Energy & Diesel Fuel & Other Commodities

EIA & Logistics Management | Feb. 20, 2013

Diesel prices hit highest level since August 2008, reports EIA

The average price per gallon of diesel gasoline is only heading in one direction of late: up. According to data released this week by the Department of Energy’s Energy Information Administration (EIA), diesel jumped up 5.3 cents to $4.157 per gallon, marking the fifth straight weekly gain. What’s more, prices have gone up a cumulative 23 cents during that period and 17.7 cents in the past three weeks alone.

This week’s price is the high point for diesel since the cost of $4.207 per gallon the week of August 18, 2008, and it tops the previous recent high of $4.116 from the week of October 22. The average price per gallon is up 19.7 cents compared to a year ago at this time. In its recently updated short-term energy outlook, the EIA is calling for diesel prices to average $3.92 per gallon in 2013 and $3.82 in 2014, with WTI crude oil is expected to hit $92.81 per barrel in 2013 and $92.17 in 2014. However, as China demands more oil for their growing economy, Middle East wars and terrorism occurrences remain high OPEC has been reducing output in order to increase the price of a barrel of oil. In the U.S. new refineries are not being built nor is approval of additional pipeline infrastructure.

The focus from a supply chain management perspective, according to shippers, is more on utilization and efficiency by doing things like driving empty miles out of transportation networks. Shippers have told LM that adjusting budgets is only part of the solution when it comes to dealing—and living—with fuel price fluctuation.

To minimize the impact of fuel costs, corporations need to refocus their efforts to collaborate with their trucking providers to ensure that every effort is being made to maximize equipment utilization, reduce out-of-route miles, and take advantage of fuel programs that identify the lowest diesel prices.

The price per barrel for oil is at $96.91 on the New York Mercantile Exchange.

Labor, Staffing & Issues

Truck Drivers Clinch New Power with First Union Contract at L.A. Ports!

Posts From Seattle/Tacoma | Jan 9, 2013

They did it again, and this time it paid off in a huge way. L.A’s Toll Group (an international transportation & freight management company) drivers, who made national and international headlines in April by overwhelmingly voting to become Teamsters, cemented their place in history by ratifying the first union contract in the drayage industry in 30 years. And boy is the contract a good one! The agreement is highly regarded as a standard-setting first union contract, and viewed as a huge win for any union and a definite game-changer for U.S. port drivers.

The drivers who haul apparel and merchandise shipped to our shores for America’s brand name stores will kick start 2013 with a contractual raise of more than $6 per hour along with paid overtime, sick leave and holidays, a far more affordable health care plan with zero change in coverage, guaranteed shift hours and other provisions to provide job security – plus a pension plan.

The landmark agreement culminates more than 24 months of worker struggle and employer resistance in which these truckers – aided by a community coalition, their children, and clergy – borrowed bullhorns, leafleted consumers, gathered signatures practiced their picket lines, staged noisy protests, crashed shareholder meetings in a dogged campaign to end the Third World-like working conditions they once routinely endured.

“U.S. port drivers are the most underpaid in the trucking industry: A typical professional earns $28,873 a year before taxes. Their net incomes often resemble that of part-time fast food or retail workers though they clock an average of 59 hours a week. They must possess specialized skills and licensing to safely command an 80,000 lb. container rig, but they fit the profile of America’s working poor. Food stamps, extended family, or church pantries are needed to get by; their children often lack regular pediatricians or only receive care at the public ER”.

Contract Highlights:

• Wages : The day shift hourly rate increased from $12.72 to $19, and the night shift hourly rate from $13.22 to $19.75. In addition to the over $6/hour increase in hourly pay rates, drivers won $0.50/hour per year raises over the life of the contract, giving Toll port drivers over a 60% hourly wage boost over the life of the 3-year contract. Overtime pay of time-and-half kicks in after a typical full time 40-hour week, which is extremely rare in an industry where truckers are exempt from federal overtime laws and an average week hovers around 60 hours.
  Retirement : Prior to the contract, less than a dozen Toll drivers could spare any extra dollars, even pre-tax, to participate in the corporate 401(k) plan. As Teamster Local 848 members, they have been automatically enrolled in the union’s Western Conference Pension Trust. Such a retirement plan at the port has rarely been seen since trucking was deregulated in 1980. Toll will make a pension contribution of $1/hour per driver until 2014, and a $1.50/hour per driver by 2015.
• Health Care : The Toll Group health care plan was financially out of reach for most of its truck drivers. The few who managed to meet the premium, deductibles and copayments will now keep significant more money in their pocket without sacrificing coverage, and the rest of their co-workers finally have access to quality, affordable health insurance coverage, including dental and vision care. The company will pay 95% of the premium for individuals and 90% for family coverage. Drivers who previously had to shell out $125/month for individual or $400/month per family will drop to roughly $30 or $150, respectively.
• Stable work hours and paid time off : Most truck drivers lose a day’s pay if they cannot work, are penalized by dispatchers for being unable to haul a load, and lack paid sick or holiday leave. Driver will now receive seven paid holidays, three paid personal days, and six paid sick days annually. They will accrue one or two weeks of vacation within the first two years of service, with longtime employees earning up to a month. They can also bank on guaranteed full- or half-day of pay regardless of seasonal slowdowns if they are scheduled to work.
  Incentives to grow responsibly, level competition, and raise market standards : The agreement establishes a high-road business model for the port trucking industry that recognizes Toll’s competitors have not yet embraced livable wages and working conditions. To encourage a more level playing field and wide-scale unionization, drivers will have the ability to re-negotiate for improvements when a simple majority of the Southern California market is organized.

Longshore clerks approve contracts with LA/Long Beach employers

American Shipper | Feb 21, 2013

John Fageaux, lead negotiator for the International Longshore and Warehouse Union’s Local 63, Office Clerical Unit (OCU), and Stephen Berry, lead negotiator for the employers of the OCU at the ports of Los Angeles and Long Beach, issued a statement late Wednesday saying OCU bargaining units voted and agreed to ratify the terms of tentative agreements reached with the Harbor Employers Association member companies on Dec. 4, 2012.

Part-timers, pensions, health care key issues in Teamsters-UPS contract talks

Logistics Management Magazine John D. Schulz, Contributing Editor | Feb 15, 2013

In one corner, the world’s largest and most profitable transportation company. In the other corner, the Teamsters union. In other words, get ready for a heavyweight labor contract negotiation. UPS and the roughly 275,000 Teamsters who make it arguably the best-run transport company in the world have already begun talks on the contract that expires July 31. It is the largest collective bargaining agreement in the nation.

Somewhat complicating these talks is they are two separate negotiations: one for the parcel side of UPS (covering 260,000 workers) and another for LTL hauler UPS Freight (covering 15,000 or so workers). UPS representatives are nearly apologetic about the news blackout from their side. That is a sure sign of the importance and sensitivity of these contract talks.

Teamsters are more than happy to fill that vacuum. They pointed out the difference in the major issues in the two contracts. For UPS Freight, the major issues are:

• addressing what the union calls “harassment” regarding the use of telematics;
• poor staffing levels and retaliation due to accident and injury reports, and other issues regarding filing grievances; and
• prohibiting subcontracting of bargaining unit work to non-union carriers.

In the small parcel contract at UPS, some of the union’s major issues are:

• dealing with the expansion of the company’s SurePost service and packages handled by the U.S. Postal Service;
• how to protect and improve pensions;
• protecting affordable retiree healthcare and restoring health insurance for part-timers after 90 days; and
• improving part-time pay, which starts around $9 an hour compared to about $20 an hour for full-time UPS employees.

Another hot-button issue is health care. Currently UPS Teamsters enjoy a zero co-pay for health care coverage—and they intend to keep it that way.

UPS is proposing Teamsters pay up to $90 a week for health benefits. But that appears to be a non-starter with Teamsters leadership drawing a line in the sand on that issue.

As Teamsters General Secretary-Treasurer Ken Hall, the chief negotiator in the UPS contract talks, said: “We’re not paying $90. We’re not paying $9. We’re not paying 9 cents. We’re not paying premiums for health insurance for a company that made $4.839 billion.”

UPS’s fourth quarter 2012 revenue rose to $14.57 billion—up $400 million compared to last year. UPS posted record 2012 fourth quarter and full year adjusted diluted earnings per share of $1.32 and $4.53, respectively. It also had free cash flow of $5.3 billion last year.

Con-way subsidiaries introduce new U.S.-Mexico intermodal service

Logistics Management Magazine | Feb 15, 2013

Two subsidiaries of freight and global logistics and transportation service provider Con-way Inc.—Con-way Truckload and Con-way Multimodal—have rolled out a new intermodal service geared towards North American shippers that, Con-way said, will leverage the capabilities of both groups to provide a “high-value, high-reliability offering for intermodal shipping.”

ATA says seasonally adjusted tonnage in January is highest on record, up 6.5 percent annually

Trucking volumes ended 2012 on a fairly positive note, and they commenced 2013 in the same fashion, according to data released by the American Trucking Associations (ATA) this week.

The 3PL & 4PL World

Vitran sells 3PL unit to Legacy Supply Chain Solutions

Logistics Management Jeff Berman, Group News Editor | Feb 14, 2013

Toronto-based less-than-truckload (LTL) carrier and transportation services provider Vitran Corporation Inc. said yesterday it reached an agreement to see its Supply Chain Operation (SCO) to Portsmouth New Hampshire-based third-party logistics (3PL) services provider Legacy Supply Chain Solutions. The purchase price is $97 million and is subject to certain working capital adjustments and expected to close during the first quarter. Vitran officials said it plans to allocate a portion of the net proceeds from this transaction to fully reduce its outstanding debt under its senior revolving credit facility, as well as to support the development of its LTL business.

Vitran SCO focuses on complex, high-velocity logistics networks that serve North American-based retailers. Legacy said that this acquisition is expected to significantly expand its market share in the United States and Canada and also expand its total distribution footprint to 35 facilities, four transportation offices, and more than 6 million square feet of warehousing space in North America, coupled with expanding its supply chain presence into the retail sector. Vitran SCO has approximately 1500 employees (full-time/part time) and 20 key clients.

Rick Dempsey, VP marketing director, Legacy Supply Chain Services, told LM that prior to this deal Legacy had been looking for the right opportunity to broaden its supply chain services capabilities.

OHL Is Now C-TPAT Certified

World Trade | Feb 21, 2013

OHL, a global 3PL company, announced that it received notice from U.S. Customs and Border Protection (CBP) that its contract logistics warehouses were accepted into the Customs-Trade Partnership Against Terrorism (C-TPAT) program and are now officially certified and part of the C-TPAT partnership. C-TPAT is a voluntary government-business initiative that builds cooperative relationships that strengthen and improve overall international supply chain and U.S. border security. C-TPAT is widely recognized as one of the most effective means of providing the highest level of cargo security through close cooperation with international supply chain businesses.

Through this initiative, CBP asks that businesses ensure the integrity of their security practices and communicate and verify the security guidelines of their business partners within the supply chain.

Some of the chief benefits touted about C-TPAT certification by CBP, the Food and Drug Administration (FDA) and certified supply chain partners include playing an active role in the war against terrorism, a reduced number of CBP inspections and priority processing, reduced border delays and improved supply chain compliance and security.

“When deciding upon whether to become C-TPAT certified we immediately recognized what the value would be,” says Randy Tucker , OHL President of Contract Logistics. “We knew it would improve our aptitude in three very important areas – customer satisfaction, process improvement and security. “We are constantly looking for new ways to improve our services for our customers and through this voluntary certification, our customers can be confident that we meet the grade when it comes to compliance and security.”

OHL operates more than 130 value-added distribution centers, offers comprehensive transportation management services, employs nearly 7,000, and has offices worldwide. OHL works with direct-to-consumer fulfillment, serves a wide range of business sectors from specialty retail to manufacturing, and specializes in the apparel, electronics, printing, food and beverage and consumer packaged goods industries.

Logistics: Carriers, All Transportation Modes & International

Lack of Competitive Rail Service Costs Chemicals, Plastics Shippers Billions, Report Says

CURE | Feb 05, 2013

The American Chemistry Council issued new research documenting how a lack of freight rail competition is costing U.S. chemical companies billions of dollars in excess shipping costs each year. Showing shipping rates that often exceed 300 percent of the revenue-to-variable cost (RVC) ratio, the ACC study estimates that if the $3.9bn premium on chemical shipments were reduced, the chemical sector could create up to 25,000 additional American jobs, with $1.5bn in new wages, and $6.8bn in new economic output.

Glenn English, Chairman of Consumers United for Rail Equity (CURE), a coalition of rail dependent shippers that includes the American Chemistry Council, said: “This new research provides critical data about a problem that is costing American companies billions of dollars and American workers tens of thousands of jobs. While these new findings focus on chemical and plastic shipments, the problem is just as dire for farmers, electric utilities, lumber and other manufacturers who depend on rail for shipping and who together make up a broad swath of the U.S. economy.

“Congress can fix this problem. Acting to guarantee competitive rail service, giving freight rail shippers the same antitrust protections relied on by all other U.S. industries to ensure competitive markets and ensuring the Surface Transportation Board has the tools to enforce the law would be enormous steps toward strengthening the U.S. economy, enhancing the competitiveness of American companies and creating good jobs here at home.

2012 Supply Chain Innovation Awards Innovation of the Year: Reduced Transportation Costs Through Railcar Co-Loading

Russell W. Goodman, Editor-in-Chief, SupplyChainBrain | December 21, 2012

Did no one tell that to Dal-Tile Corp., Whirlpool, Werner Ladder Co. and Convermex, this year’s winners of the Supply Chain Innovation Award? Obviously not. Because Dal-Tile, North America’s largest manufacturer and distributor of ceramic tile and natural stone products, has been mixing its extremely heavy shipments with the much lighter appliances from Whirlpool, aluminum and fiberglass ladders from Werner and – get this – plastic plates, cups and utensils from Convermex to great success.

Traditionally, you could either fill a railroad boxcar headed to the U.S. from Mexico with the legal weight limit of heavy tile or stone (using only about 20 percent of the railcar’s volume) or pack it entirely with lighter products; in either instance, the shipper paid 100 percent of the transportation expense. But why not put the allowable amount of heavy stone on, fill the remaining 80 percent with lightweight products – and the shippers split the logistics costs 50-50? Working with their matchmaker, the 3PL Transplace, that’s exactly what these shippers did: stone and appliances or tile and ladders or tile and plateware. In doing so, they took home the 2012 Supply Chain Innovation award.

Returns

SupplyChainBrain | Dec 21, 2012

No shipper wants to see returns, and Cardinal Health, which specializes in delivering pharmaceuticals is no different. But the product is often highly temperature-sensitive. “Warm” is the enemy because temperatures above a certain level renders use of these often costly items unsafe. The traditional shipment method, using frozen gel-packs, can be unreliable. So Cardinal, working with ThermoSafe, came up with a solution that uses a reusable, non-toxic, environmentally friendly, USDA “bio-preferred phase change material” made of plant oils that work together to maintain the narrow product storage range of 4 degrees Celsius regardless of the environment or season. For Cardinal, it’s goodbye to virtually all costly returns and the millions of dollars lost.

Even with a wealth of recycling opportunities, the disposal of corrugate and other packing materials can be time-consuming and environmentally damaging. Office Depot has devised a simple yet effective way to cut down on unnecessary shipping materials, including corrugate. For smaller items delivered to most business customers, the company has replaced corrugated cardboard boxes with returnable plastic totes and paper bags. The solution is expected to reduce the cardboard used in deliveries by more than 3.5 million pounds.

Delivering information and monitoring logistics performance is difficult at the best of times, but when a company is as large as Pfizer, the job is staggeringly complex. So the pharmaceutical giant set about getting its arms around the challenge. In conjunction with partners GT Nexus and Unyson Logistics, Pfizer came up with a cloud technology-based information strategy called the Logistics Delivery Platform.

Drewry Air Freight Index – January rates slip

World Trade | Feb 18, 2013

Air cargo rates for transpacific shipments continued to fall in January, continuing a trend that began after a spike in November, according to Drewry’s new East-West Airfreight Price Index. Last month, the average price per kilo of air cargo routing out of the United States stood at $3.25, nearly 40 cents below last year’s November high of $3.64. That high corresponded with an increase in activity, with Cathay Pacific turning in a 6.3-percent November increase in cargo carried, year over year. After the two months of price declines that followed, air cargo cost out of Asia is anticipated to bump up in February.

Regulatory & Compliance

World Trade | Feb 22, 2013

Canada-Asia trade program moves forward

The Canadian government is pressing forward with its ambitious trade expansion program, hoping to boost activity through the Asia-Pacific Gateway and Corridor Initiative. In addition to meeting with Canadian businesses to sell the benefits of the program, Ed Fast, the government’s Asia-Pacific trade minister, is planning a trade mission to Asia in April. Trade from Asia in the information technology and communications fields will help bolster Canadian businesses, Fast told the assembled industry leaders. “Canada’s economy and future prosperity is our government’s top priority. That prosperity depends on increasing our exports in fast-growing and dynamic markets around the world,” he said. “The Asia-Pacific Gateway plays a key role in supporting our growing trade with Asia, while creating jobs and growth for local communities, as well as for Canada as a whole.”