Global Logistics—June 2011
High-speed Rail Has German Upside
While the United States continues debating the pros and cons of investing billions of dollars in high-speed rail infrastructure, developing countries with nebulous transportation capabilities are fast-tracking light-rail projects. As a result, German manufacturing and transportation stand to gain the most.
Deutsche Bahn has negotiated with Siemens AG to procure 130 high-speed trains (above), and plans to purchase an additional 90 trains through 2030— a total value of US $8.5 billion. In turn, Canadian aircraft maker Bombardier received a $3-billion contract from Siemens to make shells and other components for high-speed trains in Deutsche Bahn’s rail system.
Siemens’ key business units include industrial automation, power generation, and transportation. It has seen demand pick up where it has an established presence— notably in Brazil, Russia, India, and China.
In the first half of 2010, 30 percent of Siemens’ business was in emerging markets, compared to 19 percent during the 2001 downturn. Beyond building out its physical presence from a distribution and marketing standpoint, the company is also expanding its manufacturing footprint, optimizing global cost structures from a supply chain perspective. Roughly 20 percent of its global sourcing requirements now come from low-cost countries.
Milking Free Trade
Although supporters say free-trade agreements with Colombia, Panama, and South Korea would benefit U.S. dairy farmers and other businesses, the agreements remain in limbo. Agriculture Secretary Tom Vilsack and several farm groups have urged lawmakers to approve the deals, taking their case to the House Agriculture Committee.
Disagreements in the House about whether to consider all three agreements together or individually, as well as opposition from labor unions and a few farm groups, have complicated the deliberations.
Some legislators believe the Korea agreement carries benefits to agriculture and the auto industry— reflected by broader support among interest groups— and therefore demands the greatest priority and most immediate action. The National Milk Producers Federation, representing farmer-owned bargaining cooperatives, and the International Dairy Foods Association (IDFA), which supports makers of cheese and other dairy products, support all three deals.
The IDFA estimates that U.S. dairy exports from the Korea deal could more than triple in value, by up to $336 million, and that the agreement is the most important since the North American Free Trade Agreement with Canada and Mexico— although the industry is split on how much benefit dairy farmers have seen from that.
The American Farm Bureau Federation also supports the free-trade agreements. The National Farmers Union is opposed, however, cautioning that free-trade agreements generally hurt agriculture and do not live up to promises of increased exports for U.S. goods.
Euro DCs Blend Form With Function
European warehouses are elevating innovation, inspiration, and sustainability to new heights. Here are two examples:
- Dutch logistics service provider Kloosterboer is managing the largest refrigerated warehouse in France for U.S. frozen potato and finger-food maker McCain. The company decided to build the new warehouse and distribution center close to its production facility to accommodate expanding storage requirements. The single high-density facility, equipped with Westfalia’s automated storage and retrieval system and warehouse management system technology, enabled McCain to merge the storage and distribution of eight other regional warehouses.
- German retailer Ernsting recently awarded an automation contract to systems integrator Witron to design a second high-bay warehouse in its network— this time under a glass shell. Witron acts as general contractor, delivering material flow, technology, and the mechanics and steel construction to build the 64,583-square-foot warehouse. The transparent facade integrates photovoltaic systems— which will convert sunlight into electricity— and is designed by glass artist Nabo Gass to match the retailer’s headquarters.
Asian Air Carriers Consolidate
Air China and Cathay Pacific Airways have finally consolidated their cargo businesses with the launch of a new joint venture— Air China Cargo.
Following the consolidation, Air China Cargo’s fleet will include 12 B747-400 aircraft and be based in Shanghai. The joint venture’s operational scope will satisfy the market demands of the Yangtze River Delta, which makes up two-thirds of Air China’s service area.
Additionally, the belly space provided through Air China’s extensive domestic and international passenger network is expected to boost Air China Cargo’s global business development. The goal is to develop the venture into a China-based air cargo airline with international competitiveness.
The Air China/Cathay Pacific merger comes after the Chinese government made provisional inquiries about the feasibility of consolidating cargo operations with the country’s two other main carriers, Air China and China Eastern. China, which has long relied on foreign carriers to fly freight in and out of the country, is making a push to grab a greater piece of global air cargo market share.
Mexico Approves ATA Carnets
Mexico authorities have begun accepting ATA Carnets, enabling shippers and travelers to take advantage of expediting and reducing the cost of bringing goods into the country temporarily. These “merchandise passports” are honored in about 80 countries worldwide, according to the United States Council for International Business (USCIB).
Mexico accepts Carnets for professional equipment, demonstration samples, and trade show goods. A single Carnet can be used to take goods to any accepting country for up to one year, duty- and tax-free, as long as the goods are not sold and leave the country in the same condition in which they were brought in. In effect, the free import pass facilitates doing business with Mexican companies— which has a broader impact in terms of stimulating new business development.
“It should mean a boost for business travel and sales in the country and throughout Latin America,” says Cynthia Duncan, USCIB senior vice president for Carnet services.
Suez Trade Rising Amid Uprising
In spite of Middle East volatility and the overthrow of Egyptian President Hosni Mubarak’s regime in Egypt, Suez trade shows few signs of slowing down. Cargo carried through the Suez Canal rose 4.1 percent to an eight-month high in April 2011, and yielded the third-highest profit ever for A.P. Moeller-Maersk, the largest container shipping line in the world.
The Suez Canal carries about eight percent of global goods and handled almost 57.8 million metric tons in April, compared to 55.6 million tons in March, according to Suez Canal Authority data. Through the first four months of 2011, average tonnage per month was up 7.3 percent. Rising European demand for Asian products is shoring up container rates, even as global container fleet capacity is expected to expand.
Shipments between Asia and Europe made up 38 percent of business for Maersk’s container fleet last year. The carrier sent about 2,000 vessels through the Canal in 2010.
Given the tenuous circumstances following Egypt’s uprising, Suez trade growth will be critical to stabilizing the country’s economy.
EU Sees Oceans of Green
The European Union (EU) is preparing to include maritime transport in its emissions-trading system or impose charges on carbon discharges from ships should international talks fail to cut pollution.
The International Maritime Organization, created under the United Nations system, has been unable to agree on measures to curb ship emissions. The EU is now pursuing a parallel track to design its own tools to limit industry pollution.
Global maritime transport accounts for almost three percent of carbon-dioxide discharges, and emissions from ships are expected to double by 2050.
The EU emissions trading system—the ETS— is the world’s largest cap-and-trade program. Started in 2005, it imposes pollution limits on more than 11,000 utilities and manufacturers, allowing those that emit less than their quota to sell surplus permits. One permit gives the right to discharge one metric ton of CO2.
London’s Olympic Challenge
London’s calling as the site for the 2012 Summer Olympics will present a logistics challenge for shippers moving freight into and around the city. To accommodate restrictions on delivery slots for freight vehicles, the United Kingdom’s largest transportation trade association is making a push for more nighttime deliveries.
“The benefits of nighttime deliveries are proven and irresistible; why waste time and money sitting in traffic when you don’t need to?” says Natalie Chapman, the Freight Transport Association’s (FTA) head of policy for London. “Following extensive trials with Sainsbury’s, and our work with the Noise Abatement Society, we know that nighttime deliveries don’t have to mean disturbance for local residents.”
The association argues that if businesses work nighttime deliveries into their long-term plans, the benefits of transport cost reduction, more reliable deliveries, and lower emissions will far outweigh the initial costs and effort.
The FTA has been working with the Noise Abatement Society to develop quiet delivery techniques that could allow deliveries at times currently restricted due to planning or noise pollution reasons.
“The Olympics will effectively kick-start interest in adopting this practice,” adds Chapman. “But our advice to business is to take the long view: this is not a sprint but a long-distance event.”
While many Japanese ports posted a decrease in exports to the United States since the March earthquake and tsunami, others have actually increased exports. It will take months for many ports to resume full activity.
Source: Zepol Corporation