leverage it in a real-time,
Another aspect of the tech stack for omni- actionable way to improve work processes and
channel is various edge hardware such as head off problems before they start.
TOP 50
2017
3PLs:
AND
may expect to see 58S CBRE data shows decent, but changing trends for
logistics & industrial real estate in the Americas
3PLs continue to
60S XPO Logistics takes steps to expand last mile network in
purchase high-tech Chicago area
solutions and hire 62S UPS rolls out new service in Europe for time-critical
young professionals shipments
for implementation. 63S Global 3PL Management: Factors to keep top of mind
Ryder and the Ryder logo are registered trademarks of Ryder System, Inc. Copyright 2017 Ryder System, Inc.
Ever better is a trademark of Ryder System, Inc. FORTUNE 500 is a registered trademark of Time Inc.
Special Report 2017 Top 50 3PLs A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
SPECIAL REPORT
2017 Top 50 U.S. and Global 3PLs
eading industry analysts maintain that the mega-deals witnessed over
L the past two years in the third-party logistics provider (3PL) sector have
abated, but that certainly doesnt mean that mergers and acquisitions
(M&A) will fall out of the picture.
According to Evan Armstrong, president says Armstrong. These types of advances allow for
of the consultancy Armstrong & Associates, more process automation and increased operation-
the 3PL market is also still ripe for equity al efficiencies. Theyre also increasing the quality
investment. The one outstanding example of of information available to customers of non-asset
this was when Aerospace, Transportation and based transportation managers.
Logistics [ATL Partners] bought a controlling Specifically, industries such as pharmaceu-
share of Pilot Freight Services late last year, ticals are increasing their digitalization needs,
he says. We also anticipate more M&A activity Armstrongs research reveals, putting more
as 3PLs strive to expand geographic scale and emphasis on 3PLs to match these new techno-
provide integrated solution offerings. logical demands. To better ensure counterfeit
At the same time, says Armstrong, techno- products are not being sold within established
logical changes are having a dramatic impact sales channels, for example, the pharmaceu-
on 3PL operations. Companies such as ticals industry has a 2017 mandate to begin
project44, MacroPoint and others are driving capturing product serial numbers across its
improved transit status data and carrier capac- supply chains.
ity information from transportation providers While this mandate has presented a chal-
to lead logistics companies. lenge for many value-added warehousing 3PL
This years electric logging devices [ELD] operations, the ones weve met with are imple-
mandate could also be a boon for shipment track- menting the required operations changes and
ing and carrier capacity monitoring information, will meet the deadline, says Armstrong.
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Logistics Management (LM): Do you expect barriers to entry in the 3PL space to come down, or will it
be tougher for new players to emerge?
Kevin Nolan: I believe the legalbond, insurance and backgroundbarriers to entry will stay consistent with
current levels due to the new administration. However, the difficult barriers to compete with players of scale
will grow as consolidation and investments continue. Examples of this are technology, hiring and paying
vendors faster.
LM: What advice can you give to new players breaking into this business?
Nolan: Balanceplain and simple. Being a 3PL means were in the middle of customer and vendor. Treat
carriers and customers the same, because you cant exist without either. Its easy to gravitate to the cus-
tomer side more, but the great 3PL sees both sides as equals.
LM: How important is trust in the supply chain?
Nolan: For non-asset and asset light, trust is everything. Production, construction time lines, and end-user
satisfaction are all based on delivery of product. If you dont give correct information, the trickle down will
ruin your reputation across their whole organization. In supply chain, surprises and breakdowns happen. You
have to face these problems head on and communicate with all parties so they can plan accordingly as well.
Patrick Burnson, executive editor
Mercedes- CEVA 3 years Automotive Brazil South CEVA renewed its existing contract with Mercedes-
Benz America Benz for a further three years. It also signed two new
agreements which will extend elements of the contract
for three and five years respectively.
Carlsberg DHL 2 years Consumer/ UK Europe Carlsberg awarded a two-year contract to DHL Trade-
Supply Retail team for the management of UK distribution services.
Chain
Groupe XPO Consumer/ Global XPO secured a multi-million pound, long-term contract
SEB Logistics Retail with global domestic appliances and cookware giant
Europe Groupe SEB.
SAS Kuehne + 3 years Aerospace Global SAS Scandinavian Airlines extended its contract with
Scandinavian Nagel K+N for global logistics services until 2020. K+N will
Airlines (K+N) manage the international transport of spare parts for
the SAS airplane fleet.
Neue Yusen Industry and Germany Europe Yusen Logistics won a contract for a total supply
Halberg- Logistics Manufacturing chain solution for NHG. The contract covers the move-
Guss (NHG) ment of engine blocks from Germany to the production
plant of a car manufacturer in Ohio, as well as the pro-
vision of a closed loop supply chain back to Germany.
www.yusen-logistics.com
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www.odysseylogistics.com / 855-412-0199
2017 Odyssey Logistics & Technology Corporation
Special Report 2017 Top 50 3PLs A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
logistics markets in 2015. This reflects trends in facturing in China is still undeniably strong, add Ti
the global economy, where growth rates in ad- analysts. As low cost manufacturing has departed,
vanced economies slowed overall. this has been offset by China moving up the chain
Meanwhile, multinational manufacturers to more value-added production.
increasingly consider options outside China (es- While Europe and North America suffer from
pecially nearby ASEAN) as production locations, both stagnating retail sales and manufacturing
primarily thanks to cheaper labor costs, all the production growth, Asia is taking advantage, driv-
while ingraining Factory Asia more deeply, a spur ing growth for the global market as a whole, adds
for the regions manufacturing contract logistics. Buckby.
That being said, even with rising wages, manu- Patrick Burnson, executive editor
purolatorinternational.com | 1-888-511-4811
Special Report 2017 Top 50 3PLs A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GE ME NT
pilotdelivers.com / 1-800-HI-PILOT
HEAVY LIFT 2017 Top 50 3PLs
Special Report
LEADERS.
prepares and assembles product
at that site before it heads out
to delivery. It also takes care of
customer service issues, and
conducts a check in of product
that comes off of trucks for
reverse logistics products that need to go back to a retailer or
manufacturer for any reason.
In an interview with Logistics Management, Charlie Hitt, presi-
dent of XPOs last mile business unit, said that Chicago is one of
XPOs three busiest and fastest-growing markets nationwide. We
need to invest in what our customers are having happen in the
growth of their business, particularly in e-commerce.
The impact of a rapidly growing e-commerce market on
the last mile sector, especially for heavy goods, is something
that cannot be overstated, stressed Hitt.
For XPO, that e-commerce activity, in terms of client rela-
tions, continues to grow.
We have had 15% to 20% growth in the last quarter alone
in e-commerce business, Hitt says. Traditional brick and
mortar retailers are expanding out with more e-commerce of-
ferings, and they want it to be seamless and they want it fast.
Prior to this announcement, the Chicagoland MDC was
roughly 50,000 square-feet and handled last-mile for retail-
ers, as well as business that came in from Internet sales than
can plug into the XPO system.
We think this business will grow 30% to 40% next year in
Chicago, but it could be more and were going to be opportu-
nistic about that if that happens, said Hitt. He explained that
this forecast is reflective of an ongoing do it for me theme
among consumers in that they dont want to do something like
pick up a TV at a store and hook it up on their own.
Now, they want someone to take the old TV or washer and
dryer away or have it done for them, notes Hitt. That is what
they want; they want things to be simple.
Jeff Berman, group news editor
LOGISTICSMGMT.COM
A S P E C I A L S UP P L E M E N T TO L OGI S TI C S M A N A GEME NT
visibility from origins to destinations; theyre experts at Customs most expansive global 3PLsvary greatly
clearance around the globe; and theyre active in all transportation between countries. The biggest challenge
modes and regularly adjust between ocean, air, trucking and same- is often managing expectations within a
day delivery to best accommodate individual orders. regions physical limitations.
However, global shippers need to keep in mind that supply
chain management capabilitieseven those managed by the Managing geographical
expectations
Advanced economies generally have better
highways, ports and railways as well as
better communication systems and tech-
nology. Political changes can especially
complicate matters, but those issues are
normally limited to emerging market and
developing economy countries.
As a general rule, logistics costs as a
percent of GDP are lower in advanced
economies and higher in emerging mar-
ket/developing countries. Not surprising-
ly, the countries with the largest econo-
mies dominate infrastructure statistics.
The United States has the most miles
of highways, railways and pipelines. Mean-
while, China, with the second largest
economy, has the third largest amount of
highways and railways. India is second in
the total miles of roadways; however, only
2% to 3% of Indias roadways are modern
highways. Even some of these, like High-
way 9 from Mumbai to Pune, have uneven
surfaces and transportation obstacles.
These persistent infrastructure chal-
lenges create opportunities for modern,
sophisticated 3PLs. Global shippers who
seek to succeed in todays landscape
should remember the following: Even
when a global supply chain is managed by
an experienced and expansive global 3PL,
many regions and countries have limita-
tions such as infrastructure, technology
and carrier service levels. Its important to
manage expectations based on your areas
of operation and seek out true global
3PLs that know the lay of the land.
Richard Armstrong,
Armstrong and Associates
LOGISTICSMGMT.COM
A S P E C I AL S UP P L E ME N T T O :
Carriers cope
with
regulatory
restrictions
T he ocean carrier industry was handed another setback by a major regulatory agency
last month as the U.S. Federal Maritime Commission (FMC) rejected the pro-
posed merger of three Japanese liners.
The unanimous decision to nix the Tripartite Agreement, comprising Kawasaki
Kisen Kaisha, Ltd. (K Line), Mitsui O.S.K. Lines Ltd. (MOL) and Nippon Yusen Kai-
sha (NYK) represents a fresh challenge to the 3-J alliance for the time being. Further-
more, delays in Japanese antitrust approval mean that the carriers contract deadline for
next month will be missed.
Ocean Cargo
Much of what the Tripartite par- Congressional concerns about alli- and spinoffsthe aggregate earnings
ties were asking for, says FMC com- ances more broadly. before interest, taxes and amortization
missioner William Doyle, revolved In an advisory letter written by DoJ (EBITA) of rated shipping companies
around pre-merger or pre-consolidation assistant district attorney general Renata will remain at similar levels in 2017
coordination. For example, the parties Hesse, the FMC was called upon to for- when compared to last year.
were seeking authority to share informa- bid the creation of the OCEAN Alliance, But unlike 2016, when the industry
tion and conduct joint negotiations with or to at least have the carriers rewrite the saw double-digit EBITA declines, the
third party businesses in the United agreement to ensure competition. The operating environment has bottomed
States for as much as a year in advance DoJ has long taken the position that the and earnings will remain on an even
of any potential merger. general antitrust exemption for interna- keel, although at a low level during
These provisions would violate gun tional ocean shipping carrier agreements 2017. However, a material level of
jumping laws that forbid the sharing of is no longer justified, she says. industry-wide earnings growth will be
competitively sensitive information or the For the time being, however, both beyond our 12-month horizon, says
premature combining of the parties, adds the Ocean Alliance and THE Alliance Stephanie Leavitt, a Moodys analyst.
Doyle. In order to receive the benefits of still control 45% of the global business Moodys further notes that the
a merger, one needs to first merge. by sharing vessels and operating joint continued scrapping of Panamax-class
Chris Rogers, an analyst with the services. vessels, driven by the expansion of
global trade consultancy Panjiva, is not the Panama Canal, and of older ships,
particularly alarmed by FMCs deci- Stable forecast driven by tightening environmental
sion, which he describes as technical Meanwhile, global credit research regulations, are likely to continue, partly
in nature. More of a worry, however, analysts for Moodys Investor Service offsetting global capacity expansion.
is the ongoing Department of Justice maintain that the outlook for the global Market conditions are still weak, says
(DoJ) investigation of the container liner shipping industry is stable, given that Leavitt, but are unlikely to worsen from
industry and what Rogers describes as after excluding mergers and acquisitions the levels seen for both segments in 2016.
Ocean Cargo
We expect that supply growth will exceed vessels declines materially and aggre- specter of overcapacity comes back to
demand growth by less than 2%, or within gate year-over-year EBITA growth ap- haunt the industry.
our parameter for a stable view. pears likely to exceed 10%, concludes Tan Hua-Joo, executive consultant at
Freight rates in these two segments Leavitt. the Paris-based consultancy Alphaliner,
will also gradually increase, she adds. For says that although 2016 was the most
the shipping industry generally, Moodys Overcapacity woes balanced year in terms of supply and
would consider changing the outlook However, despite growing confidence demand since 2009, he remains skepti-
back to negative if analysts see signs in a container market recovery over cal about a rate rebound. Hopes on
that shipping supply growth will exceed the past six months, other leading the part of carriers for greater stability
demand growth by more than 2%. shipping analysts are forecasting the are still some time away, he says, even
Conversely, we would consider a return of freight rate volatility to though the global fleet growth was con-
positive outlook if the oversupply of the worlds major trade lanes as the strained to just 1.6% last year.
New vessel delivery deferrals, in com-
bination with an unprecedented number
Shippers rate service quality of ocean of vessels sent to scrap yards and an un-
carriers poor to average naturally large idle fleet propelled by the
service, accurate documentation, and
T he service provided by container shipping
lines is rated as poor to average and
has deteriorated in the past year, accord-
quality of equipment (containers).
We see that shippers want to be
collapse of Hanjin last year, complicate
the matter, adds Tan. As we move into
this year, the rate of growth in the global
ing to a survey of exporters, importers treated not only as customers, but also
fleet is going to increase as theres very
and freight forwarders conducted jointly as partners when discussing their con-
little room for the industry to keep the
by maritime shipping advisory Drewry and tainer transport requirements, says Fa-
growth of fleet down.
the European Shippers Council (ESC). bien Becquelin, maritime policy manager
Alphaliner is forecasting total
The ESC and Drewry contacted sev- at ESC. In times when supply chains
eral hundred shippers and forwarders are becoming more and more complex, fleet delivery of 1.32 million twenty-
from all over the world in March and asked partnership is of key importance and un- foot equivalent units (TEU), most of
them how satisfied they were with 16 price fortunately it is missing. which will be new Mega vessels, and
and non-price related attributes of the According to Becquelin the air cargo although its also forecasting another
services provided by ocean carriers. The industry had been suffering from similar year of record scrapping levelsup to
survey also looked into areas most in need customer service issues, but has changed 700,000 TEUthere will still be a net
of improvement and how quality varies by its ways. increase in the global fleet of 620,000
type of carrier. Philip Damas, head of the logistics TEU, which would represent a 3.1%
On a scale of 1 (very dissatisfied) to 5 practice of Drewry, agrees: Shippers and
increase.
(very satisfied), customers on average did forwarders clearly see the necessity for
Altogether, 1.6 million TEU of the
not rate carriers higher than 3.3 for any the carrier industry to invest in informa-
worlds fleet found itself idled last year,
of the 16 service attributes, the survey tion technology and to balance the needs
although some 500,000 TEU of this
showed. for cost competitiveness and for more
The three areas of service or price predictability and reliability.
was Hanjin tonnage. Tan notes that
in which shippers and forwarders were Meanwhile, the ESC and Drewry plan a lot of the Hanjin vessels have been
the most dissatisfied with were carrier to run the shipper and forwarder satisfac- brought back into operation, and Pana-
financial stability, quality of customer tion survey regularly and invite interested max vessels have seen something of a
service, and reliability of booking/cargo shippers and forwarders to contact them spike in demand due to the new alli-
shipped as booked. At the other end of should they wish to be included in next ances demand for capacityleading to
the spectrum, the three areas where they years survey. charter rates going back up to around
were the most satisfied were price of Patrick Burnson, executive editor $10,000 per day.
The idled Hanjin tonnage is now
200 sizes
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Ocean Cargo
down to about 200,000 TEU, and we ex- to bid for market share and significant
pect this be reintroduced to by June, says freight rate stability will continue.
Tan. So, as long as the shipping lines take In fact, Alphaliner analysts say that
back this idle capacity, theres no sign of a they dont see a genuine recovery
recovery in the market as carriers continue in the freight markets for another 18
HERE
FOR THE ENVIRONMENT
LOGISTICSMGMT.COM
Pacific Rim Report
Patrick Burnson is executive editor
of Logistics Management. To contact
Patrick with feedback or a story idea,
By Patrick Burnson please send an e-mail to pburnson@
peerlessmedia.com.
LM: Is there a distinct West Coast management LM: Business with Cuba was one issue
style that translates well in New Orleans? addressed at the recent Cargo Connections
Christian: Effective management transcends event. Can you speculate on that trade opportu-
geography. My style is straightforward and focused on nity and others in the hemisphere?
succeeding with our mission as an economic engine. I Christian: Cuba was once New Orleans num-
value transparency and open, honest dialogue through- ber one trading partner. The country still represents
out the organization, and Im working to ensure that tremendous opportunity for the Port of New Orleans
employees have a clear path for development, both if the embargo is liftedboth for cargo and cruise.
through the ports organizational structure and with Currently, we ship frozen poultry to Cuba on a
employee engagements efforts that will be imple- humanitarian basis.
mented over the next few years. My management style We signed an memorandum of understanding with
reflects my background in quality management sys- the National Port Administration of Cuba last October
tems, which has been helpful throughout my career. and have followed up by hosting delegations here in
New Orleans and by visiting the Cuban Ambassador to
LM: Youve been on the job for six months. What the United States in Washington, D.C.
have you learned so far? Overall, were well positioned both in the hemi-
Christian: Quite a bit. The Port of New sphere and around the world as a gateway port. The
Orleans is well positioned geographically, and were Panama Canal expansion has been good for us so far,
also fortunate with diverse businesses. To make sure and we now have a direct Asian service with PEX3 and
we take advantage of our opportunities, I initiated were seeing more Asian cargo as a result. Both ship-
and prioritized a master planning process to guide pers and carriers are looking at the Gulf due to the
our investments for the next 20-plus years. In a regions robust export market and efficient access to
systematic, disciplined manner, were assessing our the Midwest via rail.
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