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

UPS Bikes Around Hawaiian Military Bases

KGM Channel 9 in Hawaii had an interesting report today on UPS's use of bicycles to deliver parcels at three military bases on the big island of Hawaii.  Said to be an experiment in "green" economics, the practice might expand to other sites.

In Europe, Latin America and in parts of Asia, seeing couriers on everything from gondolas to motorcycles to bikes is nothing new.   Its interesting to see this being used more now in the US.

Now the big question... are the drivers Teamsters?

UPS Experiments With Bicycle Deliveries Written by Brooks Baehr - bbaehr@kgmb9.com December 24, 2008 06:05 PM The company famous for its brown color scheme is taking a new "green" approach to Christmas. For the first time UPS is using pedal power to deliver packages on Oahu. UPS "driver helpers" have gotten out of their trademark brown trucks and onto bicycles to make deliveries at three military installations (Hickam, Schofield, Helemano). "We're saving money. We're not putting another car on the road to make these deliveries," said UPS Human Services Manager Ben Dorado. "We're not consuming as much fuel. And also we're not having any C02 emissions." "We like to call it our green routes. It's helping the environment. And also it's helping us getting done what we need to get done," Dorado added.

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Evergreen Cuts Costs in US Sales Agency Operations

Over the last 30 years, Evergreen Marine has developed a reputation as a symbol of global growth in the container shipping industry.  As an EMC competitor for many years, it always seemed that despite whatever the economic situation was, Evergreen was growing.

However, today, EMC announced reductions in staff and office consolidation in its US sales organization.  This follows announcements by other carriers, including APL and Maersk in terms of major liner operators who are reconfiguring their operations to meet a souring market demand.  If there was ever a sign that the US economy is in recession, cutbacks by Evergreen are a serious indication.

The JOC published in a related article that EMC net income dropped approximately 46 million dollars through the first nine months of 2008.

EMC as well as other carriers in the Asian markets  have seen results suffer as rates have crashed on key trade lanes.

Evergreen Shipping Agency cuts jobs in US restructuring Updated December 30, 2008 12:44:50 PM The JOURNAL of COMMERCE ONLINE Evergreen Shipping Agency (America), agents for Evergreen Marine Corp., announced today that it will consolidate some North America offices and reduce staff in the face of the downturn in the global ocean shipping business. "The worldwide economic turmoil has created a situation we have not seen in our lifetimes," the company said in a statement to its North America employees. The measures being taken will reduce costs and put the agency on a more sustainable structure moving forward, it said. Affected offices include Baltimore, Charleston, Chicago, Norfolk and Toronto. The agency will close its Salt Lake City office and move work done there to Dallas. The company said a number of new positions will open and agency employees may apply. Severance including salary and benefits will be given to employees whose positions will be eliminated. The changes will be implemented on or before March 15. The company did not say how many jobs are being eliminated. "It is disappointing and disheartening that we are faced with a decision that has also impacted virtually every other carrier in ocean shipping today," an agency spokesperson said. "We are positioning EGA to survive the catastrophic economic crisis and to succeed when we recover from these difficult times."

Eric

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Kalitta Air Crash: Bird Strike/FOD

On May 26th, Kalitta Air B7470200F  N209CK crashed on an aborted take off from Brussels Belgium enroute to Bahrain.  The aircraft was on charter to DHL Express.   There was no loss of life, but the aircraft was a complete loss, having broken its back in multiple places. 

European air safety authorities have now ruled that the crash was a result of ingestion of a bird into the number 3 engine.  The resulting loss of power created an overrun of the runway and loss of the aircraft.  

Belgian authorities reported the bird as a Kestrel, a common small bird of prey.   In this case, the little raptor destroyed one of the largest birds on earth.

Kalitta Airways has had a particularly rough year.  Two weeks following this crash, another Kalitta jet crashed in Colombia, while later in the year dragster driver Scott Kalitta, son of Kalitta Airways founder Connie Kalitta, was killed in a racing related accident.

Kalitta has also sufferred the same economic issues as other global freight carriers, recently grounding almost half of their 21 aircraft fleet due to weak market conditions.  The air carrier also laid off approximately 200 workers.

Eric

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A Tangled Web for Christmas This Year

For years I have told my customers that as a carrier,  we were more of a part of each others business than either truly appreciated.   In fact, I used to say, "If you can't sell it, I can't ship it".

Nowhere is that saying more apparent than in today's retail market. Even in this holiday peak season, parcel volumes are well down.  DHL is quickly leaving the US domestic (only) market, yet FedEx and UPS are not full because major online shippers are not hitting the sales volumes of years past.

DHL has been well publicized (and criticized) for it's restructuring efforts in the US parcel trades, but this week FedEx announced salary reductions and changes in bonus and benefits structures that will hurt their exempt employees all the way up to Fred Smith, CEO of FedEx.   These are tough times that hurt everybody.

There are parcel aircraft that were flying last year that are sitting in the desert this season because of lack of volume.

However, the US and global economic downturn extends to all facets of business.    The US government is struggling to figure out how to bale out the US automakers, whilst other industries including high tech and manufacturing firms are turning away from parcel and air freight and more toward slower, extended modes of transport like ocean.  I know that every time I talk about LCL or any deferred freight product, my customers perk up considerably.  While shippers struggle to figure out how to deal with this economy, carriers are doing what would seem crazy 12 months ago. 

These include:

• Maersk Line laying up ships to reduce available capacity.   These are capital assets which are of greater value not earning any money than incurring any costs. 
• APL announced lay offs of up to 1000 employees and a probable change of headquarters addresses away from expensive but historically significant, Oakland, California. (now announced as moving to Phoenix!)
• DHL announced and is in progress of withdrawing from the US parcel business, whilst keeping traditional US international services.  The cost to serve is just too expensive.  This was accompanied by lay offs of a major portion of the US company in resizing the business.  
• FedEx announcing salary reductions for exempt employees as well as senior executives.  A hiring freeze.  Reductions in 401K benefits for a period up to a year as well as other bonus and compensation reductions.  I will say that this decision probably saves FedEx from firing people at least near term.
• Numerous commercial passenger and air freight airlines have either restructured or shut down capacity on key lanes.  This drives up cost to shippers and limits options on multiple lanes within major markets.

This is just part of a longer list, but these are major, global transportation companies whose employees are feeling (directly) the pinch of "If you can't sell it, I can't ship it".  That's not to blame anybody, its to highlight the fact that all of us work in a tightly woven, interconnected global market place.  

I don't have a recipe for a cure here, but I will say that smart managers are reacting to tough times both authoritatively and probably too severely, but only hindsight will tell that.    In the meantime, families of employees of many transportation companies this year will have a leaner Christmas than in years past.  They will share that experience with the families of their customers.   

Perhaps that will create a bond for discussion in the new year. The US government will have new leadership in late January that appears motivated to do "something" toward economic stimulus.   Transportation infrastructure will be a key part of that package if the new team is wise enough to realize it.

In the meantime, we all better buckle our seatbelts for a long ride. I ask that you pray for peace and your fellow man harder than ever this year.  Many, many families will need it.

Merry Christmas and Happy Holidays

Eric

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Hard Times make Strange Bedfellows

Ocean carriers have been sharing capacity for years. Ocean carriers pool ships, terminals, containers and capacities in order to save on the huge cost of operating merchant container fleets. It is not as common to see whole fleet alliances, consisting of multiple carriers merge services to serve a particular trade. Such is the case below.

The Grand Alliance, consisting of Hapag-Lloyd Container Line, MISC, Nippon Yusen Kaisha (NYK), and Orient Overseas Container Line (OOCL), and New World Alliance members (TNWA) APL, Hyundai Merchant Marine and MOL, are pooling their assets to serve the Asia to West Med trade.

The carriers have had an agreement to combine services to serve specific markets since 2006. Such flexibility allows the carriers to match capacity to available cargo demand. In hard economic times such as today, that flexibility takes cost out of the service while stabilizing equitable freight rates.

The carrier alliances have cooperated before to serve markets such as the Black Sea trade from Asia. That service started in June, 2008.

Grand Alliance, NWA pool services on Asia-West Med Updated December 12, 2008 2:57:53 PM clipped from The JOURNAL of COMMERCE ONLINE Two rival ocean container consortia have pooled services between Asia and Europe in the latest capacity cuts amid declining cargo volumes and tumbling freight rates on one of the biggest liner trade routes. The four-carrier Grand Alliance and the three-member New World Alliance today announced they are joining forces in a revised Asia-West Mediterranean service, halving the number of vessels currently operating the route. The new service, due to start December. 23, will be operated by eight 6,000 TEUs vessels -- six from the Grand Alliance and two from the New World Alliance. The carriers said the new service, EUM, would offer shippers “better market coverage” by including Busan and Valencia. The service rotation is Busan, Shanghai, Ningo, Chiwan, Shekou, Hong Kong, Singapore, Port Klang, Jeddah, Damietta, Genoa, Marseilles-Fos, Barcelona, Valencia, Damietta, Singapore, Hong Kong, and Busan.

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