Thanks to the roller coaster ride on Wall Street this week, my dream of retiring at 82.5 has been torn to pieces, just like the Powerball lottery ticket I tossed in the trash after not winning the jackpot on Wednesday—heck, I didn’t even get a single number!

And so I blog…

On Tuesday, President Obama announced new fuel efficiency standards for commercial trucks, a first for the industry. Here are some details from the press release:

Certain combination tractors – commonly known as big-rigs or semi-trucks – will be required to achieve up to approximately 20 percent reduction in fuel consumption and greenhouse gas emissions by model year 2018, saving up to 4 gallons of fuel for every 100 miles traveled.

 

The standards are expected to yield an estimated $50 billion in net benefits over the life of model year 2014 to 2018 vehicles, and to result in significant long-terms savings for vehicle owners and operators. A semi-truck operator could pay for the technology upgrades [approx. $6,220 additional cost per tractor according to sources] in under a year and realize net savings of $73,000 through reduced fuel costs over the truck’s useful life. These cost saving standards will also reduce emissions of harmful air pollutants like particulate matter, which can lead to asthma, heart attacks and premature death.

The American Trucking Associations (ATA) supports the new standards. Glen Kedzie, ATA’s vice president and environmental counsel, was quoted as follows in a Wall Street Journal article: “Fuel is one of our top two operating expenses, along with labor. This is one of the few regulations I’ve ever seen where there’s going to be a financial benefit going back to the purchaser of that truck. Most regulation is a capital outlay, which you don’t recoup.”

But while the ROI of these more fuel-efficient trucks might be strong, especially for large trucking companies, the added upfront cost might be too burdensome for small carriers and owner-operators, which represent the vast majority of the trucking industry. Not surprising, The Owner-Operator Independent Drivers Association (OOIDA) is against this measure. “By totally ignoring the impact on small-business trucking, the EPA has demonstrated yet another example of our wretchedly broken regulatory process,” said Joe Rajkovacz, Director of Regulatory Affairs for OOIDA. He added, “This rulemaking basically takes EPA’s SmartWay program and mandates participation – regardless of whether certain technologies are appropriate for a particular operation.”

So, what does this all mean for shippers? Your carrier base will become “greener” than it is today. And although carriers will incur higher upfront costs for new trucks, they will make it up several times over in fuel savings. Will they pass the savings along? Probably not, but it doesn’t hurt to ask. On the flip side, there is some validity to OOIDA’s position, and this regulation may drive some small carriers and owner-operators out of business, especially if fuel prices keep going up too, which would further constrain capacity.

On the technology front, LeanLogistics (an ARC client) announced new fleet routing and optimization capabilities. According to the press release:

LeanFleet is a web-based application utilized for asset-based management of dedicated and private fleets. LeanFleet addresses the exponential volume of transportation execution variables in order to determine the best moves for assets. LeanFleet, a true software-as-a-service (SaaS) technology, provides companies with visibility into street-level routing as well as automatic consolidation functionality.

I haven’t seen a demo of the solution yet, so I can’t comment on its capabilities. But this announcement is yet another example of “The Expanding Footprint of TMS” that I wrote about more than two years ago. Read the posting for a more complete analysis of this trend, but simply put, software vendors continue to transform TMS from a fragmented collection of applications to a unified platform where users across the enterprise and value chain can execute role-specific processes via configurable user interfaces, workflows, and web services.

If you ship via FedEx Frieght, your rates are going up. The company announced a 6.75% general rate increase (GRI) effective Sept. 6, 2011 for “FedEx Freight shipments within the contiguous U.S., between the contiguous U.S. and Canada, and within Canada. The rate for cross-border FedEx Freight shipments between the U.S. and Mexico will also increase 6.75% for only the U.S. portion of the shipment, and will be effective Sept. 6, 2011. This rate increase…applies to shipments covered by the FXF 1000 and FXF 501 series base rates.”

The US Postal Service lost $3.1 billion in its latest fiscal quarter, and it warned that it will have “a cash shortfall and will [reach] its statutory borrowing limit by the end of the fiscal year.” A big part of the problem, besides the declining relevance of postal mail in this well-established era of electronic communication, are USPS’s pension and healthcare liabilities. “Since the passage of the Postal Accountability and Enhancement Act of 2006 (PAEA), the Postal Service has contributed more than $37 billion to a trust fund for future retiree health benefits,” says Joseph Corbett, CFO and executive vice president. “We are experiencing a severe cash crisis and are unable to continue to maintain the aggressive prepayment schedule that was mandated in the PAEA. Without changes in the law, the Postal Service will be unable to make the $5.5 billion mandated prepayment due in September.”

How much longer can we keep an outdated and money-losing business model alive? With an army of unionized employees with a lot of political power, the answer is probably forever….or at least for many more years. This is a microcosm example of the financial and political problems the US and other countries are dealing with at the moment.

Finally, after almost 8 months of non-stop blogging, it’s time to power down the laptop, shut the cell phone off, and go on vacation. Logistics Viewpoints will be on hiatus next week. If you can’t go a week without us, please see a doctor…then can catch these reruns, the Top 10 most read postings published this year. And check out our podcasts too if you haven’t listened to them yet.

  1. The Japan Earthquake and Supply Chain Risk Management
  2. Nestle DSD Makes Optimal Production Sourcing Decisions
  3. Goya Foods Transforms Its Supply Chain to Enhance Profitable Growth and Service
  4. Inventory Liquidation, Auction Technology, and 3PLs
  5. Supply Chain and Logistics Conferences to Attend in 2011
  6. Relationships Matter: Social Media and Transportation
  7. The Catch-22 of Supply Chain Risk Management
  8. Troubling Trends in Transportation
  9. Food Safety Modernization Act Increases Need for Electronic Track and Trace
  10. Unraveling the True Meaning of Supply Chain Collaboration

Have a great weekend!

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