August 2008 | News | Trends

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West Coast ports have endured their fair share of growing pains lately, what with congestion and capacity recurring quandaries for stateside shippers and consignees.

Still, the ports are moving forward with efforts to increase throughput efficiency by spreading existing traffic across more hours and optimizing valuable port assets.

PierPASS' OffPeak program, for example, has diverted more than nine million truck trips from daytime traffic to off-peak hours since the initiative began three years ago.

The not-for-profit company, created by marine terminal operators at the Los Angeles and Long Beach ports, has developed evening and Saturday shifts to eliminate costly bottlenecks, reduce gridlock on area freeways, and curtail air pollution resulting from idling traffic.

Under the OffPeak program, all international container terminals in the two ports have established five new weekly shifts - Monday through Thursday from 6 p.m. to 3 a.m., and Saturday from 8 a.m. to 6 p.m.

As an incentive to use the new shifts and to cover additional costs, most cargo moving during peak hours requires a traffic mitigation fee.

Off-peak shifts handle an average of 68,000 truck trips in a typical week, or about 40 percent of all container moves at the two ports on days with both peak and off-peak shifts.

Without the program, most of these trips would shift back into peak daytime traffic Monday through Friday, causing heavy congestion on highways approaching the Los Angeles and Long Beach ports and increasing local air pollution.

An independent review of traffic data near the ports, conducted by BST Associates, an economic research and strategic planning firm, indicates the program is meeting its objective.

"At the traffic counter closest to the ports, the share of truck traffic moving off-peak grew from 10 percent in 2004 to 32 percent in 2007," the company reports.

GTM Market Tracking Up

The fast-changing dynamics of global sourcing and selling, and an equally flux regulatory environment, are creating a growing niche for global trade management (GTM) solutions.

The worldwide market for GTM applications will grow at a compounded annual rate of 10.1 percent over the next five years, according to a new ARC Advisory Group study. The Dedham, Mass.-based consultant forecasts the market to surpass $800 million by 2012, up from $503 million in 2007.

ARC slices the GTM market into four solution types: Customs and regulatory compliance; trade financing and financial settlement; ocean/air procurement and contract management; and global trade visibility.

"This is an interesting market where the growth of ERP suppliers with GTM solutions does not come at the expense of certain types of best-of-breed suppliers," reports Steve Banker, service director of supply chain management and principal author of ARC's Global Trade Management Worldwide Outlook: Market Analysis and Forecast Through 2012.

Since ARC's last study in 2005, SAP has grown into the largest GTM supplier, with Oracle poised to enter the market and capture a considerable share of demand as well. In contrast to other markets, however, ERP solutions will not replace best-of-breed suppliers, but rather complement them.

Whether ERP or best of breed, GTM solutions must support the "3 Cs"—compliance, content, and connectivity, the study indicates. This means ERP suppliers that utilize SOA software to support complex compliance processes will unhappily share customer accounts with best-of-breed developers that have better networks and/or SaaS platforms, or have better content and connectivity.

Wholesale Changes Merit Price Differentiation

As business logistics costs rise and the environment for wholesalers grows more challenging, productivity improvements alone are not enough to boost profitability, notes Tim Emmitt, director in the advisory services practice of Grant Thornton LLP, a Chicago-based global business advisory firm.

While costs continue to soar, productivity (cost per order) remained the same or worsened during the past year for nearly 70 percent of distributors responding to a recent poll.

Citing figures from Distribution 2008, an annual survey conducted by The Manufacturing Performance Institute, Emmitt noted that distributors face cost increases for nearly every segment of their business, from equipment and IT to labor and logistics/transportation.

To help counter these rising expenses, distributors can use a series of price differentiation methods to better support their value proposition.

"To implement price differentiation, it is important to understand and segregate your customer base, including customers that cost more to service," Emmitt advises.

"Pay attention to customers who value your unique competitive advantages and are willing to pay for them," he adds.

For example, innovative DCs are adopting value-added activities such as repackaging, light manufacturing/assembly, reverse logistics, and sequencing. These services need to be factored into a differentiated pricing strategy.

For many wholesalers, opportunities to streamline pricing structures are within reach.

"Some distribution companies may not know that their existing system may already include at least half the data needed to improve their pricing strategy," Emmitt observes.

Railroads Building a Sustainable Track

The efficacy of moving more long-haul freight off the highways and onto rail lines has captured greater attention from cost-conscious shippers, largely as a result of current economic constraints and fluctuating capacity needs.

But as "green speak" pervades the marketplace, U.S. railroads are making sustainability and efficiency a core value proposition.

Last year, freight railroads were more fuel-efficient than ever, moving one ton of freight an average of 436 miles on each gallon of fuel, a 3.1 percent gain over 2006 - or the equivalent of traveling between Baltimore and Boston, reports the American Association of Railroads (AAR).

By comparison, in 1980 a gallon of diesel fuel moved one ton of freight an average of 235 miles, representing an 85.5-percent improvement over the last three decades.

During this same period, freight railroads reduced fuel consumption by 48 billion gallons and carbon dioxide emissions by 538 million tons.

If one percent of long-haul freight now moving by highway shifted to rail, shippers could eliminate 1.2 million tons of greenhouse gas emissions annually, according to the American Association of State Highway and Transportation Officials.

At the same time, railroads and rail suppliers have reduced the weight and increased the capacity of rail cars to improve fuel efficiency and cut emissions. Average freight car capacity now stands at nearly 100 tons, up 17 percent from an 85-ton average 20 years ago.

Beyond the practicality of making rail a more important part of the U.S. transportation system, carriers continue to make great strides investing in technologies and equipment that further reduce fuel consumption and emissions.

In May, for example, Union Pacific introduced the first of four next generation Genset locomotives at its J.R. Davis Rail Yard in Roseville, Calif. The new Genset switcher is projected to cut emissions of nitrous oxides by 80 percent and particulate matter by 90 percent, while using up to 30 percent less fuel compared to older switching locomotives.

This fuel savings also translates into a reduction of greenhouse gases by up to 30 percent. Other railroads are following suit.

But perhaps the railroad industry's greatest contribution is the broader influence it wields in developing a more diversified and sustainable U.S. freight transportation network.

Moving cargo by rail does more than just reduce fuel consumption and pollution; it also alleviates highway congestion and brings more capacity online, giving non-traditional rail/intermodal shippers additional options for streamlining costs.

By making the domestic freight industry more competitive, U.S. railroads are bound to have shippers seeing multiple shades of green.

Ready to Serve

As further evidence of the synergies between military training and front-line logistics discipline, the U.S. Army Reserve and Con-way Freight have launched the Employer Partnership Initiative.

This public-private partnership allows both organizations to recruit, train, and employ individuals interested in serving their country and pursuing a career in freight transportation.

The Army Reserve's partnership with the Ann Arbor, Mich.-based LTL carrier is the first of its kind in the state; and Con-way Freight is the first transportation company to join the new Employer Partnership initiative.

The Employer Partnership seeks to formalize relationships between the Army Reserve and the private sector by establishing a process where both parties can share the talents of trained professionals. Partners such as Con-way, the American Trucking Associations, and Inova Health Systems benefit from employing men and women with military experience and proven leadership skills.

The agreement between the U.S. Army Reserve and Con-way Freight provides reservists opportunities for employment once they successfully complete their military occupational training.

HMT Bill Sets Sail

Domestic shippers exploring alternatives to expensive and congested surface-bound transportation networks may find relief in an unexpected place - the U.S. Senate.

Frank R. Lautenberg (D-NJ) has introduced legislation that would exempt "coastwise" container shipping from the Harbor Maintenance Tax (HMT), with the goal of reducing road and rail congestion.

The HMT was implemented in 1986 as a federal tax on freight cargo and cruise ship passenger tickets. Designed to raise revenue and offset harbor infrastructure costs, the tax has accumulated a year-end balance of more than $3.75 billion.

Exempting coastwise shipping from the HMT is projected to cost the federal government only a small fraction of this revenue. Such an amendment would incent shippers to consider short-sea shipping routes.

"This bill would make our waterways a more viable and affordable alternative for freight transportation, and help coastal shippers meet increased demand," observes Lautenberg.

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