Detroit Automakers Stockpile Cars Again

Recently, the Big Three in Detroit have began to build up their stock of passenger cars again, despite what they said about never doing that again since the downturn that occurred in 2009. Ford, GM and Chrysler all have several months worth of supply in different models of their passenger cars, with Chrysler holding on to approximately 6 months worth of inventory on their 2013 Dodge Dart.
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The 2013 Dodge Dart
In part, this build up of inventory is due to a robust resurgence of the Japanese automakers Toyota and Honda. Last year, both of these companies suffered set backs due to the natural disasters that took place in Japan. These companies, in an effort to gain back market share, have offered some of the best financing terms they ever have. This has resulted in a build up of American made cars.
carinventory
This shows the inventory held by several different car companies

This inventory build up can be potentially very problematic. The big three currently have a very large decision to make, they can either cut production or they can offer their own sort of incentives to drive sales. This directly relates to transportation management because if Ford, GM and Chrysler begin to slow their production there will be repercussions through out shipping lanes. LTL companies that work with auto suppliers will be forced to raise their rates to recover the lack of business from the suppliers which means some companies might go out of business and it will put a strain on the transportation system. Another risk associated with inventory build up is obsolescence. This is especially relevant to the car industry where there is a new model released every year. If the American car companies are unable to sell off their inventory of 2013 cars before the 2014 model is scheduled to come out then they will take a massive hit to their profits.

Sources:
http://online.wsj.com/article/SB10001424127887323401904578159601729569798.html?mod=WSJ_business_whatsNews

http://www.google.com/imgres?num=10&hl=en&sa=X&tbo=d&biw=1275&bih=571&tbm=isch&tbnid=nWlb3urD3OzxmM:&imgrefurl=http://www.autoblog.com/2012/01/07/this-is-the-2013-dodge-dart-w-video/&docid=a1262az9WTIlSM&imgurl=http://www.blogcdn.com/www.autoblog.com/media/2012/01/01-2013-dodge-dart628.jpg&w=628&h=407&ei=MNO-UMXOK-Pk0gGQqoG4AQ&zoom=1&iact=hc&vpx=476&vpy=133&dur=40&hovh=181&hovw=279&tx=178&ty=85&sig=117199133999535119049&page=1&tbnh=139&tbnw=225&start=0&ndsp=15&ved=1t:429,r:2,s:0,i:90
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Department of Transportation awards $3.2 million to Pacific Northwest

The state of Washington was awarded $3.2 million by the United States Department of Transportation. Currently in the Pacific Northwest, some of the most congested roads in the entire country are stacked everyday in Oregon and Washington moving from suburbia into city centers like Eugene and Seattle. As it is right now, nearly 25% of working people in the Northwest travel rail from Eugene (Oregon) to Vancouver (Washington) on a daily basis.

The $3.2 million is going to be put towards the Mount Vernon siding extension project. This project is working towards substantially improving rail capacity and reducing the current bottleneck situation that is such a pain for citizens everyday. The bottleneck that exists comes about because freight and passenger trains on the Amtrak Cascades service currently share a rail. When they are both operating, idle time for one of them is necessary. The Mount Vernon project extends these rails, and gives them each there own to operate.

In addition to current issues in The Pacific Northwest, studies show that the population is looking in grow by 40% by the year 2050. This project is so vital not only for the current state, but also for the future.

 

 

Strike at LA Port Hurting Many in US

A union of port clerks at the LA port has finally gone on strike, after waiting over 30 months for a new collective bargaining agreement to be reached upon. The effects of this strike have been felt in many different sectors, and the pains caused by it are expected to continue to grow until an agreement can be reached between the union and LA/Long Beach Harbor Employers Association.
According to the article by Christopher Palmeri, a total cost of $1 billion a day each day the strike has been going on has occurred. While many companies hurt from strikes like this, as they scramble to find other ports to deliver goods to, consumers feel the trickle down as well. Prices for many goods are expected to increase, especially with holiday shopping going on, as the supply of many different sought after goods is being bottled up at the port.
Perhaps those suffering the most are workers affected by this strike. While the actual port clerks still get pay from their union during the strike, which does nothing for the many other workers in the industry, such as truckers who are out of work and are not receiving any compensation. It is really sad that this is occurring during the holiday season. One can only hope that an agreement is reached soon, although that seems unlikely since the union has high demands such as guaranteeing jobs be continuously filled even upon retirement and not outsourced elsewhere.

Source: http://www.bloomberg.com/news/2012-12-04/striking-l-a-port-clerks-cost-u-s-1-billion-a-day.html

Counterfeit Components in Supply Chain’s

The threat of being supplied with counterfeit components and products has become a significant problem in many supply chain systems. Illicit parts span nearly all industries, including government contractors, electronic suppliers, drug suppliers, and numerous others. Counterfeit suppliers are often sophisticated and track market conditions as diligently as a legitimate producer. When a market for a particular product is growing, counterfeit suppliers ramp up their operations in order to provide consumers or businesses with imitation parts in times of limited supply.

In March 2011, the Senate Armed Services Committee performed a study in order to estimate the amount of phony electronic components that existed in certain U.S. military vehicles. The study found counterfeit parts in cargo planes, Special Operations helicopters, and surveillance planes. These ill-legitimate parts were suspected to be from China, with the total amount exceeding one million. These counterfeit supplies compromise safety, security, and intellectual property protection rights.

In order to reduce the amount of counterfeit parts, businesses and governments are focusing on scrutinizing all supplies flowing through the supply chain. An amendment was made to the National Defense Authorization Act to now require the Department of Defense to detect high-risk suppliers, sub-contractors, and to strengthen the inspection routine. Supplies should only come from certified and trusted suppliers. The amendment also requires counterfeit parts to be reported to appropriate governments officials and to the Government-Industry Data Exchange Program, which shares information from governments and business purchasers. Section 818 of the National Defense Authorize Act describes the compliance measures in more detail.

A study conducted by IHS reported the number of high-risk suppliers to the U.S government and the electronics industry, has grown by nearly 62% from 2002-2011. The government and all industries are encouraged to test supplier compliance often with rigorous testing, inspections, and reporting. The threat of counterfeit components has continued to grow and supply chain experts are looking into ways to eliminate ill-legitimate products in circulation.

More information can be found on the following websites:

http://www.militaryaerospace.com/news/2012/11/20/spotting-a-fake-eliminating-counterfeit-parts-in-the-supply-chain.html

http://www.wifcon.com/dodauth12/dod12_818.htm

http://www.ihs.com/info/sc/a/combating-counterfeits/index.aspx

Holiday Logistics

Holiday travel can either be an exciting or stressful. With all of the recent fuel cost increase, how does this year holiday travel look? During the Thanksgiving break many worried about airfare, gas, hotel, and other costs while some just worried about weather delays and other unexpected problems that tends to happen on a regular occurrence such as baggage loss. However, it was reported that travel for Thanksgiving went much smoother than usual. There were not as many flight delays because of nice weather, gas prices did not sky rocket like usual, and many consumers took advantage of cheaper forms of travel such as the MegaBus and trains. While last weeks travel may have gone smooth, how does the Christmas holiday look?

Christmas is usually one of the largest holidays of travel. This is when most families have the longest similar breaks from school and work so it is much easier. The travel concerns consumers have during the winter season is mainly cost and convenience. As of yesterday, the Detroit Free Press has reported that airfare for the holiday travel is up from last year. Many airlines have increased their ticket prices along with plenty of hotels. On average it will cost about 8% more for a plane ticket this year than what it cost last year with about 10% price increase for hotels. Fortunately enough, many of the popular vacation destinations have lowered their hotel fees for the season. So why is there such large variations of prices from last year to this year? The airlines and hotels are trying to take advantage of consumer’s holiday travels. They know that consumers are willing to pay more to see family; they also know that around this time of year many workers are going to try to use up their unused vacation days from the year. The price variation in cities verse popular vacation destinations could have to do with where family is located compared to if family are traveling in smaller groups during this season instead of summer months when vacation destinations are larger.

There are a few steps to overcome these rising prices. Many travel agents have also recommended extending your options of when you are able to begin to travel and the day you are willing to come back. This leaves more room to choose days that are cheapest and not as busy. Recently there has also been an increase in joint booking of airfare and hotel. Allegiant Airlines have been very successful with this option and offer large discounts when you choose this option.

 

 

 

 

 

A few other things people usually get concerned about during the holiday time are the delivery of their important packages and timeliness. The roads become more congested, companies are receiving many more orders, and things can become very hectic. According to Derby Supply Solutions, the holiday season is a time when consumer demand can make or break a business. The holiday sales make up between 20-25% of the annual sales for most companies and reach almost 40% some retailers. That is a large increase of demand in such a small amount of time (1/12th of the year). This not only increases package delivery requirements for companies but also cause them to rethink how to handle this much business within the office, warehouses, manufacturing, and much more. UPS currently has an average 15.8 million packages delivered on a daily basis. They suspect nearly a 12 million-package increase (average daily volume) during the season. That 12 million-package increase alone is still larger than UPS’s nearest competitor’s average daily delivery volume of less than 11 million (UPS). To adjust to this busy time of year most companies hire seasonal employees, additional flights scheduled, and have extended business hours.

Additional Statistics:

In 2010:

 212 million shoppers visited stores or online websites on Black Friday.

23 million people were shopping on Christmas Eve

62% of shopping is done between November and December

        The average consumers planned on spending almost $700 on gifts

In 2012:

There are 32 shopping days and only 21 shipping days

UPS will hire 55,000 seasonal employees

UPS expects to deliver 500+ packages during the holiday

December 18th is the busiest online tracking day of the year

December 20th will be UPS’s peak day of delivery with 28 million deliveries

Delivering 28 million packages a day is equal to about 300 packages per second!

http://www.nbcnews.com/travel/trip-home-smooth-many-thanksgiving-travelers-1C7208007

http://www.freep.com/article/20121128/FEATURES07/121128020/Airfares-for-holiday-travel-up-from-last-year?odyssey=mod%7Cnewswell%7Ctext%7CFRONTPAGE%7Cs

 

http://blog.ups.com/holiday/

 

http://www.derbyllc.com/logistics-of-the-holiday-season/

 

 

Rising fuel prices foster the viability of rail transport

Halfway through the presidency of Bush 1, the Federal Railroad Administration conducted a comparative study between rail and truck transport to determine which mode was more fuel efficient, and its conclusion was a definite, if intuitive, one. Transportation of goods, when the commodity is modally competitive, requires less fuel by train. Since those days, new technologies have improved the transportation industry’s ability to meet customers’ ever more taxing expectations, themselves a product of the new technologies. Intermodal strategies, railcar designs, commodity mix: these are some of the aspects of the industry that experienced the most significant innovations, bringing with them increased efficiency across most associated costs, including fuel.

In 2009, the FRA conducted another study that recreated relative measurements from the 1991 study in an effort to find correlating results with current data and quantify the technological effect of the preceding two decades on fuel efficiency. 23 movements were examined where rail and truck compete for freight. No commodity movements were considered where either truck or rail are considered by industry standards to be a preferable means of transport.

The FRA concluded that railroad transport’s fuel efficiency improved about 20% between 1990 and 2006, citing changes in traffic mix, technological improvements, and changes in operating practices as significant contributing factors. The fuel efficiency of trucks improved 11% between 1992 and 2002. Operational calibration and technological improvements to almost every mechanical aspect were the primary stimuli. The study’s conclusion asserts that the rising cost of fuel has incentivized this drive toward energy-conserving innovation in the transportation industry, and that the trend indicates a continuation of conservation consciousness, even if for the sake of the bottom line. Railroads are ideally suited to the anticipated effects. While the trucking industry has experienced an increase in freight activity of over 50% between 1990 and 2005, this despite the fact that it is less fuel efficient, as a mode of transportation its flexibility at every level is the reason for this. But as fuel costs continue to climb, the fuel efficiency of rail transport will drive the industry ever more toward intermodal designs, and the ensuing integration of train services within industry-wide strategies will increase rail operators’ modal vitality.

http://www.fra.dot.gov/Downloads/Comparative_Evaluation_Rail_Truck_Fuel_Efficiency.pdf

http://www.logisticsmgmt.com/article/2012_rail_intermodal_roundtable_rails_new_golden_era/

Pipeline Regulations

           After the re-election of President Obama he has made it very clear that his administration will begin to take a strong look into the pipeline transportation industry.  The Obama administration is looking to tighten up the regulations on pipelines and make sure their level of safety greatly increases.   During his most recent term in office pipelines have taken several lives and one of the largest being the natural gas pipeline explosion in San Bruno California.  In the San Bruno tragedy on September 9, 2010 a 30” steel pipeline exploded and killed eight people while destroying 38 homes in the process.  Disasters like this one are the main target that will be addressed with the coming regulations.

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San Bruno pipeline explosion

One of the potential regulations that the Obama administration could be looking to impose is the inspection of older pipelines that had bypassed previous regulations to the grandfather clauses.  These inspections will hopefully catch any structural damage in the pipes but currently the industry lacks the proper inspection technology to make a complete and thorough search impractical.  The pressure testing that’s currently used to test many of the newer types of pipelines may even damage some of the older pipelines further.  Jeffrey Wiese the Associate Administrator of Pipeline Safety with the Department of Transportation’s Pipeline and Hazardous Material Safety Administration (PHMSA) points out another flaw in the inspections when he said, “You have pipelines that are the sole gas source into a town.  You can’t just take them out of service for an inspections”.  Another possible regulation that the Obama administration may impose is a much greater increase in the number of homes required to use pressure shut off valve that will shut off supply of gas if there is an issue with the distribution system. These shut off valves won’t allow gas to transport through faulty pipes but have also been proven to shut off at incorrect and inopportune times.  Customers living in the northern parts of the country will not be happy if their gas is improperly cut off during the frigid winter months.

The regulations that are sure to come to pipeline industry will aim to improve safety and hopefully encourage companies to invest research and development money into inspection technology.  Wiese describes the inspection process of pipelines today as “grossly underinvested” and with regulation put in place by the Obama administration hopefully the ball will get rolling with more research in this department to prevent future disasters.

Resources:

http://energy.aol.com/2012/11/13/pipeline-safety-regulation-looms-officials-warn/