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

CSCMP Releases 2010 State of Logistics Report

Sponsored by Penske Logistics, the Council of Supply Chain Management Professionsl (CSMP) released their 2010 state of the logistics industry.

Check out this video with Rosalyn Wilson, author of the report.

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The 21^st Annual “State of Logistics Report^®,” released by the Council of Supply Chain Management Professionals (CSCMP) and presented by Penske Logistics, reveals that, continuing the decline reported in 2008, business logistics costs fell to 7.7 percent of U.S. Gross Domestic Product (GDP) in 2009, as compared to 9.3 percent the previous year.  Total U.S. logistics costs dropped again last year showing a significant decrease from 2008.  Interest rates remained historically low, and this, combined with lower inventory levels, pushed the interest paid on inventories down over 89 percent from 2008 levels. 

 The report, authored by Rosalyn Wilson, a transportation consultant for Delcan Corporation, was presented today at the National Press Club in Washington, DC. A panel of senior supply chain executives and academics from BNSF Railway, Covidien, Delcan Corporation, Jones Lang LaSalle, Miami University (Ohio), Penske Logistics, Staples, and Sustainable SC Consulting discussed the implications of the report’s findings on their companies, the logistics industry, and on the economy as it recovers.

via state-of-logistics.presslift.com

DHL: Press Releases

 I'm a few days late in posting this, but this is a significant event for DHL and the folks in Clinton County, Ohio. DHL donated the former Airborne hub at Wilmington, Ohio to the Clinton County Port Authority.

What DHL gave the CCPA is a big, big deal. This is the largest privately held airport in the United States. Its a former SAC base with twin 10,000 ft runways and a complete logistics infrastructure to support it.  A major airport capable of landing 747's in the middle of the United States, plus 1500 acres of logistics park, including warehouses, etc.  Is a great asset to help central Ohio recover from the jobs loss created by the DHL hub move to CVG and its departure from the US domestic parcel business.

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CCPA, DHL FINALIZE AIR PARK TRANSACTION Wilmington, Ohio and Plantation, Fla. -- June 3, 2010 Deutsche Post DHL officially deeded the Wilmington Air Park to the Clinton County Port Authority (CCPA) in an afternoon ceremony held at the former Employee Welcome Center, highlighting the opportunity to once again open the Air Park to employee traffic.  
 
"We are pleased to accept this donation today," said John Limbert, Chairman of the CCPA. "However we understand it is just the beginning of the process of reactivating the Air Park. There is still a lot of work ahead of us." 
 
Many dignitaries were in attendance to mark the occasion. Representatives from the Ohio Department of Development and the Economic Task Force, as well as local and regional elected and business officials shared their comments with the group assembled at the Air Park. 
 
"I commend John Limbert of the CCPA who, along with State and Local Officials, worked diligently alongside our DHL team to conclude the donation agreement in the best interests of the local community," said Ian Clough, CEO of DHL Express USA. "With today's official donation of the Wilmington Air Park, we are confident that the community here and throughout southwest Ohio will be poised to prosper and attract new and exciting development to the Air Park property in the future." 
 
The CCPA, working with the State of Ohio, the County Commissioners, the Mayor's office and other Economic Development leaders, have been bringing visitors to the Air Park, sharing information on building specifications and discussing possible business opportunities. Now that it can enter into agreements with these groups, the CCPA will be able to negotiate in more detail with these potential tenants what it would take to make things move forward. 
 
"A lot of people put a lot of hours into this donation agreement," noted Limbert. "We want to thank DHL for this opportunity for our community and for their commitment throughout the process." 
 
At different points in the process over the last year - negotiations first began in early June of 2009 - DHL and the CCPA had the assistance of representatives from the State of Ohio, from national legislators, the community and its leaders and professional consultants, all with the intent of making sure the Air Park would be functional and viable as the CCPA accepted ownership and began to market it in earnest. 
 
Included in the property transfer are approximately 1,500 acres of land and several buildings located, for the most part, "inside the fence" of the airport. ATSG, ABX Air and AMES all will continue their leases of buildings at the airport. 

via www.dhl-usa.com

BNSF Runs the Ethanol Express

Burlington Northern Santa Fe Railroad moves a lot of ethanol. With major track ownership in the US midwest, BNSF is a prime mover of corn and corn related products. Unit trains of ethanol move to market regularly with BNSF operating a key unit train to Dallas called the Ethanol Express.

Warren Buffet has invested a lot of money in BNSF as well as other railroad assets such as Union Tank Car. (UTLX).

BNSF Expands Ethanol Express to Dallas/Fort Worth FORT WORTH, Texas and OKLAHOMA CITY, Okla., Oct. 9, 2008: BNSF Railway Co. today announced that it will begin delivering unit trains to Musket Corporation's newest ethanol storage terminal on Nov. 1. With storage capacity of 10 million gallons, the Dallas/Fort Worth Musket Ethanol Terminal is one of the area's largest ethanol storage facilities and is designed to meet the daily needs of the Dallas/Fort Worth Metroplex. Located in the Mark IV industrial area in North Fort Worth, the facility maintains its own rail spur and is designed to completely unload a unit train of 95 cars every 24 hours. Tank cars are drained via an underground piping system and ethanol is pumped directly into the four storage tanks. The ethanol can then be pumped directly into trucks for local distribution. The new facility will receive shipments exclusively from BNSF Railway's Ethanol Express a 95-car unit train service specifically created to move ethanol from a single origin or gathering place to a single destination. The Ethanol Express will save ethanol producers and end-users time and money through increased fleet utilization, lower inventory carrying costs, and logistics coordination and support each and every day around the clock. BNSF moves more than 370 million gallons of ethanol per year through the Ethanol Express program.

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Economic Downturn Spells reduction in Container Capacity

Everybody expected that the airlines would reduce capacity this fall.  They have been saying this for months. Shippers planned for it.  I'm less sure however of how many US importers expected a reduction in container ship capacity.  The US and global economic downturn definitely has taken a toll on ocean carriers. They've just been a bit less visible in terms of planning for the crisis at hand.  

APL has now announced a reduction in capacity in its east-west trades between Asia, the US and Europe.   This is not surprising given the reduced demand created by the weakening in consumer confidence as well as fuel volatility particularly in the North American market place.  It also does not surprise me since APL CEO Ron Widdows is an operations guy.   He thinks in terms of ships and capacity.

What APL doesn't say is what they will do with their ships.  Containership capacity doesn't just "go away".  It gets laid up.  APL has made a calculated decision that ship capacity is cheaper being parked than moving freight.  Don't expect APL to be the first to make this decision either.  Consortium partners will naturally have to consider the impact, not only of APL's decision, but whether they themselves should also consider parking some tonnage to wait out the storm.   

Maersk, Evergreen and major Japanese carriers no doubt will be considering this as well even within their own homogenous, but huge fleets of container vessels.  The goal is matching market capacity against shippers ability to pay the highest rate that can be negotiated.  If ships are not available, rates go UP. Carriers are betting on this with fleet reductions. Much of it however is a reflection of re-balancing of trade. Ships follow the business. Current economic pressures will squeeze new origins and port pairs. APL is being very smart in waiting to see how this all balances out.

APL slashes capacity on major trade lanes Updated October 21, 2008 9:14:52 AM Peter T. Leach / The JOURNAL of COMMERCE ONLINE Today APL announced it is slashing vessel capacity on the major east-west shipping lanes and restructuring its network in response to what it called "increasingly challenging conditions in the major container trades". The subsidiary of Singapore-based Neptune Orient Lines, and the eighth-largest global liner company, said the capacity reductions would amount to 25 percent on the Asia-Europe trade and 20 percent on the trans-Pacific. "The traditional seasonal softening of demand in the main container trades has been compounded by the global financial crisis and economic slowdown," said APL President Eng Aik Meng. On the trans-Pacific trade between Asia and North America, APL already has suspended the PS3 (Pacific South Express 3) service. To cover the loss, it has upsized the PCX (Pacific China Express) service and revised its port rotation as follows: Ningbo, Yangshan, Kwanyang, Pusan, Long Beach, Oakland, Pusan, Kwanyang, Ningbo. The liner operator also has suspended the PSW (Pacific South West) service. In light of this change, the SAX (South Asia Express) service now makes additional calls at Yantian and Chiwan. The revised SAX rotation is: Singapore, Yantian, Chiwan, Singapore, Kaohsiung, Chiwan, and Singapore. The PCE (Pacific Coast Express) is omitting calls at Xingang and Nagoya, but includes an additional Pusan call in the eastbound direction. Revised coverage is Qingdao, Pusan, Yokohama, Singapore, Oakland, Dutch Harbor, Yokohama, Pusan, and Qingdao.

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Supply Chain Strategy: Developed by Market.

Cranfield University in the UK is a leading supply chain educational institution. Richard Wilding, PhD is an expert on supply chain strategy by market. He is a professor of Supply Chain Risk Management at Cranfield. Dr. Wilding is a well respected expert in Europe on Supply Chain Strategy.

Corporate marketing teams make the case relative to product value in individual markets. Logistics teams however are the ones who fulfill the delivery of the promise made by marketing.

Eric

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Old School Air Cargo

Once upon a time, back in the 1960's, my grandmother, my granddad and my father all worked for Lockheed Georgia Company in Marietta, Georgia.  In those days the premier products coming out of Lockheed Georgia were the C-130 and the C-141.  By 1970 that also included the mammoth C-5A.

The Vietnam War was raging and Lockheed couldn't produce enough airplanes.  The parking lot at what had been the "Bell Bomber Plant" in the 40's, and became "Air Force Plant No.6", was full. 

My father worked in international aircraft sales.  Amongst the derivative products of the C-130 was the L-100.  The L-100 was a civilian version of the venerable and well proven C-130 Hercules.  I loved it as a kid.  Simple reason.  Dad had a desk model of the L-100 in Delta colors.  Any airplane I could play with had to be cool.

Delta and Alaska Airlines operated the L-100 along with Southern Air, which had its connections to the CIA.  I wish I still had that desk model...

At the time the L-100 was introduced with Delta, the main customers were "Aerospace customers". Guess what?   The main customers that would have fit Delta's route structure then would have been Lockheed California Company and Lockheed Georgia. The CEO of both Lockheed companies was Dan Houghton.  My Grandmother happened to be his executive secretary.  (she was a bar certified lawyer to boot.)

What is ironic is that Delta abandoned specialized air cargo aircraft when they developed belly capacity in then new, wide body aircraft like the 747, L1011 and DC-10.  Delta abandoned the 747 in  1976 because it didn't fit their network.  The L-1011 was a workhorse and handled the majority of domestic air cargo.

Today, airlines are using regional jets and smaller commercial jets to service longer distances.  This has killed the domestic air cargo market because there is no excess belly space for freight.  Perhaps an aircraft like the L-100 would have found a niche today?

As for "Air Force Plant No. 6"... Lockheed produces a new product called the F-22.  Along side the C-130J!

clipped from blog.delta.com Forty-two years ago this month, on September 15, 1966, Delta launched the world’s first scheduled service of the all-cargo, turbo-prop Lockheed L-100 Hercules.  It was the commercial version of the military C-130 Hercules, famous its ability to land on unimproved short strips, yet carry bulky loads and vehicles. This photo of the rear of the boxy L-100 fuselage shows the loading system.  Cargo pallet transporters, pulled in a train by a tug, were wisked from the Delta freight facility to the Hercules.  The palletized freight was then moved over the roller bed surfaces of the transporters and the floor of the plane.  Here, you see a T-shape option for complex loading/unloading where the pallets are moving from side position onto the main line of loading.  According to Delta press releases from 1966, three men could unload and load a full Hercules–45,000 pounds–in less than 30 minutes. The Hercules was suited to Delta’s relatively short haul, small shipment operation in the 1960s.  With this plane, we offered the first single-carrier cargo service between California and the Southeast, filling a big gap between the aerospace industries in those regions. When our first widebody passenger jets–the Boeing 747 and Douglas DC-10–arrived with their speed and large underfloor “belly bin” capacity, we did not need a fleet of specialized cargo aircraft any longer.  Delta’s last L-100 flight operated thirty-five years ago this month, on September 1, 1973.

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AeroLogic signs with Boeing for after market services

AeroLogic is a joint venture company between DHL and Lufthansa Using a fleet of Boeing 777-200F freighters, they will jointly serve markets in Europe, North America, Asia and other destinations as needed starting in 2009.

AeroLogic is based in Leipzig Germany, which is a joint freighter hub for both carriers. Their fleet will eventually consist of 11 x 777-200F freighters.

Boeing will provide after market support.

clipped from www.marketwatch.com Boeing and AeroLogic Partner to Streamline Carrier's Maintenance Operations MADRID, Spain, Sept 25, 2008 - Boeing announced today at MRO Europe that AeroLogic has adopted the airplane manufacturer's Web-based solutions, Maintenance Performance Toolbox and Airplane Health Management, as foundations for the carrier's 777 Freighter maintenance documentation platform when deliveries begin in 2009. Maintenance Performance Toolbox, including the Library and Authoring modules, will help AeroLogic, based in Leipzig/Halle, Germany, streamline an array of maintenance activities, including managing technical publications and training and customizing online maintenance manuals. A total of 14 European carriers now use this innovative maintenance tool. AeroLogic will use Boeing's Airplane Health Management to monitor its 777 Freighters, giving the airline a real-time fault management tool to identify maintenance needs and communicate with ground teams to enable proactive, planned and timely maintenance operations and address potential issues. AeroLogic GmbH is jointly owned by DHL Express and Lufthansa Cargo AG, with each company holding a 50 percent stake. The airline, which was founded in September 2007, developed from the joint venture set up by the two partners in 2004. AeroLogic's cargo capacities will be used primarily by DHL Express and Lufthansa Cargo. The two partners also will be responsible for sales and warehouse handling.

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DAL/NWA Merger Takes Next Step

Back in April of this year Delta and Northwest Airlines announced their intent to merge their two airlines into a single entity still called Delta.

Today, the FAA approved a transitional plan to merge the air operations of the two airlines into a single network. Ultimately that will result in a single operating certificate. The process should take about 18 months.

Delta is holding its annual shareholders meeting in New York this week.  Delta Shareholders are expected to approve issuance of new shares to buy Northwest.  Northwest Shareholders will be asked to approve the acquisition.  DAL hopes this whole thing is done and dusted by the end of the year.

As a long time Delta passenger, native Atlantan, former DAL summer employee, and general fan of the airline, I'm not so sure this whole thing works to my benefit as a passenger.  However, as a freight carrier, Delta will clearly benefit from Northwests experience in cargo operations and extensive Asian routes. (at least the ones they haven't killed off yet.) Professionally I like that.

We will see. 

clipped from minnesota.publicradio.org FAA approves transition plan for Delta, NWA merger September 22, 2008 Atlanta — (AP) - The Federal Aviation Administration has approved a transition plan designed to combine the operations of Delta Air Lines and Eagan-based Northwest Airlines, and to achieve a single operating certificate after they merge. Airlines are required to have an operating certificate, which means they must prove to the FAA that they have the financing and management expertise to run an airline. Delta and Northwest each have their own operating certificate right now. The plan they submitted to the FAA outlines the methodology, processes, tools and timing they will employ to maintain the safety of their day-to-day operations during the transition period. The FAA's seal of approval for that plan means the two airlines can move forward with the transition process. Their goal is to achieve a single operating certificate over the next 15 to 18 months.

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Airline Fuel Hedging is Risky Business

Airlines buy fuel hedges in an effort to balance current cost of fuel against what they think the price of fuel will be in the future. That's an excellent strategy when the price of fuel goes up.  Southwest Airlines and Alaska Airlines are both famous for doing this very well.  In a number of fiscal quarters SWA has claimed that the only reason they made money was that they had a competitive advantage in the price of fuel because they hedged well.

Typically airlines hedge by buying forward contracts on kerosene, or home heating oil because Jet fuel isn't actually a traded commodity.  Kerosene however moves at about the same price levels as Jet Fuel.

Now, while aviation fuel remains high, the price for crude oil is falling.  United, Northwest and Delta are feeling the pinch and stand to lose money on their hedges.   Hurricane Ike took a number of refineries off line so supply is keeping the price of Jet A high even while the kerosene or heating oil the airlines used for hedges falls. 

clipped from seattletimes.nwsource.com By JOSHUA FREED The Associated Press MINNEAPOLIS — Airline bets that oil prices would rise looked like a no-brainer this summer. But with oil prices falling, those hedges against rising fuel costs are getting expensive. United Airlines said today it is on track to lose $544 million on fuel hedges this quarter. That included $72 million in realized losses and another $472 million in unrealized losses. Those positions forced United to put $400 million into restricted cash for the parties on the other side of its oil price bets. Other airlines have not disclosed their hedging losses or gains for the third quarter, but it is likely that United was not alone in underestimating oil's dramatic fall. Oil settled at $97.16 a barrel on the New York Mercantile Exchange today, down from a July peak of $147. Northwest Airlines said in July that its hedges require it to pay if crude falls below $108. Its hedge for 10 percent of its fuel for next year requires it to pay if crude falls below $112. Of course, rallying oil prices could make those hedges look smart again. And — importantly — even if United loses money on fuel hedges, it will save money because the fuel itself is cheaper. JPMorgan analyst Jamie Baker wrote in a note that oil's fall over the space of just one week will save airlines $3 billion. Fuel has become the biggest expense at the big airlines. United's 2007 fuel bill was $5 billion, which was reduced slightly by an $83 million hedging gain. "Yes, hedgers are under water on their hedges, but they are seeing some relief on the cash market side. That's how it should work," said Jonathan Leak, a senior vice president for risk management at World Fuel Services, which puts together fuel-hedging programs for airlines. However, fuel prices have not fallen as much as crude in the short run because refiners are at capacity. Hurricane Ike made that worse because 12 of the 14 jet fuel refineries in its path are still shut down because the power is out, Leak said. Those 14 refineries make 19 percent of the nation's jet fuel.

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Port of Houston survives Ike.

The good news is that the Port of Houston sustained minimal damage from Hurricane Ike, which did considerable damage to the city of Houston and surrounding areas. The impact seems contained to the port area and major assets like port cranes survived without significant damage.

Port operations will resume with permission of the Port Captain once an inspection is complete.

clipped from www.logisticsmgmt.com Ocean cargo: Port of Houston well on way to recovery Patrick Burnson -- Logistics Management, 9/15/2008 12:50:00 PM HOUSTON— The Port of Houston Authority (PHA) is in “an asset assessment and operation recovery mode” in the wake of Hurricane Ike said port spokesmen. “The welfare of PHA’s employees, customers and neighbors is our first concern,” said Argentina James, the port’s director of public affairs. Based on preliminary assessments, the PHA facilities have limited negative impact from the hurricane, he added. “As is most of the Houston Area, we are without electricity and we are operating with limited temporary power from generators,” stated spokesmen. In a voicemail message, press officers noted that phone service was still unreliable to the region, advising shippers to contact PHA via email. Meanwhile, containerized shipping movements in and out of the vital Gulf gateway are expected to resume on a case-by-case basis. “We rely on the captain of the port to make that determination,” said spokesmen. “At this time, that determination has not been made. We will continue to coordinate communication and assessment efforts with the local and regional port coordination team.” Initial assessments of the PHA terminals revealed minimal wind damage that knocked down a few fences, containers and electrical lines, said officials, who added facilities and its assets are in “good shape” considering the magnitude and strength of the hurricane.

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