Following on yesterdays article on the oil spill mess in the Gulf of Mexico, I got a very good comment from a reader who pointed me to a site called Deep Sea News that breaks down the Jones Act issue and its impact on the BP Deep Water Horizon oil spill clean up.
The Jones Act does prevent use of foreign vessels in US domestic commerce, but apparently is not directly preventing clean up activities in the Gulf by foreign owned skimmers etc. The Jones Act involves those domestic waters out to 3 miles from the shore. Activities conducted beyond the 3 mile limit, in international waters, are still open to use by any ship of any flag. In fact the Deep Water Horizon well itself is beyond 3 miles from the coast of Louisiana.
I will stand corrected (and updated) in my comments on the concerns on the Jones Act, though I still think the President should set it aside for this particular catastrophe. Thanks TG for your excellent post in response. I'll admit I got suckered by Fox News on this one.
Last week we took the kids to the beach down in Gulf Shores, Alabama. My bride's sister and brother in law own a condo that we get a chance to use periodically. We had a BLAST.
The water was beautiful, the sand was sugar and the weather was great. Just the kind of break we needed after a long winter and busy spring. We were fortunate because we don't pay anything to use this family owned condo overlooking the beach. Gulf Shores was also fortunate, because if we had been paying a typical rental of as much as $1500.00 a week, there is a very high likelihood that we wouldn't have made the trip. Too much money for the risk of an oily mess on the beaches. Lucky for us, it was free and the beach was great. So we went and spent our money in restaurants, shops, movies and the outlet mall.
Interestingly, if you listen to the locals, its not the oil that's killing the Gulf tourism business. it's the national news. We heard multiple stories of news folks getting out of their satellite equipped vans in their pressed suits and making a news video with the ocean in the background. The only thing is, they didn't get within 100 yards of the actual water. They had no clue as to the actual water conditions that day. This goes out over national airwaves (and probably gets picked up internationally too.) and everybody thinks the Exxon Valdez ran up on the beach. The truth is, there is more oil afloat in the Gulf of Mexico than the Exxon Valdez ever held. But its not ashore everywhere. Beaches are dynamic ecosystems. Its different every day. One day may be great, and 4 days later, there may be tar balls.
There is a guy doing one HELL of a job in keeping would be vacation travelers honestly informed. Bruce Alexander is a local Realtor in Gulf Shores, who runs a web site called Bruceatthebeach.net. Bruce goes down to the ocean daily and makes a youtube.com video reporting daily on water conditions, oil clean up etc. For folks like our family, considering and anguishing over whether to go to the beach, this guy is doing yeoman's work. I will say this, not only is he helping his community and would be tourists, I'd buy a property from him. Anybody who cares this much, must be a good guy to trade with.
This isn't a post about Bruce or the beach really. This mess is going to take my 2 year old grandsons life time to clean up. And with millions of gallons of oil now in the global ocean currents, its a global problem. Two years from now, I will not be surprised for some of this oil to be found fouling landmasses in Ireland. The clean up effort is an environmental and economic nightmare writ large. Who knows how many whales and other lifeforms have died and nobody knows?
The video below shows what this oil really looks like at sea. Its a mess, and its everywhere. From thousands of feet below the surface of the sea to tar balls on the beach. In thicknesses ranging from heavy brown tar to a viscous shine, this junk permeates the ocean at all levels. A hurricane would just stir it up like salad dressing in a shaken bottle.
Deepwater Horizon oil spill flyover
There is a large flotilla of ships and activity throughout the northern Gulf of Mexico right now. It's costing the American people billions of dollars. (Like we need that with the War in the Middle East, the recession and Obama trying to nationalize healthcare) People are losing their livelihoods, but at the same time, somebody is making money. I'd like to own a company that made oil booms or did heavy marine engineering. Own a septic tank pumping business with pump tanker trucks? Send em to the Gulf. The government is paying $50.00 an hour 24 hours a day to move oil from recovery ships to holding tanks and tankers. Now there is a Logistics Business.
I believe we borrow the environment from our children. My children and grandchildren will be paying for this one for their generations lifetime. That is the real tragedy. Hopefully, the oil companies, the governments and the people will be able to clean this mess up. To the extent the logistics business plays a role, I hope as an industry we step up and play our part. God knows, if any shipping company has assets useful in the clean up of oil, they are needed.
To this end an open appeal to Mr. Obama: Please issue an executive order temporarily suspending the Jones Act restricting foreign vessels in US trade. There are Dutch and Scandinavian ships specifically designed to collect oil etc. These ships are needed in US waters doing what they are designed for. If you are leading on this issue, lets suspend the bullshit and get with the program for the good of our people and the environment.
Capital infusion to fund development of e-commerce portal
INTTRA, the carrier-owned portal for ocean-freight bookings, is getting a fresh capital infusion that will enable it to develop new electronic commerce services for new markets.
ABS Capital Partners, a capital fund that specializes in later-stage growth companies, has invested $30 million in INTTRA and is taking a majority stake in it.
INTTRA will use these funds to further develop its platform for electronic invoicing and to roll out a new product that will enable shippers to make bookings and instructions with non-vessel-operating common carriers.
“ABS Capital’s investment will give us the financial strength to accelerate our business plans and operations,” said INTTRA CEO Ken Bloom.
He said INTTRA’s search for new investment was started by its board more than two years ago before the onset of recession.
The INTTRA ocean portal is one of two major carrier neutral portals for booking, documentation and tracking of ocean freight.
Originally backed by European ocean carriers such as Maersk and Hapag-Lloyd, the portal has grown in sophistication and breadth of membership.
A number of leading NVOCC's including DHL Global Forwarding, Panalpina and UTi, also belong to the portal as a way to provide a common user interface to ocean customers who want a one stop shop for eCommerce.
The ABS investment is interesting because (as far as I know), this is the first VC investment into the portal. Given that the portal is backed by several of the worlds largest ocean carriers, the investment must be viewed as relatively safe. However for cash strapped ocean carriers, this has to be seen as a major win in divesting the majority stake in a non-core business whilst still keeping the portal and its inherent economic benefits intact.
Venture Capitalists are not known for their long term views nor holdings, so it will be interesting to see how a VC dominant position on the INTTRA board changes the direction of the company over time. As a late stage investor, ABS may intend to hold the investment for a longer period, but one wonders what the eventual exit strategy of a VC would be in an ocean portal?
This blog is about logistics. You will find almost 500 posts here and only one or two that are politically related. That's on purpose. I try to stay within the boundaries of my business.
In this case however politics is my business. Former President Bill Clinton gave a speech recently at the University of California, Berkeley, warning about the power of words and the potential of rhetoric to incite harm. Specifically Clinton referred to the strong negative discourse today between Tea Party Republican /conservatives and supporters of the current government over a host of issues, with healthcare being at the center.
In this case, I think Clinton meant to align the Tea Partiers with radicals, which I disagree with, but I think he still has a bigger point worth noting.
Clinton reminded the audience that in 1995 similarly strong sentiments were running when Timothy McVeigh and accomplices bombed the Federal building in Oklahoma City. His point was that words have strong meaning and what may be political rhetoric for elective purposes for some, may incite violence from others with a more literal interpretation. Speech is free, but it is not without cost.
The key point with which I agree with a president I did not support,... is that the words we say to each other matter. As Americans, political balance is one of the reasons our democracy has been successful. I also believe it's the reason our economy has been as successful as it has for almost 235 years. Weights and balances allow dialog, even difficult dialog, to take place. Political dialog allows a free market economy to work.
What happens nowadays though, especially amongst we bloggers, is that information and opinions, regardless of viewpoint, are now as free as electrons. Crazy can travel as freely as traditional. Words incite actions, even unintended actions. What's dangerous is that what's crazy to you may be both sane and logical to me. Even more so, cultural collisions now happen instantly thanks to the Internet.
Where that comes back home to my world is that it costs the global economy serious money to scan freight shipments and packages for explosives. It also costs big money in airline and shipping company practices and policies on security. Doubtless, much of this is borne on the back of 911 related terrorism, but domestic terrorism is also a factor. I suspect your office building has different security measures now than it did in 1990. That's a result of both domestic and international attacks on our country.
Ultimately, I think this comes down to respect. Difficult to enact other than through restraint. I'm not talking about being politically correct. That's only a way of masking true feelings with obtuse words. What I'm talking about is being educated on the issues and speaking in a way that engages discussion.
I'm about driving costs out of supply chains, which means finding a safer world. I hate to think the only way to do that is to ramp up the security investment while the rhetoric takes the same arc.
I don't have all the answers here, nor am I sure my opinion is completely coherent. But I know that the ramped up conflict increases risk, and risk costs money.
Most people think of Memphis as the home of Elvis, Blues and Barbecue. That's all good, but that ain't all there is. Not according to the Memphis Chamber of Commerce anyway.
Freight is also important in Memphis Tennessee. How many metropolitan Chambers of Commerce have a Vice President of Logistics? Memphis does.
Jim Covington is the Vice President of Logistics for the Greater Memphis Chamber, and he wants new business. Air, ocean, intermodal, river traffic...the works. In this regard, the Greater Memphis Chamber has started a marketing campaign dubbing Memphis as "Americas Aerotropolis".
America's Aerotropolis
Memphis has the blessing of being centrally located in the United States. Its location on the Mississippi River also gives it access to the biggest riverine domestic corridor in the country.
Freight transportation companies can obviously read a map. A well known purple express company has its largest global hub in Memphis, making it the busiest cargo airport in the country. Additionally several major railroads have intermodal hubs in Memphis. All this makes for a great place for companies to set up distribution facilities in the region. Retailers like Williams Sonoma, Dell, and others have facilities nearby in order to leverage the infrastructure.
Nevertheless, Memphis wants more. See this linked White paper that the Greater Memphis Chamber has put out on the benefits of the city and surrounding areas. The local TV stations are in line with the effort. Check out this news story that includes some video as well.
At the end of the day, the Chamber of Commerce in Memphis wants jobs. Whether employment comes from additional transportation company investment, warehousing or retailer investment, the community wants to grow and is leveraging its best assets to make that happen.
Cushman & Wakefield are global commercial real estate brokers specializing in commercial real estate space. Their interests in both commercial office space and warehouses are substantial. As a result, C&W have produced an interesting white paper that documents trends in commercial warehouse space in both the Americas and globally.
Interesting findings include:
Global industrial rents
declined by an average of 5.5% in 2009
While the Asia Pacific region
saw the largest decline in rents (-6.4%), it is also the first to show
signs of stabilizing due to an up tick in exports and rise in production
Ottawa now
replaces San Francisco as the
most expensive city for industrial space in the Americas
In the US, an increase in
consolidation has caused a trickle down effect including an increase in
supply of space and a downward pressure on rental rates
Upturn in domestic consumption
and regional trade will be the determining factors in the strength of
recovery in occupational demand
The global info in the C&W white paper didn't surprise me. However, some of the trends in the Americas were of interest. In particular the expense of commercial property in Canada and Mexico. Both are growing markets, but the cost of commercial buildings surprised me given the downturn in the global economy.
George Clooney and Wyclef Jean have their hearts and minds in the right place. Both championed and created the "Hope For Haiti" Telethon that debuted tonight on HBO. I watched the show and was impressed with the number of TV and movie stars that donated their time and money to the cause. Common folks calling in donations but getting the phone answered by Julia Roberts, Steven Spielberg, Mel Gibson, etc. were impressed. No doubt MILLIONS will be donated.
Then tomorrow will come. The money will be contributed to major charity and relief organizations who will convert the cash into usable materials and food. All that stuff will then need to be delivered to the island nation of Haiti.
Haiti is one of the poorest nations on earth. Its poor people are known to eat mud cakes just to have something in their bellies. I know this because our church has a twin parish in Haiti. Take that poverty and add a very thin layer of social infrastructure in terms of electric power, gas and communications as well as fuel, and what you have is a little crust of a society that can be broken with a strong wind. Much less a 7.0 earthquake.
Despite politics, people are sympathetic to anything that puts children at risk. Images of little children being rescued from collapsed buildings will immediately interest anyone who has had a kid of their own (and rightly so!). Our humanity is called to action! Many nations have sent medical and rescue teams to Haiti to save victims. Companies, including my own employer, DHL, have sent Disaster Response Teams to help with the efforts. For the most part, these are very brave volunteer forces.
Lets break down what needs to happen. The Port au Prince airport normally handles about 35 flights a day. The American aircraft carrier, USS Carl Vinson is now near shore and with her Navy air traffic controllers as well as USAF controllers, inbound flights are up to 100 per day. The inbound freight is staged in the open air, which is a risk, but it's on the ground, which is at least a positive. Canadian forces are working to open a second airport at Jacmel but the time table to get that organized is not firm. Port infrastructure at the port of Port au Prince was heavily damaged in the quake, with the container cranes there being knocked off their rail mounts or knocked over. The US Navy is engineering the reopening of the port now to allow relief aid to enter the country.
There is no aviation fuel on the island. This means that inbound flights must have at least enough fuel to redeploy to a near by airport. The crux of this is that an airplane that has to carry extra fuel to repatriate to another country can carry less in the way of relief goods. For this reason the United States has set up a staging base at Guantanamo Bay in Cuba. For more nefarious reasons, the world at least knows exactly where Gitmo is. I suspect Miami, San Juan and perhaps airports in Cuba and other Caribbean nations will serve similar roles.
Given the tactical nature of this rescue effort, I think the hero of the campaign will be the venerable C-130, which has been ideally suited to tactical materiel delivery since the 1950's.
Once goods are on the ground, the key will be how efficiently they are distributed to those who need them. This is an area where I feel our industry has expertise to share. Shipping lines, airlines, trucking companies, contract logistics (warehousing and TMS) firms all have expertise gained by handling the worlds global commerce can help Haiti. Haiti has no distribution network. For this reason a green field opportunity exists to put this little impoverished nation on a new footing.
The world will provide Haiti with billions of dollars in assets and infrastructure it would never have had access to before this earthquake. Despite its chronic poverty, Hollywood stars weren't concerned with Haiti until it hit a world stage. For this reason I take at least some of the "stars" with a big grain of salt. In my opinion however, Wyclef Jean is a Haitian patriot. He stands for his countrymen as a voice in the west.
It will take years and many global dollars, but I wonder in the end, if this earthquake will not turn out to be a blessing of sorts for the nation of Haiti? Many of her citizens have perished tragically, but I can think of no other event that might have pushed the worlds "first world" countries to be so forceful in helping the least of the third world.
Almost assuredly, the Hollywood movie stars had their minds on other things...as did we all.
Just a quick post to wish all who visit here a very Merry Christmas and happy new year. This has been a very hard year for many folks both personally and professionally.
Lets hope we here in the United States have turned the corner and can look forward to a better 2010. I know many carriers are trying desperately for rate increases, but dont know how well those will stick. Shippers are hurting as much as carriers.
My old saying is "if you cant sell it, I cant ship it.". That applies now more than ever. 2010 is going to be an interesting year because carriers painfully need more money and are going to be pretty much "non negotiable" in both air and ocean freight. Both modes have removed capacity and it will not return without profitable margins.
I wish all of us a very Merry Christmas, happy New Year and above all...peace. This is just business. Love your family and take care of yourself.
April 1, 2010 - Some recent interest in this subject by some readers warrants reposting this article. It was one of my favorite ones to write because I spent many years in the ocean freight business.
Despite the slick advertising you see on Sundays between NFL games, shipping by any mode is still more of an art than a science. Nature plays a factor in the movement of anything. No whiteboards involved at all.
Check out the video below, which shows a container ship at sea in heavy weather. The ship takes an absolute beating and rest assured, nobody on deck is very happy. That HDTV you have in your living room right now might have been on this ship but you'd never know it.
This takes me to another subject... How many of you know what "General Average" is? Do you know where it came from? Methinks its time for a maritime history lesson!
General Average is a maritime legal term that allows a carrier to charge its customers for damage done to the ship while at sea. The video above shows a major storm. If the ship were damaged with massive cargo loss etc., the carrier could legally take the cost of the repair and divide that by the cargo interests on board and send you a bill. Look at the back of your ocean bill of lading. Its on there.
Here's the history.
Back in the "olden days", prior to the early 1800's, merchant ships would be commissioned for voyages. A British merchant with wool to sell, along with other merchants with other native products, would commission a vessel and a captain and crew to sail to a foreign market like China or India. On arrival, the captain became a trader and would sell the goods in exchange for money or other local goods like silks, tea, Chinese pottery, anything! How much money the enterprise made, including the captain and crew, depended on how good he was at trading. Now, if the ship got damaged in transit from weather, pirates, acts of god, etc., the commission contract said that the commissioning merchants could be billed for the damage repair cost. That tradition in maritime history continues to this day though carriers are very sensitive about whether to charge this because it is very unpopular with major customers.
The reason shippers get so mad about General Average today is that they enjoy what's called full liner terms on their ocean bills of lading, which is a contract of carriage. The shipping company promises to run a regularly scheduled service with predictable schedules. Given that people expect that what they buy will be fulfilled, they are very surprised when something happens to their goods and they themselves are held responsible. Most protest vehemently! That wasn't the case prior to 1837.
In 1837 the Peninsular and Oriental Steam Navigation Company (P&O) was commissioned by the British Government to make scheduled runs between England and Spain and Portugal in support of the British mails. A country trying to run an empire needs regular mail service.
P&O was the international mail company long, long before UPS, DHL or FedEx ever delivered an envelope. P&O started what became known as Liner Service. England is an island nation and this was a common way that shipping companies got started. NYK of Japan started the same way. Nippon Yusen Kabushiki Kaisha means Japan Mail company.
This idea of commissioning ships with trade goods created strong trades with China long before Wal*Mart ever existed. Ever heard of the Opium Wars? Shipping companies (P&O in particular) wanted to trade British wool with the Chinese. The Chinese already had silk, which was not only cooler, it was lighter and much more suited to the weather in China. Frustrated, the Brits needed a different product. They were already active in India and noted that the Indians had a nice local trade in opium poppies.
So...rather than trade that smelly old wool, the Chinese were offered opium. That's a product that creates instant demand if you weren't already aware... and a nice but infamous trade took place for awhile between India and China and P&O made good money on it. That's something the company wasn't real proud of in the view of history, but that's what happened.
In case you didn't know it, I spent many years working for P&O Containers, then P&O Nedlloyd. Both now part of Maersk Lines. The heritage of our commerce is directly tied to our global maritime history. That's evolving to suit current markets, but the old history is worth knowing. I'm intensely proud to be an old steamboater, even though I now wear a forwarders clothing!
2009 has been a rough year in transportation. Virtually every carrier and freight forwarder has had to tighten the belt in some form. Office consolidations, revised business services, reduced product offerings, layoffs, you name it, its happened.
Just this week CGM sent a letter to its major customers explaining the creation of a financial governance board to supervise its strategic direction and to secure the financial backing to survive. Hapag-Lloyd meantime has announced that it has secured financial backing from the German government.
I started in the container shipping business in 1983. It seems like container carriers have been both cutting rates and dying like flies ever since. I used to keep a list of the names of the carriers. When it got to over 30 I stopped. It was too depressing. The maritime history that was simply dying was too painful.
I get data from a couple of consultant firms that show that while the market curves have been precipitously downward in direction for well over a year, some rebound is happening. Freight volumes from Asia for retail are up in a mini-peak, trucking volumes are weak but also on a slight uptick. Year over year retail store figures are still down, but sales are up over the last quarter.
The point is, there is a pulse. The patient isn't dead yet.
The shipping business has never been heavy on people. Its an asset heavy business, but the largest shipping company in the world might still be only 15,000 people. Try explaining that to somebody who works for Oracle, whose US organization is over 80,000. Its just not a big people business. Having said that, the industry still needs people. I'm talking about the entire transportation business, not just the parts I've personally touched.
Jobs still are out there.
I get calls from executive recruiters all the time. Since I run this blog, people assume that my Rolodex is pretty fat. What I hear is that good jobs are still out there. Our industry still needs good employees and even better management. What I am also hearing is that the position that paid 100K two years ago is now 80K. Simply put, there are a lot of candidates and with corporate income depressed, so are the resources to pay job candidates.
I'll write an article soon on strategies for job networking in the shipping industry and also how to use some online tools. I'm not a fan of social networking generally, but there are some resources that are professionally focused. Stay tuned!
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