August 2009 | News | Trends

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Presaging a major shift in how industry might approach sustainability efforts, Walmart hosted a Sustainability Milestone Meeting in July 2009 where CEO Mike Duke and other executives discussed how the company is establishing its global green footprint.

When push comes to shove, Walmart has the clout and wherewithal to bulldoze its goodwill on suppliers, partners, customers, and industries alike. And its sustainability strategy is no different.

Presiding over an audience of 1,500 suppliers, associates, and sustainability leaders, Walmart outlined plans to introduce a worldwide index that would establish a single source of data for evaluating product sustainability.

"Customers want products that are more efficient, last longer, and perform better," said Mike Duke, Walmart's president and CEO. "And, they increasingly want information about the entire lifecycle of a product so they can feel good about buying it. They want to know that the materials in the product are safe, that it was made well, and that it was produced in a responsible way.

"We do not see this as a trend that will fade," he added. "Higher customer expectations are a permanent part of the future."

The company plans to roll out the initiative in three phases, beginning with a survey of more than 100,000 suppliers around the world. The survey includes 15 questions that allow Walmart's suppliers to evaluate their own sustainability efforts. The questions focus on four areas: energy and climate; material efficiency; natural resources; and people and community.

"The survey will include simple but powerful questions covering familiar territory, such as the location of our suppliers' factories, along with new areas such as water use and solid waste," added John Fleming, chief merchandising officer, Walmart U.S. "The questions aren't complicated, but we've never before systematically asked for this kind of information. The survey is a key first step toward establishing real transparency in our supply chain."

As a second step, Walmart is helping to create a consortium of universities that will collaborate with suppliers, retailers, non-governmental organizations, and government agencies to develop a global database of information on the lifecycle of products—from raw materials to disposal. Walmart has provided the initial funding for the Sustainability Index Consortium, and invited all retailers and suppliers to contribute.

"It is not our goal to create or own this index," said Duke. "We want to spur the development of a common database that will allow the consortium to collect and analyze the knowledge of the global supply chain. We think this shared database will generate opportunities to be more innovative and to improve the sustainability of products and processes."

The final step in developing the index will be to translate the product information into a simple eco-rating system that keys consumers into the sustainability of items they purchase, providing transparency into product quality and history.

While some suppliers within Walmart's universe, and others outside, will cringe at the expense and resources required to comply with this emerging green mandate and the new expectations foisted upon consumer product supply chains, others will likely see this as a major watershed in environmental awareness.

Whether consumers will buy into the new rating system remains to be seen—but Walmart suppliers will likely have no choice.

Retail Volumes Remain Unsettled

The waves are rising, but ocean trade is still bobbing in a sea of uncertainty. In May 2009, import cargo volume at the nation's major retail container ports climbed back above the one-million mark for the first time in four months, but is continuing to see double-digit declines compared with last year, according to the monthly Port Tracker report by the National Retail Federation and IHS Global Insight.

"Monthly numbers are rising as we enter the back-to-school season, and will continue to rise as we build up to the holiday season. That's the cycle every year, whether the economy is good or not," says Jonathan Gold, vice president, supply chain and customs policy for the National Retail Federation. "The volumes are far below what we saw last year, however, and will stay that way until the economy begins to recover."

U.S. ports surveyed handled 1.04 million twenty-foot equivalent units (TEUs) in May, the most recent month for which data is available. A five-percent increase from April, the boost ended a three-month streak of numbers below one million TEUs—but was down 20 percent from April 2008. After February (839,492 TEUs), March (970,949 TEUs) and April (990,632 TEUs), the figure was the fourth lowest since the 901,497 TEUs seen in February 2004, and marked the 23rd month in a row to see a year-over-year decline.

The first half of 2009 is now forecast at six million TEUs, down 20 percent from the 7.5 million that passed through U.S. ports in the first half of 2008. The total volume for 2008 was 15.2 million TEUs, down 7.9 percent from 2007's 16.5 million TEUs and the lowest level since 2004.

Keeping in Step With the Regulatory Beat

The Obama Administration plans some major changes across myriad areas of the regulated community in the coming months. The Department of Labor anticipates hiring 1,000 new employees, including approximately 670 investigators. The Occupational Safety and Health Administration's budget alone is expected to increase by $51 million during fiscal year 2009, with a lion share of dollars channeled toward the hiring and training of new enforcement officers. Labor-intensive logistics industries should perceive this increased emphasis on compliance and oversight as a wake-up call.

"In light of the diverse and varied initiatives on the legislative docket, it is in the best interest of the regulated community to be informed," suggests Ann Christopher, vice president and general counsel for Kenco Logistic Services, a third-party logistics provider based in Chattanooga, Tenn. "Now is the time to be politically engaged."

Here's her take on three significant regulatory issues that will affect the logistics sector:

  1. No labor legislation has received more attention over the past year than the Employee Free Choice Act (EFCA). This card check legislation would provide a boost to organized labor as it facilitates union mobilization within the nation's workforce. In its original form, the proposed legislation would require union recognition based on authorization cards signed by a majority of employees in a workplace. This would eliminate the secret ballot union election process that is currently in place. When at least 50 percent of employees sign authorization cards in support of a bargaining unit, it becomes the exclusive bargaining representative of the employees without election. Furthermore, employee information regarding their position on unionization would no longer be private.
  2. As proposed, Food Safety Legislation (H.R. 2749) would require certain food facilities, including warehouses that store food products, to register and pay a $1,000 annual fee on a per location basis (such registration currently has no cost). Affected facilities include those that are required to register with the Food and Drug Administration in accordance with the Bioterrorism Act of 2002. In addition, registered facilities would be subject to inspection at a minimum of every three to four years, as determined by the Food and Drug Administration's risk-based schedule.
  3. The proposed SAFE Truckers Act of 2009 (H.R. 2200) legislation is also security based. It would prohibit an individual from operating a motor vehicle in commerce while transporting a "security sensitive material" unless such individual has a valid transportation security card issued by the Secretary of Homeland Security. The draft legislation appears to place some accountability on shippers to confirm that the motor vehicle operator transporting the security sensitive material holds a valid transportation security card. One would assume that the definition of "security sensitive material" is likely to undergo intense scrutiny prior to the enactment of any legislation.

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