The Three Leading Threats to Logistics Prosperity – – Weather, Government, and Candy Machines.
- Walmart.com Growth Lures Warehouse Investment: Corporate Brazil
- Winter Weather Pushed ATA Truck Tonnage Index Down 4.3% in January
- Obama to order tougher fuel standards for heavy trucks
- Railroads and Mexican Government on Collision Course (WSJ)
- Iowan Fired for Using Forklift on Candy Machine
- Anger at supply chain costs
Bloomberg had a nice piece about the impact of Walmart.com, and e-commerce in general, on warehouse capacity expansion in Brazil. Three to four large warehouse development companies are expanding existing sites and building new ones to accommodate increasing demand created by e-commerce expansion. Here are a couple of lines from the article.
Prologis, based in San Francisco, joined Brazil’s Cyrela Commercial Properties SA in building warehouses to lease to Walmart.com and others. Singapore’s Global Logistic Properties Ltd. (GLP) is increasing the size of its existing distribution centers by almost 100 percent, and Australia’s Goodman Group is adding four sites in Rio de Janeiro and Sao Paulo.
Last Friday’s LV post discussed the downturn in US factory production for the month of January. I also noted that this wasn’t a surprise, as January retail sales had also been negatively impacted by the weather. Now, the ATA reports that its truck tonnage index was down 4.3 percent in January. Let’s hope that these slowdowns are only temporary. Here are a couple quotes from the ATA press release:
The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index decreased 4.3% in January, after edging 0.8% lower in December…..“Like most economic indicators, truck tonnage was negatively impacted by bad winter weather in January,” said ATA Chief Economist Bob Costello. “The thing about truck freight is that it’s difficult to catch up. Drivers are governed by hours-of-service regulations and trucks are limited to trailer lengths and total weights, thus it is nearly impossible to recoup the days lost due to bad storms.”
Clearly the bad storms had a negative impact on transportation volume. However, I do believe that the days lost can be recouped over time, it will just take longer than otherwise, due to the operational constraints on transportation.
Speaking of operational constraints on transportation, on Tuesday, President Obama announced that he is directing the Environmental Protection Agency and the Transportation Department to develop fuel-efficiency and greenhouse gas standards for heavy-duty vehicles produced after 2018. The ATA posted a video response to this initiative. The video of ATA Chairman, Phil Byrd can be seen here. Mr Byrd stated ATA’s viewpoint on these standards as follows:
ATA is supportive of the president’s initiative, both with greenhouse gas emissions, as well as with fuel economy standards. What we are concerned about however, is the timing and the rollout of these new regulations and standards for our equipment. We just simply caution the president to make sure that these new technologies were marketplace ready – that we didn’t roll it out into the marketplace, and that equipment owners and truck operators had to endure technology that wasn’t proven, that wasn’t reliable, that wasn’t efficient and safe. We don’t want to save monies on fuel, but yet spend the same money on maintenance issues as we try to deliver america’s goods.
The Wall Street Journal wrote an informative piece on proposed changes to Mexico’s railroad structure. Mexico’s legislature is working on a bill to open its rails to new passenger and freight operators. Currently, rail freight is dominated by two companies, the Mexican unit of Kansas City Southern, and Ferromex. The bill’s sponsors say that the current duopoly has led to low investment and high prices. Meanwhile, the railroads state that the bill would infringe upon the 30 year exclusivity agreements currently in place.
An out of control Iowan mounted a forklift and conducted a surprise attack on an unsuspecting candy machine. This warehouse worker used a forklift to to get a candy bar from a malfunctioning vending machine. He was subsequently fired and denied unemployment benefits. That qualifies for excessive force in my book. He is quoted in the article as saying, “That machine was trouble.” Can vending machines be spiteful?
Continuing with the “Anger” theme, an article from Downunder (aka Australia) states that farmers have expressed horror at the findings in a report by the by Australian Export Grains Innovation Centre (AEGIC). The report estimates that around 30 per cent of production costs for grain producers was made up of supply chain
expenses. These expenses are deducted from final payments, so they don’t obtain the same scrutiny as other expenses. A grains consortium representative is quoted in the article as saying that the profits of growers are being diverted to the bulk handlers. The AEGIC report states that heightened supply chain costs are influenced by Australia’s volatile grain production. It sounds to me like the article was a bit slanted to the growers’ perspective.
Have a good weekend everyone!
This week’s video, a tribute to the unhappy grain growers of Australia.