Global and regional trends such as the rise of e-commerce and the growth of intermodal hubs are affecting the placement and location of facilities
By SCMR Staff
May 07, 2012

The North American logistics and distribution property market is improving following the recent economic downturn, said analysts for the London-based think tank, Transport Intelligence.
Global and regional trends such as the rise of ecommerce and the growth of intermodal hubs are affecting the placement and location of facilities.
Ti’s latest report “North America Warehousing and Distribution” identifies ten key trends which are impacting on this important sector:
1. Oil Prices. Rising oil prices have resulted in some companies re-evaluating supply chains and distribution networks in an attempt to offset cost increases. Freight transportation accounts for the majority of logistics costs – in some instances over 50% of total logistics costs. Companies in some sectors, where high levels of customer service are required, are expected to expand the number of cross dock facilities in order to reduce the overall distances to customer destinations, hence reducing fuel costs, as well as reducing delivery times.
2. Increase in inventory levels – As oil prices and supply chain risk increases, inventory holding levels are expected to rise. As a result of higher transportation costs, many shippers are likely to move away from quick and frequent deliveries to slow and less frequent shipments, thus driving up inventory.
3. E-commerce. To support online sales, many brick and mortar retailers are expanding their distribution facilities. While many retailers, such as Adidas, utilize mega-distribution facilities to support both online and in-store inventory, other retailers are building separate, more specialized facilities to support their e-commerce division.
4. Intermodal transportation, that is, the transport of freight via several modes of transportation – ship, rail and truck, has increased over the past few years and this has led to the construction of intermodal hubs. Not only are these serving as transfer points, but more and more of them are becoming logistics hubs. Besides storage of inventory, value-added services such as kitting, light manufacturing and reverse logistics are also offered in such locations.
5. Larger space. Throughout 2010-2011, companies took advantage of lower vacancy rates and “traded up” to larger warehousing and distribution facilities. Many markets are experiencing a shortage of large, quality blocks of space and this is the area which developers will focus.
6. Near-shoring. A shift towards regional supply chains, or nearshoring, is resulting in manufacturing moving closer to customer-bases. Rising costs such as oil prices and labor costs are being attributed to this shift, also, risk management, a shorter supply chain, i.e. lower transportation costs and quicker time–to–market are other reasons for the move towards regional supply chains.
7. Containerized imports. Over the past ten years, containerized imports have become one of the most important drivers of demand for warehousing and distribution centers in the US. Although this will continue to be the case, the focus of growth for distribution property locations is likely to change. The development of ports in Canada and Mexico poses a threat to US West Coast ports, such as Los Angeles and Long Beach.
8. Panama Canal. Related to the point above, the expansion of the Panama Canal, scheduled for completion in 2014, is a driving force for port infrastructure activities across the region. With two-thirds of the US population located east of the Mississippi River, many of the products that had previously been transported across the country from the West Coast after delivery from Asian markets may now remain on vessels all the way to Eastern ports.
9. Sustainability. Sustainability measures have been on the rise for many businesses for a variety of reasons such as lowering costs, to customer pressures and to simply “it’s the right thing to do”.

10. Trade with South America. Trade has steadily increased between the US and South America and Brazil is one of the largest trade partners of the US. Miami’s warehousing and distribution market has improved over the past couple of years. Demand in locations such as Miami and Houston is being driven from existing tenants already in the market: renewals, relocation and expansions

Logistic Software as delivered via a web based platform has been in existence for longer than one might think; 10 years and counting and to great success. Cloud products have recently been expanding in market awareness, however, and as such Logistic Software-as-a-Service (SaaS) has become far more available. Furthering Cloud software popularity are the “perfect combinations” of key technologies. Moreover, the benefits of the logistic software are significant since they reduce upfront and operational costs (as well as risks) while allowing scalability through multi-tenant style architecture.

Less-than-truckload motor carriers that survived the recession are struggling with challenges, including modal shift and rising costs, that are transforming their industry, a quartet of trucking CEOs said Monday at the NASSTRAC 2012 Logistics Conference in Orlando, Fla.

“LTL is a strange animal,” said Rob Estes, president and CEO of Richmond, Va.-based Estes Express Lines, and many shippers would agree. LTL trucking has roots that go back to the 1920s, with unique operating networks and unique pricing structures.

The 2009 recession put those unique facets of LTL trucking under a microscope and under extreme pressure, Estes and the other CEOs told an audience of nearly 500 shippers, trucking freight brokers, truckers and technology suppliers at the conference.

“In the last couple of years we have had to look at ways to make our operation more efficient,” said Estes.

“If we’re alive today, we’re definitely stronger,” Estes said. “We’ve all had to adapt and really change. We’ve had to look at how we do business, find ways to improve costs. We’re competing with thoroughbreds now. The nags have gone by the wayside.”

That competition increasingly crosses modal lines, Estes and the other LTL executives said. “LTL is the meat in the middle of a hamburger bun. On the top is truckload, and when business is tight they come down into our shipments.”

“Below” the LTL carriers are UPS and FedEx, parcel shipping giants with large LTL freight subsidiaries of their own that for decades have targeted smaller LTL shipments. “In the LTL space we are challenged because we’re right in the middle,” Estes said.

Jack Holmes, president of UPS Freight, confirmed that modal shift. “If you look at distribution models, certainly there’s been a move toward consolidation, mode-shifting up from smaller shipments to larger shipments,” Holmes said.

That shift can occur in either direction, however. As truckload capacity tightens, LTL carriers gain opportunities to haul freight that once would have moved in a truckload.

From May 15 thru May 22 Chicago will be hosting both a G8 Summit and a NATO Summit at the McCormick Place Convention Center on South Lake Shore Drive.  Chicago Mayor Emmanuel calls it “a security challenge that no American city has ever had to face” and the events could mean essentially a shut-down in the downtown area.  Police are bracing for protests, security for world leaders and their motorcades will be extremely high, and more than 10,000 visitors have booked nearby hotel rooms.  Transportation to and from Chicago’s airports will result as many as 50 rolling street closures each day.  For security reasons most road closings are not being published in advance.

All moving services including building security clearance, packing, loading, delivery, surveys, and commercial moving are expected to be greatly restricted for the entire city during this time.

Lidinsky proposes ‘top-to-bottom’ modernization that would ease regulation

Federal Maritime Commission Chairman Richard Lidinsky Jr. said he hopes the FMC can move quickly on a “top-to-bottom” modernization of rules covering non-vessel-operating common carriers.

In a speech to the annual meeting of the National Customs Brokers & Forwarders Association of America, Lidinsky outlined the FMC’s efforts to overhaul its regulations covering NVOs.

He said the FMC would begin discussion at its May meeting on modernizing regulations for licensing, registration and proof of financial responsibility for NVOs and freight forwarders.

The commission also is working to update regulations covering NVOCC service arrangements, which allow NVOS to enter confidential service contracts, and negotiated rate agreements, which substitute for NVOs’ requirements to file tariffs.

Lidinsky said he hopes the agency can move within weeks to simplify documentation requirements “that cause NVOCCs problems without adding much value.”

A second step would include more substantial changes. One change under study would exempt foreign, unlicensed NVOs from tariff-filing. Lidinsky said such a change would have to be accompanied by an agreement requiring foreign NVOs to comply with FMC processes, document requests or orders, even if their country has a “blocking statute” that limits U.S. regulatory reach.

Other proposed changes would include adding negotiated rate agreements to include non-rate terms, and narrowing the current prohibition on amendments to the agreements.

The FMC, Lidinsky emphasized, is trying to balance the need to reduce regulatory burdens on NVOs, which have no antitrust immunity and are required to post bonds, with the need to protect the shipping public against fraud and unfair practices.

Estimates on carriers’ 2011 losses revised upward to $6.5 billion

Ocean carriers succeeded in raising freight rates on the headhaul legs of the Asia-Europe and trans-Pacific trades in the last month, but their results are likely to be weak in the first quarter before improving as the year progresses, Drewry Maritime Research said in its latest Container Forecaster.

The general rate increases implemented in March lifted spot rates above or at least close to break even, but even the largest container ships operating on the Asia-North Europe trade weren’t making money until very recently.

Drewry raised its estimate of carrier losses last year to $6.5 billion from its previous estimate of $5.2 billion.

As a result, it will take some time for the industry to make up lost ground, because carriers couldn’t sustain 2010’s surprisingly strong recovery last year, when global demand increased 7.4 percent.

In the wake of the last month’s rate increases, Drewry forecasts east-west freight rates, including fuel surcharges, will increase as much 13.7 percent this year.

“But we should not be lulled into a false sense of security by the considerably higher spot rates revealed in the weekly rate indices and think that all is now fixed,” the quarterly Container Forecaster warned. “Demand is by no means certain and we have downgraded our 2012 global forecast to 4.6 percent, largely on the basis of a weak Eurozone, crippled by debt.”

The possibility of turning a profit this year will hinge on the liner companies’ “determination to maintain their rate increases and little else since they resolutely refuse to put significant tonnage into lay-up,” the report said. Another 59 ships of at least 10,000 20-foot equivalent units will enter the global fleet this year, it noted.

“This is only stage-one in the recovery process, and how 2012 pans out will be very much dependent on carriers’ commercial behavior and their strategy for laying up ships as well as the relative health of the industry fundamentals,” said Neil Dekker, head of Drewry’s container research.

Carriers expected to raise rates starting between April 15th and May 1st.

As Supply Chain Solutions, Inc. continues to reinforce the talent and experience in our consulting business and throughout the organization, we will work on an even more streamlined reporting structure to better service our clients and the SCS organization as a whole. Under Rob’s guidance as President, Dave will drive and continue to deliver the tremendous value we provide in our consulting business to our clients.

Prior to working at SCS, Dave worked at IBM as a Supply Chain Consultant leader and at Haworth Incorporated in a variety of positions, including transportation specialist, supply chain specialist and North American distribution operations manager.  During his time at Haworth, he served as project manager for various assignments, including a lead supply chain modeling project, warehouse management system implementations and budgeting, design and implementation of delivery programs, among many other tasks.  Dave also served as a logistics engineering manager and senior logistics engineer for Ryder Logistics in Ann Arbor, Michigan, and was a logistics specialist for Leaseway Logistics in Birmingham, Michigan.

Dave completed his undergrad studies at Michigan State University in 1990, earning a Bachelor of Science degree in Materials and Logistics Management.

We welcome David Whittaker to our Supply Chain Family!

Diesel prices across the U.S. hit a 33-month high in the week ending March 26, climbing half a cent as oil prices rose to nearly $107 per barrel.

Diesel prices increased to $4.147 a gallon, the highest price since the week ending Aug. 18, 2008. The average price is 2.1 cents higher than the same period a year ago, according to the U.S. Energy Information Administration.

The rise was the steepest in the Rocky Mountain region, where prices rose 1.7 cents to $4.136 per gallon. Prices inched up in all regions, except in California, where prices fell half a cent to $4.476 a gallon.

Crude oil for May delivery rose $1.52 to $106.87 a barrel on the New York Mercantile Exchange. The increase came amid news that some buyers have halted or curbed imports of Iranian oil because of Westernsanctions.

http://online.wsj.com/article/SB10001424052748703959704575453322894007714.html#

by Keith Wagstaff

The only surprise about Amazon’s move to acquire Kiva Systems for $775 million is that it didn’t come sooner. Kiva is a robotics company focused on making warehouses more efficient. Amazon spent $4.6 billion on warehouses last year.

Kiva’s dutiful orange robots aren’t likely to inspire any science fiction stories soon. Think of them as smart forklifts that bring inventory to the workers instead of making them walk around a large warehouse looking for it.

Several companies that use Kiva Systems, including Soap.com, Diapers.com and Zappos.com, have already been bought by Amazon. Whether or not the Seattle-based giant decides to make Kiva available to competitors — including companies like Staples and CrateandBarrel.com that already use it — remains to be decided.

The fact that a company as large as Amazon is willing to sink that much money into Kiva’s robots could represent a serious shift in how robots are used in commerce worldwide. Before, robots were mostly stationery things that worked in the automotive and electronics industries.

Think of the simple, immobile robots that spray and assemble parts, like the ones Foxconn announced it would be manufacturing in its “robot kingdom“ back in November after its factory workers started committing suicide. That, of course, gets us to the other big issue: What does this mean for workers? If you don’t remember, Foxconn chairman Terry Gou announced that the company was building an industrial park in the Taiwanese city of Taichung, where it hopes to produce 1 million robots in three years to replace around 500,000 jobs.

Amazon certainly didn’t have workers jumping to their deaths from ledges, but it did get a lot of bad PR last fall when employees complained about extremely high temperatures and mandatory overtime while working in the company’s warehouses. Typically the rule is that if a robot costs more than two years salary, it’s more cost effective to just hire a human worker. But for highly profitable companies who want to avoid bad publicity and lawsuits, the best long-term solution could be to just eat the high installation costs and hope it pays off over time.

Now companies like Kiva are taking the debate beyond just electronics and auto companies; if some other company comes along and offers similar systems for less, who is to say smaller distributors won’t start using robots too. This deal could be just as beneficial for mobile robots in general as it is for Amazon’s bottom line.