Eric Joiner's Freightdawg.com - The Logistics and Supply Chain Blog!

European Ocean Carriers form new VSA

Citing a need to rationalize costs in a down economic climate, three European ocean carriers have announced a historically large vessel sharing agreement.  Maersk Line of Denmark, Swiss carrier Mediterranean Shipping Company (MSC) and French carrier CMA-CGM have announced three transpacific loops covering north and south Asia to the US west coast. 

The three strings of ships will use a total of 10 x 8000 TEU vessels on two loops and another 5 x 4000 TEU vessels on a third string.   The combined strings will move a massive total of 50,000 container loads a week.  Port rotations and vessel mix are highlighted in the graph below.

In better financial times, Maersk had resigned from other vessel sharing agreements after they purchased P&O Nedlloyd.   With a fleet bigger than any other carrier on the planet, Maersk figured they had the economy of scale that didn't require shared assets.   Now, with a weaker US dollar, consumer spending way down, and fuel at astronomical levels,  Maersk has been forced to consider a new economic model.  Meanwhile in the last several years both MSC and CMA-CGM have grown into powerful competitors with huge fleets of their own.  This new bundling of assets will stabilize capacity and allow the carriers to better weather difficult times.

Strange times make strange bedfellows.  I think the combinations and contractions on the ocean carrier front will continue for the foreseeable future.  I wouldn't be surprised to see this VSA combination become global.

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Chapter 11: More on Lillian Vernon

Jerry Hempstead of Hempstead Consulting is a great friend and former colleague of mine. After 32 years in the express and parcel business in the United States, Jerry "retired" a couple of years ago only to become one exceptionally busy guy. Jerry's expert knowledge of the parcel business has led him to some very interesting consulting engagements in China and the United States.

The article below is an Opinion/Editorial reflecting Jerry's personal insights. Jerry can be reached at gmhempstead@aol.com

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After reading Richard Palarea’s article on Freightdawg.com,  “Two Catalog Retailers Seek Court Protection”, I thought I might add some additional history and perspective especially about Lillian Vernon.

Once upon a time, Lillian Vernon probably had the lowest residential delivery rate for parcels ever negotiated. They once used a parcel consolidator called APX.  APX was the company that purchased RR Donnelley Logistics out of Chicago.  Donnelley had previously acquired the parcel consolidator CTC Logistics out of Minneapolis. APX was a BIG parcel consolidator!

For those who don’t know what a parcel consolidator is, these are firms that pick up from high volume shippers of residential delivery parcels like e-tailers (Amazon, Zappos), multi-level marketers (Mary Kay, Tupperware, Avon), telemarketers (Home Shopping Network, QVC), catalog retailers (JC Penney, LL Bean, Lands End) and check printers like Deluxe, Clark American and Harland.  They make pick ups then directly inject the collected parcels downstream into the USPS delivery network. They use the USPS Parcel Select product and charge the shipper a rate that is less than a deeply discounted UPS Ground Residential Package. The margin is extremely thin at only a few cents per package.

The two big players were APX and Parcel Direct. FedEx bought Parcel Direct in August of 2004 and changed the name to Smartpost. On March 15, 2006 APX filed bankruptcy. This bankruptcy profoundly changed the rules for residential parcel pricing because when APX went out there was a domino effect and the marketplace lost DDU Express, Total Logistics Services (TLS) Parcel Logistics Service (PLS) and Parcel Corp of America. This meant that Smartpost could charge  more for its services as it became (by far) the dominant player in the parcel consolidation industry.

There really was little Lillian Vernon could do other than to switch to Smartpost at a rate that was higher than they were paying to APX but much lower then they could get from DHL@home (which had higher operating costs than Smartpost) or UPS Ground Residential. For the mailing of the Lillian Vernon catalog and for pieces less than 1 lb. there was no alternative to the USPS and those prices went up substantially in May of 2007.

Now I did get upset with the statement of Michael D. Muoio, the CEO of Lillian Vernon in January at the time they announced a massive layoff; in a recent interview he said  “The December layoffs at Lillian Vernon Corp. stemmed from rising postal costs, the falling U.S. dollar and lower-than-expected holiday sales." its chief executive told a trade publication. 

"The most damaging was the postal rate increase of 20 percent," said CEO Muoio, who also cited the parcel carrier rate increase of 25 percent, according to a story on the Web site of Multi-channel Merchant magazine.

"Basically, FedEx and the U.S. Postal Service reached down into our pocket and took out $8 million," Muoio said. "For us, there was no choice."

FedEx Smartpost was the next cheapest method for Lillian Vernon to go to. They bailed Lillian Vernon out when they stepped up to the plate and transported their packages when APX went under. Now with the bankruptcy filing of Lillian Vernon, FedEx is out over $3 million dollars. FedEx most likely will never see a dime of this money because of the bankruptcy filing.

FedEx and the US Postal Service are not to blame. The USPS charter calls for them to operate at break even for their service. The USPS does not set its own rates. The Postal Regulatory Commission sets the rates. The PRC is a federal commission appointed to protect the mailers, not the USPS. There is a complex system of checks and balances on what and how the USPS charges for its service.

FedEx on the other hand is deregulated and they are a publicly traded company on the NY stock Exchange. Last time I checked there was still a system of free enterprise in this country that says FedEx can charge whatever they want to and shippers can use whatever carrier they want to ship with. Had UPS or DHL@ home been used in lieu of FedEx Smartpost , Lillian Vernon may have gone into bankruptcy sooner.

"At the end of the day, it was Lillian Vernon that had some complicity in the fall of their consolidator, APX and then their own subsequent demise."

I think the Lillian Vernon scenario points to a great reason why it is very important for there to be three viable parcel carriers in the United States. The presence of three express players, who can competitively price and service parcels, has served to contain price increases and allowed shippers to negotiate significant concessions from the carriers. All three bring unique capabilities to the market. In order to keep pricing fair, all three need support. If DHL does not stay viable in the US then the potential is there to see a lot more Lillian Vernon’s in the not too distant future. If there is a duopoly in Express and ground then the shippers can blame themselves.

Jerry

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US Airways Follows UAL on 2nd Bag Fee

Here we go again.

US Airways, an airline that consistently rates LAST in customer satisfaction, has chosen to follow United Airlines recent decision to charge passengers $25.00 for carriage of a second piece of luggage. I recently wrote an article detailing how United was applying this fee and the several reasons why it was a BAD idea. This rule victimizes vacationing families most of all.

Rather than streamline their operations or incenting passengers to assist the airline in achieving operational efficiency, US Airways has chosen to charge the customer for their operational weaknesses.

Read my recent UAL article called "Here's Why I don't Fly United.". The same game is in play here with UAL. No wonder I don't fly either airline. (and I fly 150K miles a year.) When are airlines going to learn that the same behavior won't work in todays market? 

The big guys just don't get it.

clipped from www.statesmanjournal.com US Airways will permit only 1 free checked-in suitcase, plans to charge $25 for second By Chris Kahn The Associated Press February 26, 2008 TEMPE, Ariz. — US Airways Group Inc. said Tuesday it will start charging fliers $25 to check in a second bag, the latest effort by the company to raise revenue and deal with rising costs. The new charge will begin May 5 for tickets bought after Tuesday, the company said. The announcement follows a similar policy change disclosed early this month by United Airlines. US Airways spokesman Morgan Durant said the baggage charge is expected to generate $75 million in revenue and cost savings each year. The carrier decided to add the charge as it looked for new ways to make money while dealing “with the operating reality that we have with $100 a barrel in oil,” he said. About 8 percent of US Airways customers check more than one bag, Durant said.

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Two Catalog Retailers Seek Court Protection

Richard Palarea is the COO of PA & Associates, Inc., among the fastest growing privately held companies according to the Baltimore Business Journal. PA & Associates has been saving companies money by negotiating strategic small package carrier agreements for seventeen years. Mr. Palarea can be reached at 866-200-SAVE (7283) x 201, rich@paaa.com or www.paaa.com

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On February 20, 2008 troubled retailers Sharper Image Corp. and Lillian Vernon Corp. filed for creditor protection under Chapter 11, citing both the weak holiday season coupled with the struggling economy as the collective straws breaking the back of these formidable camels.

Sharper Image’s CFO Rebecca Roedell told CNN Money that the company had been experiencing declining sales since 2004, a severe liquidity crisis and began posting losses in fiscal 2005 that have continued through the first quarter of this year. Further pressure has come in the form of overseas price competition. The organization obviously had issues that it could not chart a recovery from, having installed its third CEO in 17 months. The market has been soft for its two mainstay products; air purifiers and massage chairs.

Of more concern to me was the Chapter 11 filing by Lillian Vernon. A veritable distribution legend, the 56-year old company specializes in home and garden items, personalized gifts and low price-point knick-knacks. The company had branched out from its traditional sales channel—a 90-page catalog containing 700-plus items – to the Internet. The online store seemed a natural fit and an efficient method of enhancing their already popular personalized gifts service.

Although the companies cite reasons in common for their demise, more than one Lillian Vernon statement I read stated “insurmountable costs from soaring printing and mailing expenses” and that their “$8 million mailing and shipping cost increases in 2007 ate up profits”.

Like my kitchen the morning after cooking fish for dinner… something doesn’t smell quite right.

It would seem that a catalog company specializing in distribution would have a handle on its printing and shipping costs. The Lillian Vernon website boasts that it shipped 3.3 million packages in 2006 from its Virginia Beach, VA national distribution center. The “center” is 827,000 square feet – the size of 18 football fields.

Another somewhat puzzling fact is that both Lillian Vernon and Sharper Image charge customers for shipping based on the ticket price of the order. While the method has been around for decades, it seems less relevant to employ this model today than it might have in years past. Why? With strategically-negotiated carrier agreements, significant control is available over shipping costs based on distance (zone) and weight. Furthermore, the pressures on ground pricing and market share acquisition are producing ground discounts-from-list rate those of us in the small package consulting and negotiating business would never have dreamed of in years prior. For direct-to-consumer operations like Sharper Image and Lillian Vernon, there have never been more competitive and strategic options for the residential delivery of ground packages. 

I concede that hiding behind the delivery-charge-by-order-total method may be a way for retailers to run a shipping profit center, but with today’s tight integration of warehouse management systems, order entry/ERP systems, shipment creation systems and back end accounting systems, exacting control is well within reach. Logistics managers of medium to large shipper that cannot account to the penny for shipping expenses versus revenue ought to consider why they think they will have a job on Monday morning.

I recently toured the impressive facility of a prospect account in the check printing business. The company is one of the largest custom check printers in the nation and spends $6 million annually with UPS; mostly for residential fulfillment. The spend comprises only 20% of their annual distribution expense; the remainder of packages are sent by U.S. Postal Service. It’s an enormous operation.

The upcoming postal increase of $0.01 scheduled to hit our pockets on May 12, 2008 will result in a $2 million expense increase to this client. Is he rolling over and dying?  It didn’t appear to be the case as I toured the thriving plant and met with this manager who was so intimate with his fulfillment pricing and how to leverage it correctly that I wouldn’t be surprised if his home wasn’t wallpapered with copies of his current UPS agreement. 

My point is this; every business…large or small…should avail themselves completely of every ounce of information available. These are lean times and businesses need to pay attention to every dollar being spent. Gone are the days when supply chain elements, especially outbound delivery, can be viewed as a sunk cost. These are highly variable, strategic and controllable elements which must be leveraged completely for any business to be healthy, survive and thrive. 

Rich

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Virgin Flies Biofuel Assisted B747 Test Flight

Virgin Atlantic recently flew a test flight from London to Amsterdam using a biofuel mixture of palm and babassu oil in one of the test 747's wing tanks.  The flight took place as a result of cooperation between Boeing and General Electric Aviation.   

Environmental groups called the event a stunt, claiming that biofuels threaten food crops and even potentially damaging the environment.  In this case Virgin responded by indicating that they were committed to green technologies and fuel sources and that neither of the components of the biofuel used were food stocks.  I think the flight was a true test program success.   It also sets commercial footing for another of Sir Richard Bransons enterprises.

Virgin has a company that produces biofuels in the form of ethanol in the United States.  I wrote about this in a previous article here at freightdawg.com.   Virgin Green Fund has made a $100 million dollar investment into the development of a variety of biofuels.

Where the environmentalists may have a point is with use of corn in North America as a feedstock for ethanol production. Corn is a primary food source for cattle and poultry production. Farmers who sell their corn for ethanol production limit the amount of corn available for food.  This drives up the cost of feed and ultimately the cost of food at the grocery store.    In developing countries this can be a very bad thing.   Development of biofuels through use of non food substances such as algae may be the better way to go long term, though some scientists doubt that enough algae can be grown and sustained to meet commercial demand.

clipped from www.theaustralian.news.com.au LONDON: The world's first commercial aircraft to be powered partly by biofuel flew into controversy yesterday as environmental campaigners denounced the inaugural flight as a publicity stunt. The Virgin Atlantic Boeing 747 flew from London to Amsterdam, with one of its fourmain tanks carrying 80 per cent standard jet fuel and a 20per cent mix of coconut and babassu oil. Virgin Atlantic chief Richard Branson said the passengerless test flight was a historic step towards using biofuels on commercial flights, with the aim of reducing carbon emissions. But he said fully commercial biofuel flights, still a few years away, were more likely to use feedstocks such as algae than the coconut and babassu oil mix. The fuel was developed in partnership with Boeing, engine-maker General Electric and energy company Imperium Renewables. Environmental groups say biofuel crops are raising food costs in developing countries, damaging the environment and displacing indigenous people.

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Just call me "Grandpaw"

This week there was a new parcel delivery that went perfectly.

Anybody who follows freightdawg.com knows that I put up new content regularly. This week has been an exception! On February 20th at 11:41AM our first grandchild, Gavin Joiner was born. Our daughter Claire and the baby are now home and healthy and happy. A great week for the Joiner clan!  Between a hectic work week and this blessed event, Freightdawg took a little rest.   In the meantime our family added 8 lbs 2oz of perfection.

Just call me "Grandpaw". I'll put up with the teasing just to enjoy holding this little fellow.  My sister teased me the other day about this and I said "but you're a great aunt!" in retort, she said ..."I was always a GREAT Aunt!. You're GRANDPAW!" 

Yes I am. And blessed to be so.   Look for more freightdawg topical stuff next week.

Eric

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LinkedIn Networking Groups: A great way to stay connected!

Those who follow my writing here at freightdawg.com know that I am a big believer in the power of social networking using LinkedIn Network. Its a great site for connecting with logistics and supply chain professionals as well as others in related industries such as banking, government, consulting, executive search and operations management.   Unlike other social networks, like Facebook or MySpace, LinkedIn really caters to business professionals.

I have really come to like the ability within LinkedIn to form sub-groups of people with particular interests.  I belong to several of these groups on topics ranging from air freight to the Supply Chain Network.  The talent in these collections of people is amazing.

I recently set up a new group for colleagues and alumni of DHL and DPWN related companies called the "DHL Networking Group" to in order to keep track of my own business contacts and resources. Anyone interested in joining that group may do so by visiting this web address.  Note that the group is open only to DPWN related colleagues and alumni.

NOTE: Reference to DHL is not an endorsement of this LinkedIn group by DHL nor DPWN, only that it is a common employer of present and former staff.  Participation is voluntary and independent of any DHL/DPWN official activities, funding or endorsements.

Eric

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AST&L Announces New Distinguished Logistics Professionals

Here's a little publicity that includes yours truly.  I'm very pleased and honored to be a part of the American Society of Transportation and Logistics. AST&L is one of  the oldest professional transportation organizations in the world.  AST&L is one group every logistics professional should belong to! 

Washington, DC  February 14, 2008  The Board of Directors of the American Society of Transportation & Logistics ® has approved the following nominees for the prestigious DLP (Distinguished Logistics Professional). This designation recognizes the unique, upper echelon of logistics professionals who have shown their mastery through significant and career-long contributions in the industry.

Jim Cochrane was named Manager of Package Services for the U.S. Postal Service in 2002 directing the product development and strategy for the USPS' $11 billion portfolio of domestic and international package products. Under Jim's direction, the USPS is developing new product initiatives, as well as enhancing and repositioning existing products to improve customer value. Beginning in 1974, his broad knowledge of Postal Operations derives from having served in positions of increasing responsibility in Operations, Sales and Marketing. His operational background includes time as the District Manager, Customer Service and Sales of the Washington DC metropolitan area, where he led the efforts of 14,000 employees in over 200 facilities. Jim is a graduate of American University with a Masters Degree in Public Administration from the School of Public Affairs, Key Executive Program.

Harold Friedman has been helping companies reduce their transportation costs and the costs associated with the processing of transportation invoices for over 38 years.  He is Senior Vice President for Global Corporate Development at Data2Logistics, LLC.   He was the driving force to establish freight bill processing on a global basis.  He had been with Data2Logistics' since they acquired his company, CTI Logistics. Mr. Friedman had previously been President of Chase Trans Info, the freight bill processing subsidiary of The Chase Manhattan Bank.  He holds a BA degree in Accounting from Pace University and attended Wharton School of Continuing Studies.  He graduated with honors from the U.S. Army Transportation School and is a member of numerous transportation organizations. 

Joe Hete joined ABX as Accounting Manager in September of 1980 and held positions as Treasurer, Director of Strategic Planning, and Director of Administration from 1981 to 1985. He was promoted to Senior Director of Administration in 1985, to Vice President of Administration in 1986 and to Senior Vice President of Administration in 1991. In early 1997 he was named Chief Operating Officer, and he was named President and COO in December of 1999. He became President and CEO in August of 2003. Joe is active in his community serving as Honorary Chairman, Clinton County United Way Drive and director on several boards. He graduated from University of Akron, BS in Accounting and took graduate coursework at Cleveland State University.

Eric Joiner is a Regional Customer Manager for DHL Global Customer Solutions.  Eric manages multi-national customers in the Americas for DHL's Global Sales team known as GCS. GCS handles DHL's top 100 strategic accounts.  Eric has 25 years experience in domestic and international supply chain, logistics and logistics software fields, and his record includes successful executive level management of customer relationships in Europe, Asia, and US markets. He has worked with Fortune 500 customers in the CPG, Electronics, retail and engineering and manufacturing verticals. Eric graduated from Auburn University with a BS in Marketing and Transportation. In addition to the DLP, Eric was elected to the Board of Directors of AST&L.

Douglas Kahl is currently the Transportation Products Director for Unishippers. Doug's logistics career began in 1987 with Airborne Express in sales, sales management and training throughout the United States, Canada, Europe and Asia. He played a role in launching ComAlliance, a third-party fulfillment company; as the Director of Sales & Business Development Doug played a role in AFMS' growth and recognition as a two-time recipient of the Inc 500 award as one of the fastest growing private companies in America; and now at Unishippers Global Logistics, a 3PL focused on helping the SMB sector in managing their transportation programs Doug is the Transportation Products Director responsible for managing the strategic sourcing of over $200m in transportation. He attended Arizona State University earning a Bachelor of Science degree in Business Administration, Finance in 1984.

Tom Underkoffler is currently the Director of Logistics of Medco Health Solutions, Inc. based in Franklin Lakes, NJ. Medco is a leader in managing prescription drug benefit programs that are designed to moderate the cost and enhance the quality of pharmacy healthcare for private and public employers, health plans, labor unions and government agencies of all sizes, and for those individuals served by the Medicare Part D Prescription Drug Program. At Medco, Tom is currently responsible for all cost and service components of distributing mail order medication to more than 1.2M members per week. Tom and his team manage the most advanced physical and electronic distribution network in the PBM industry. Tom is on the Board of Directors for both the Association of Postal Commerce (PostCom) and for the Parcel Shippers Association (PSA) in Washington, DC.

About AST&L

The American Society of Transportation and Logistics is a professional society founded in 1946 by industry leaders to insure a high level of professionalism and promote continuing education in the field of transportation and logistics. AST&L's mission is to facilitate education and certification in the fields of transportation, logistics, and supply chain management. The membership of shippers, carriers, educators, consultants and third-party logistics individuals are dedicated to continuing education and are committed to raising the professional standards in the industry.  For additional information visit www.astl.org.

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Parcel Market Dynamics: A Rate Flexible USPS?

Jerry Hempstead of Hempstead Consulting is a great friend and former colleague of mine. After 32 years in the express and parcel business in the United States, Jerry "retired" a couple of years ago only to become one exceptionally busy guy. Jerry's expert knowledge of the parcel business has led him to some very interesting consulting engagements in China and the United States.

The article below is an Opinion/Editorial reflecting Jerry's personal insights. Jerry can be reached at gmhempstead@aol.com

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You may not have noticed but history was made this week.

The United States Post Office (USPS) announced a rate increase.

Now you might think that they raise rates all the time. Well not quite.

Prior to this weeks announcement of increases in First Class postage and other mailing rates, the USPS had to have rates approved by the Postal Regulatory Commission.  This was a long, drawn out process that could take months and involve testimony, rate filings, and federal negotiation. Prior to the adoption of “The Postal Accountability and Enhancement Act” the Post Office had to fight to change any price. They were not free to increase (or decrease) their prices.

Now, the USPS can raise rates on their non-competitive products (those covered by their monopoly) each year in May, so long as the distributed increase in cost to mailers does not exceed the increase in the Consumer Price Index.

The USPS used to have to cart all kinds of documentation in front of the PRC for debate.  These included minutia on all historic costs, projected costs in the future, current and projected volumes by class of mail, as well as their attributed costs for current and projected volumes.  The PRC is an independent, appointed board that represents you and me.  It is chartered with the mission to keep the US Postal monopoly from using its powers unfairly by overcharging the public. In the past the USPS had to run a break even operation. Prices and costs prices had to align.

A request for a change used to signal the beginning of a 10 month debate.  Parcel firms like UPS and FedEx would argue that rates were not going up ENOUGH while major mailers would argue that rates at least in their classification were going up unfairly and that they were being asked to subsidize other classes of mail.

The point of my piece today is twofold. One is to point out that on the monopoly products the rates are going to go up each May. I think it would be prudent to count on that. But you can plan for that.  Monopoly products include stamps for example. 

The Post Office is offering a hedge against rate increases however, at least for first class, called the Forever Stamp. It costs $.41 and is good for door to door transportation, inclusive of all fees and surcharges to any point, business or residential in the 50 states and Puerto Rico. That’s an awesome deal and their service is great.  This is actually prepaid transportation that never expires.  

The second thing to note in the announcement is that rate increases for Parcel Services, Express Mail, Priority Mail & Parcel Select were not announced. 

Isn't that odd?

These are now considered competitive products because they compete straight up with UPS, FedEx and DHL. The people that fought this case made sure the USPS had to compete fairly and the cost of these products now will have to carry the burden of an implied income tax just as if the USPS were like a regular company. Think about why UPS and Fed may have wanted to have the USPS add costs to their pricing formula.

In any event these prices will be announced shortly. In the past the USPS did not have residential fees or out of area surcharges, or fuel surcharges, but the new legislation now allows the USPS to price their competitive products just like everyone else in the business.

The great news is that with the legislation also came new latitude for the USPS to offer shippers discounts just like the other guys. 

The rate commission has not yet decided on what the rules of engagement are going to be for the USPS to offer these discounts. I would hate it if the rate commission said that the USPS had to publish those discounts because then that would just undermine the process.  FedEx and UPS would just price under the USPS and the positive impact of creating more competition would be lost.

I would challenge you, that if you think the United States would benefit by having the USPS be able to operate in the parcel space just like the other three big guys, you should write to the PRC. (www.prc.gov) or join a lobby group like the Parcel Shippers Association (PSA) or POSTCOM. So many are impacted by the USPS changes and potential changes and yet few are involved. 

Every corporation in America will be affected by this rate increase in May. It's been public knowledge since last May that this was coming.

I wonder how many budgeted for it? The US Post Office with the ability to negotiate individual rate deals with corporations would be the 8000 lb parcel gorilla.

Jerry

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Green Rails: CSX Calculates Carbon Footprint

I really have to hand it to the marketers at CSX. Class 1 railroads don't usually engage in extensive on-line advertising, but CSX has been running a campaign on Yahoo! and other sites for months now. Their on-line web advertising campaign is unique in the freight market. Now CSX is extending their marketing by showing that not only are railroads cost effective, but they are an environmentally responsible way to move freight. 

CSX this week added a "Carbon Calculator" to their web site. This tool is designed to allow shippers to look at the "carbon footprint" of a particular freight movement based on size and weight of the shipment as well as distance. CSX makes the claim that railroads can move a ton of freight for over 400 miles on a single gallon of fuel. Of course that's an incremental measurement based on moving many, many, many tons of freight at once.

The heavier the weight and the larger the size of the consignment, the more cost effective railroads are.  Movement of 300 tons of a commodity material such as chemicals over a 1000 mile distance shows that a total carbon emissions savings of over 18 tons is possible.   This is based on use of 4 rail cars versus 27 semi trucks. If you play with the tool though, it also shows the break point (carbon wise) between trucks and trains.

If you have a single truckload of product, at say 18 tons, you can move that material up to 800 miles with the same carbon impact as a railroad. That's because rail transportation is designed to move thousands of tons of freight with a specialized heavylift device...a rail locomotive. Lighter loads and shorter distances still favor trucks. Heavier and longer is a railroad move.

The concept of a green calculator is a really great idea. I'd like to see one created that compares modes beyond truck.  What about barges and domestic short sea shipping? Short sea shipping is a mode whose future is coming.   Horizon Lines I know thinks so.   Further, what about international shipments? DHL has a new business unit called DHL Neutral Services that provides consultancy in looking at designing green supply chains. The direct cost of freight movement might be slightly higher, but if the total cost of the supply chain goes down because of indirect cost savings, including environmental impact, then both customers and communities benefit.

Green is going to become a significant force in RFQ's in 2008 and beyond.  Publicly traded companies are being asked what their policy is toward the environment.   That will cascade downward to vendors and suppliers. CSX is positioning itself toward both marketing attractiveness and social responsibility. In addition to showing that railroading as an industry is a cost effective way to move freight, it shows that CSX is a member of a greater community.

Eric

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