World Trade - November 2008 - (Page 26)

COVER STORY Crude Oil Prices Skyrocket ($ Per Barrel) $120.00 $100.00 $80.00 $60.00 $40.00 $20.00 $0.00 2002 2003 2004 2005 2006 2007 Sep-08 imately 272,000, down from approximately 332,000 over the prior year. For the three month period ending June 30, 2008, Expeditors reports that airfreight (tonnage) out of Asia decreased 4%. This was the ﬁrst time that a negative industry airfreight tonnage was reported for the ex-Asia trade lane. Long Haul Trucking U.S. Currency Decline (% Change from 2 Years Ago) 110.0 105.0 100.0 95.0 90.0 85.0 80.0 75.0 Sep-06 Nov-06 Jan-07 Jan-08 Mar-08 Jul-08 Jul-07 Sep-08 Mar-07 May-07 Sep-07 Nov-07 May-08 Chinese Yuan Japanese Yen Euro Long haul trucking has also suffered due to increasing energy costs. Pacer reported in its recent quarterly report that increasing fuel costs caused a $3.4 million decline in income from its logistics segment, partly due to the effect of fuel costs on the Company’s trucking units. Similarly, J.B. Hunt’s DCI (trucking) Segment reported a 17% reduction in its second quarter of 2008. Both Pacer and J.B. Hunt’s intermodal operations helped to offset declines in their trucking business. Overall, long haul trucking will continue to face pressure, due to expensive fuel and inexpensive rail among other factors. Others The dislocation brought about by near-sourcing may create other losers. For instance, smaller companies that are tied to the fates of less attractive markets may be unable to adapt as quickly. As near-sourcing causes international manufacturers to change locations, companies that lack a full global footprint may ﬁnd their network value shrink precipitously. Freight forwarders that lack a complete set of locations in the U.S., Asia and Europe may be particularly vulnerable. Options for Supply Chain Business Owners Imports from Mexico $225 Billions ($ USD) $205 $185 $165 $145 $125 02 03 04 05 06 07 20 20 20 20 20 20 08 E* Companies Dependent on One-Way Asia-U.S. Imports West Coast import-based supply chain service providers are reporting a softening of the Asia-U.S. trade lane. As Mexican imports are strengthening, conversely Asian imports are softening. For instance, the Port of Long Beach is receiving fewer loaded containers. In its July 2008 monthly tonnage report, Long Beach reports an 18.1% decrease in loaded inbound containers to approx26 WORLD TRADE NOVEMBER 2008 Amidst the challenging market demands of near-sourcing, how should you respond? Supply chain business owners have several options for growth amidst these major pressures. First, smart leaders should consider adding services that respond to near-sourcing. Now is a great time for trucking and shipping companies to pursue opportunities in logistics. This move can enable asset-based ﬁrms to enjoy growth in asset-light segments. In addition, logistics services can provide some insulation from the fuel shocks and cyclical capacity problems that plague much of the asset-based markets. Lastly, logistics services can enable asset-based ﬁrms to increase touch points and cross-selling opportunities with both current and future customers. For example, the refrigerated trucking leader C.R. England pursued an acquisition strategy to gain access to non-asset transportation management and freight forwarding. By acquiring Trans-Man Logistics and Dynalink, C.R. England was able to capitalize on increasing U.S. exports and increasing domestic 3PL service demand. Second, companies in the segments of warehousing and packaging can consider combining. This convergence play can allow ﬁrms to cross-sell their capabilities, and can also reduce transportation costs. In a high-fuel era, customers are increasingly interested in ﬁnding ways to cut transportation expenses. The mergers of ﬁrms like Wilpak-Jacobson and Power-Exel create opportunities to pursue network cost savings. 20

Table of Contents Feed for the Digital Edition of World Trade - November 2008

World Trade - November 2008 Contents Unexpected Responses to Unanticipated Change Reading the States of Risk in Today’s Global Economy Supply Chain Watch Tradewinds Failed Promise: Mexico and NAFTA, 15 Years Later The Short Tale Marrying Trade Finance and Transportation into a Single Transaction Trucking Gets a Double Whammy Are We Safe Yet? Logistics Resurrects the Rust Belt Keep on Compressing

World Trade - November 2008

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