Thursday, November 13, 2008

Applications for unemployment benefits soared to the highest level since just after the Sept. 11, 2001, terrorist attacks while the trade deficit shrank more than expected as demand for imports plunged, further evidence of the struggling U.S. economy.

The Labor Department reported Thursday that jobless claims shot up by 32,000 last week to a seasonally adjusted 516,000, the highest total in seven years. The tally was much higher than analysts expected and a further indication of how much the labor market is deteriorating amid the shrinking economy. The government reported last week that the unemployment rate surged to a 14-year high of 6.5 percent in October.

Freight market looks good for buyers, but carriers show signs of stress

Lower freight rates could result in fewer options for shippers down the road.

How you characterize the current state of the logistics industry depends a lot on your role within the supply chain. While carriers and logistics service providers across the modes report lower volumes and increased financial pressure, logistics buyers are reporting lower rates in many contract negotiations and, finally, decreasing fuel costs and surcharges.

But while lower rates are good for buyers in the short-term, an overly stressed carrier base reduces a buyer's choice of providers in the long-term, and could reduce carrier investments in capacity and the infrastructure required when demand for freight comes back. With that in mind, logistics buyers need to analyze the current fundamentals in each mode before taking a sourcing strategy.

Trucking carriers, often considered a bellweather for the U.S. economy, may be the mode hardest hit by the current economic slump. According to estimates by Avondale Partners, more than 1,800 trucking firms have left the market in the first half of 2008, on top of the 2,000 that left the market last year. While much of that carrier base shrinkage is due to slumping demand for trucking and tightening credit markets, Rosalyn Wilson, a panelist at the Council of Supply Chain Management Professionals (CSCMP) in Denver last month, pointed out that much of that equipment has left the U.S. market permanently to be sold in other regions and won't be back when the trucking market does rebound.

"We can expect some very tight capacity constraints when the market comes back," Wilson said. Panelist Thomas Escott, president of third-party logistics provider Schneider Logistics in Green Bay, Wis., added that despite the steep decline in trucking demand, the first quarter of 2008 "felt tight" due to the surprising lack of equipment.

"Pricing has become more competitive" as truckers compete in a dwindling market, said Wachovia Securities analyst Justin Yagerman in a recent report.

Stifel Nicolaus analyst John Larkin said in a recent note that next year, "Rising demand layered on top of declining industry capacity...should create a veritable bonanza for freight transportation companies that are able to provide capacity into the marketplace."

How to approach the spend: Use current trucking market to negotiate improved service levels and access to capacity from carriers, but be very leery of cutting too hard on base rate. Also work to improve visibility into carriers' financial status if at all possible. Full Story.........

Wednesday, November 12, 2008

YRC touts benefits of merger

The merger of the national trucking carriers operated by YRC Worldwide Inc. has gone smoothly so far with no impact on customers, the company’s top officer told analysts Tuesday.

Bill Zollars, YRC chairman and chief executive, said consolidating the terminals of Yellow Transportation and Roadway is proceeding and will be accelerated through 2009. About 60 terminals have been merged or are in the process of being completed, he said at an analyst conference in Chicago held by Robert W. Baird & Co. Inc.

And with a weakening economy prompting YRC to write down nearly $900 million in goodwill during the first nine months, Zollars said the consolidation will benefit the company.

Zollars said the company has conservatively estimated that $200 million in annual cost savings could result once the Yellow-Roadway merger is finished.

“We have an opportunity to improve our performance even with the economy we have today,” he said.

Some industry analysts have questioned YRC’s timing of the Yellow-Roadway merger, the biggest of its kind ever attempted in the U.S. trucking industry. If it does not go according to plan, customers could flee at a time when YRC can ill afford to lose business.

However, Zollars responded that unlike most other previous merger scenarios in the trucking and rail industries, the groundwork for this particular consolidation has been laid since 2003, when Yellow Corp. acquired Roadway Corp. Full Story........

Monday, November 10, 2008

After helping Obama win White House, James Hoffa Jr. visits Israel

On Election Night last week, one of Barack Obama's major supporters was not in Chicago savoring the hard-won moment.

Instead, James Hoffa was home in Troy, Michigan packing his bags for his first trip to Israel. Back in Chicago, balloons floated into the air and champagne bottles were uncorked without him.

It was a case of bad timing, said Hoffa, who explained that this visit on behalf of the Yitzhak Rabin Center, which began last Friday, had been planned before he even knew he would become an Obama fan.

Now, just the name makes him grin, even though he is thousands of miles away.

"I am an extremely big supporter [of Obama]," said Hoffa with a smile, as he sat in the lobby of the David Citadel Hotel in Jerusalem on Sunday morning, the day after he addressed a memorial rally for Rabin in Tel Aviv.

But this was not initially the case, said Hoffa.

As the head of the International Brotherhood of Teamsters, a union with 1.4 million members in 50 states, the question of which candidate his union supports can be critical.

So when the Teamsters had to decide whom to endorse, the Democratic candidates - including early favorites in the race, such as John Edwards and Hilary Clinton - came to meet its governing council.

But it was the unknown senator from Illinois, Barack Obama, who excited them, even back then. They liked his ideas on workers' rights, trade and economic stimulation.

By February, the Teamsters had come out for Obama.

"It was the first major union to do so," said Hoffa proudly. Full Story........

DHL to cut 9,500 jobs and close US service centers

Deutsche Post AG will close all of its DHL Express service centers, cut 9,500 jobs in the United States and eliminate U.S.-only domestic shipping by land and air, the company said Monday, citing heavy losses and fierce competition.

The Bonn-based company said that new round of cuts are on top of another 5,400 job cuts it already announced and blamed heavy losses at the unit, which competes with rivals UPS Inc. and FedEx Corp.

The cuts are part of a wider plan to curtail operations in the U.S., including domestic ground and delivery services though its international shipping to and from the U.S. will continue. The Express unit currently employs some 18,000 workers.

Part of the plan calls for the halt to domestic shipping by Jan. 30, the company said after it closes all of its ground hubs.

Deutsche Post said the U.S. remained a key market and that its other operations, including Freight and Global Mail and other logistics, won't be affected by the closings.

"The retained U.S. international Express network with a total of 3,000 to 4,000 employees will be tailored to the needs of the group's international Express service customers," the company said in a statement. "All international shipments into the U.S. will still be delivered, while 99 percent of the outbound shipments will be picked up."

It wasn't immediately clear how Deutsche Post's decision might affect a proposed collaboration announced in May between DHL and Atlanta-based UPS in which UPS would carry some air packages for DHL. The deal, if completed as initially proposed, could last up to 10 years and infuse up to $1 billion in annual revenue for UPS.

UPS has said the contract, which it has been working to finalize, would mostly involve the transport of DHL packages between airports in North America — not the pickup or delivery of DHL packages to customers.

A person familiar with UPS' talks with DHL said Friday that if DHL made significant cuts to its ground operations in the U.S., it wouldn't necessarily affect UPS and DHL reaching a deal since their talks have solely involved air delivery of packages, not ground delivery. The person spoke on condition of anonymity because of the sensitive nature of the talks.

Deutsche Post's announcement Monday appeared to go beyond the elimination of ground products within the U.S. Deutsche Post said it will discontinue U.S. domestic-only air and ground products on Jan. 30 to focus entirely on its international offering.

A spokesman for UPS said Monday the company would have to review Deutsche Post's statement before commenting.

Sunday, November 09, 2008

DHL Employees Brace For Second Round Of Restructuring, Job Cuts

DHL Express, the American unit of the Deutsche Post-owned German courier, is expected to announce more job cuts when it discloses another round of restructuring in its nationwide operations on Monday.

News reports citing unnamed sources have made DHL employees weary of their jobs. In May, DHL announced the closure of several small facilities in the country and its plan to outsource domestic packaging operations to UPS.

The outsourcing will save DHL $1 billion a year but effectively ended 10,000 jobs at ABX Air, ASTAR Air Cargo and DHL.

DHL has been lagging behind competitors FedEx and UPS. The firm cited the volatile markets and a slumping economy for its poor performance.

Freight consolidator Unishipper shifted from DHL to UPS, while Walgreen's withdrew from a shipping agreement with DHL last month.