Trends-December 2006

Global trade works in interesting ways, especially when it comes to port activity. While some pundits predict freight will be diverted to alternate ports on the East and West coasts to avoid traffic at the ports of Los Angeles/Long Beach, others see continued growth at the Southern California ports, based on stateside and transshipment demand to Latin America and the Caribbean Basin.

An increasing number of importers in Latin America and the Caribbean Basin are sourcing from China and moving their shipments through the Los Angeles/Long Beach ports.

Their reasons? The United States’ superior transportation infrastructure, as well as established trade, business, and cultural ties, among others.

The Los Angeles region will continue to grow as a hotspot for products coming in from the Pacific Rim, according to Keith Davis, president and founder of L.A.-based Sterling Transportation.

“Los Angeles will always be the hub for shipments from Asia,” he says. “In addition to standard freight carriers serving the region, passenger airlines also offer regular capacity. As long as continued demand exists for passenger traffic between Los Angeles and the Pacific Rim, planes will fly. And if planes fly, their bellies will be filled with product.

“This ensures the continued growth of Los Angeles as a transshipment point for Pacific Rim products,” he adds.

The growing demand for service to the Latin American/Caribbean Basin markets from the U.S. West Coast has given rise to specialized, niche service providers. Davis’ company is one such provider, concentrating specifically on serving the Los Angeles-to-Miami market to meet the needs of the Latin American/Caribbean shipping community.

Sterling offers an expedited, nightly LTL service from Los Angeles to Miami, carrying electronics, apparel, machinery, and other industrial equipment.

To best serve Latin American and Caribbean shippers using surface and air cargo inbound from Asia, Sterling works with both airlines and forwarders, and importers and exporters.

Latin American importers, for example, can ship goods from China to the ports of L.A./Long Beach, where Sterling picks up the load and expedites it to the Latin American/Caribbean region via Miami through the importer’s airline or forwarder. This, in effect, creates a door-to-door service from China to Latin America.

This niche service also allows Latin American and Caribbean air carriers and forwarders to offer California’s West Coast as a destination for shippers exporting goods from Latin America/Caribbean Basin.

The bottom line? Don’t expect activity at L.A./Long Beach to dry up as long as Latin America’s trade continues to grow.

Bill Augello: Farewell to a Friend

Transportation law expert and longtime Inbound Logistics columnist William Augello, Esq., 80, passed away on Nov. 19, 2006 at his home in Tucson, Ariz. Well-known and highly regarded in the transportation industry, Augello was an educator and a passionate advocate for shippers.

In his The Fine Print column for IL, and in his own educational seminars, Augello vigilantly kept shippers informed about pertinent legal issues, including recent controversial legislations expanding the degree to which shippers can be held liable for damages in transportation accidents.

His passion for ensuring fairness in transportation law extended to his legal practice, where he represented shippers in a wide range of cargo loss/damage and transportation claims.

Augello was an active participant in industry organizations such as the National Industrial Transportation League, and served for many years as executive director of the Transportation Consumer Protection Council.

He was also co-author of several books, including Transportation, Logistics, and the Law, and Freight Claims in Plain English.

In his last interview, with TranzAct CEO Mike Regan, Augello explained his enduring dedication to continuing education in transportation law. ” It needed to be done,” he said. “Shippers must be aware of the pitfalls in transportation.”

The University of Arizona has established a scholarship fund in Augello’s name. Donations may be made to: William J. Augello Scholarship for Transportation and Commercial Law Studies, James E. Rogers College of Law, The University of Arizona, P.O. Box 210176, Tucson, AZ 85721-0176.

Humanitarian logistics has been in the spotlight a lot lately, thanks to the Asian tsunami, the 2005 hurricane season, and the ongoing war in Iraq.

Now, supply chain professionals are banding together to become better prepared for future disaster recovery efforts by forming the American Logistics Aid Network (ALAN). Announced at last month’s Council of Supply Chain Management Professionals (CSCMP) annual conference in San Antonio, the group will focus on assisting relief agencies in providing humanitarian aid—including goods and services—to prepare for and respond to disasters.

“ALAN’s mission is to unite the supply chain community to support and assist humanitarian relief efforts,” says Mark Richards, one of the founding members of the new initiative and vice president of Associated Warehouses in Los Angeles.

The group has been working on the initiative for the past year and is now campaigning to enlist support from other private corporations, industry associations, and individuals.

The collaborative effort combines members of leading trade associations, including CSCMP, the Warehousing Education and Research Council, and the International Association of Refrigerated Warehouses, among others in all phases of the logistics and supply chain industry.

The group will focus on developing supply chain processes needed to effectively respond to disasters, and assisting agencies in collecting, routing, and delivering supplies to disaster areas.

In the event of a disaster, ALAN will work with government and relief organizations to ascertain logistics, supply, and transportation needs and provide assistance as required. The initial focus will be on one-time crisis situations that occur in the United States, such as hurricanes, floods, or earthquakes.

In the future, ALAN could serve as a model for assisting relief agencies with disaster response in other regions of the world.

Is 88 the Magic Number?

Businesses and economic development organizations in the region surrounding Illinois’ I-88 West are banding together to promote their area to the logistics industry.

The newly formed I-88 West Corridor Association, recently announced by The Greater Sterling Development Corporation, comprises Sterling, Rock Falls, Dixon, Whiteside, and Lee counties, all in the Chicagoland area.

The corridor is located approximately 100 miles from Chicago; 50 miles from the Quad Cities; 30 miles west of Interstate 39; and 30 miles from the Mississippi River.

The region offers companies economic advantages such as growing logistics, distribution, and warehousing activity; transportation assets; and proven economic development capability and tools, according to David Barajas Jr., executive director of the I-88 West Corridor Association.

Apparently, Wal-Mart agrees with Barajas. The company built a 900,000-square-foot distribution center on 143 acres of land in Sterling this year.

Other companies flocking to the area include Spectrum Brands (formerly Ray-o-Vac), which employs approximately 300 employees at its 576,000-square-foot packaging and distribution facility in Dixon; and UPM Raflatac, a paper manufacturer from Finland, which is building a pressure-sensitive label stock factory in Dixon.

Tree Tracking

Earlier this month, the 2006 Capitol Christmas Tree finished its 4,300-mile journey from Washington state to the U.S. Capitol building in Washington, D.C.

Whether you were part of the team transporting the 65-foot Pacific Silver Fir, or just a Christmas tree enthusiast, you could track the tree’s location throughout the trip thanks to a Smart Sensor tracking unit from SkyBitz, a Sterling, Va.-based trailer-tracking technology provider.

SkyBitz installed the tracking device onto the extendable flatbed trailer designed for the tree by Fontaine Trailer Company. The SkyBitz unit reported the time-stamped location of the trailer to Fontaine and the team of drivers at National Van Lines at 15-minute intervals.

The tracking data, complete with a detailed street-level map of the tree’s most recent location, was accessible to the general public on the company’s web site, www.TrackTheTree.com.

Dissecting Supply Chain Disruptions

Supply chain disruptions cause major headaches for shippers, carriers, and customers, often resulting in lost productivity and profits. The effects of supply chain disruptions also reverberate beyond the initial event, as companies scramble to fix problems and get back to business.

More than two-thirds of companies that experience supply chain disruptions say it takes more than one week to recover from the disruption, finds a new Accenture study that surveyed 151 logistics executives in U.S. firms with revenues of more than $1 billion.

Seventy-three percent of the executives surveyed report experiencing supply chain disruptions in the past five years. Of those, more than one-third (36 percent) say it took more than one month to recover, and 32 percent needed between 1 week and 1 month to recover.

Additionally, the vast majority of respondents (94 percent) say disruptions—which are most often caused by problems associated with supply chain partners, raw materials, and natural disasters—impact profitability and the ability to meet customer expectations.

When asked to rate the impact of disruptions on profitability and customer service, 50 percent and 56 percent, respectively, say disruptions have a “moderate or significant” impact.

Respondents, however, are upbeat about the future risk of supply chain disruptions. Nearly two-thirds (68 percent) say their supply chains are secure from potential disruptions, while 48 percent expect their level of supply chain risk to increase in the next three years.

Their investment plans, though, imply a lower degree of confidence: Nearly two-thirds plan to increase spending on supply chain risk mitigation, using logistics technology, forecasting/planning, and increased logistics capacity.

The study also gauged executives’ expectations about upcoming supply chain disruption risks in specific areas.

Respondents replied as follows when asked which specific factors will have an increased level of risk associated with them over the next three years:

• 50 percent expect risks associated with supply of raw materials or parts to increase.
• 36 percent expect risks associated with port operations and customs delays to increase.
• 36 percent expect risks associated with service failures due to longer supply lines/lead times to increase.
• 35 percent expect risks associated with geopolitical instability to increase.