The air cargo industry, manufacturers, exporters, importers, and consumers face the prospect of dramatic global supply chain disruption if the U.S. Transportation Security Administration (TSA) enforces a proposed deadline of Dec. 31, 2011, for 100-percent screening of all international inbound cargo on passenger aircraft. The subject dominated The International Air Cargo Association’s (TIACA) Executive Summit in Bangkok recently, with both panelists and delegates expressing strong views.
“Unless TSA and, more broadly, the entire U.S. government, focuses the necessary resources on reviewing the process and timeline by which foreign security programs are validated and placed into the TSA’s National Cargo Security Program (NCSP), we will face some significant disruptions to the global supply chain,” says Neel Shah, senior vice president and chief cargo officer for Delta Air Lines and a TIACA board member.
“It’s critical that we get more foreign programs certified into the NCSP in the next few months— especially if TSA is considering an accelerated deadline for 100-percent inbound screening,” he adds.
The TSA is still considering whether to establish Dec. 31, 2011, as the new deadline— two years earlier than originally planned, Doug Brittin, TSA general manager, air cargo, told TIACA delegates. Industry input, however, clarified that many challenges exist for meeting that time frame, he noted.
The transportation management systems (TMS) market has bounced back after the global recession, according to Transportation Management Systems Worldwide Outlook, a report by ARC Advisory Group, a Dedham, Mass.-based consultancy. In 2010, the sector grew significantly faster than the rate of inflation, and is forecast to continue growing through 2015.
“Multi-tenant solutions that leverage the network remain a key growth driver for this market,” reports Steve Banker, service director for supply chain management at the ARC Advisory Group, and principal author of the study.
Transportation is inherently a multi-partner collaborative endeavor. Networked-style solutions, particularly Software-as-a-Service (SaaS) deployments based on a multi-tenant architecture, facilitate a number of different efficiencies— from onboarding new partners to improving freight payment audits and transportation benchmarking.
Some TMS market players, however, disagree about whether multi-tenant solutions are as functionally rich and robust as traditional behind-the-firewall solutions. And, with intellectual privacy and Internet security a probing issue these days, concerns regarding hosted solutions might become more prevalent.
As yet another sign that North American railroads are reaching beyond their captive comfort zone to invest in intermodal equipment and attract new shippers, CN recently acquired more than 1,000 domestic containers to improve service to grocery and consumer goods manufacturers and distributors across Canada.
Roughly 80 percent of the new containers are heated, ensuring year-round consistent service for temperature-sensitive goods. The balance of the boxes comprises standard dry containers.
CN’s domestic intermodal business focuses on delivering truck-competitive, cost-effective service, with an approximate 24-hour rail advantage from central Canada to western Canada. The service is also competitive with single-truck-driver service between central Canada and the Winnipeg, Calgary, Edmonton, and Vancouver markets.
“CN has established a growing business transporting temperature-sensitive goods in long-haul markets across Canada,” says Jean-Jacques Ruest, CN’s executive vice president and chief marketing officer. “Our continued investment in infrastructure will benefit supply chain reliability for our grocery, consumer goods, and manufacturing customers.”
Shippers such as global food company Heinz, in turn, value the specialized service capabilities that make transitioning to rail/intermodal a palatable option— especially as capacity tightens and transportation costs rise.
“Heinz welcomes CN’s investment in new heated equipment,” notes Tim Epplett, supply chain manager, traffic for Heinz Canada. “This will make load planning easier for us, knowing that the railroad can provide more containers to send to our customers during seasons requiring heated equipment.”
Evidence that the steep and winding road motor freight carriers have been treading on for the past three years is flattening and straightening continues to build. To point: 92 percent of carriers expect volume increases in the next 12 months, according to Transport Capital Partners’ (TCP) First Quarter Business Expectations Survey.
“This topped all prior quarters surveyed,” says Richard Mikes, TCP partner. “And, for the first time, not one surveyed carrier expected a decrease.”
Furthermore, 91 percent of polled carriers anticipate rate increases in the year ahead. As volumes rise and no new capacity comes online, truck pricing will continue to inflate with the costs of fuel, tires, new equipment, and drivers— swinging the pendulum away from shippers to truckers.
Amazon is finding site selection a tougher sell these days. After its distribution center exodus from Texas over sales tax reparations and legal wrangling in early 2011 (see Inbound Logistics, March 2011), the online retailer has pulled out of South Carolina after losing a legislative showdown on a sales tax collection exemption for opening a DC in the state. Company officials immediately halted plans to equip and staff a one-million-square-foot building already under construction.
“We canceled $52 million in procurement contracts, and removed all South Carolina fulfillment center job postings from our Web site,” says Paul Misener, Amazon vice president for global public policy.
Amazon has made a fast habit of picking up and going elsewhere if state economic development authorities and comptrollers try to play hardball over sales tax and exemptions. Too many other states are willing to make concessions in an effort to create new jobs. The stigma attached to butting heads with Amazon also becomes a potential deterrent to other large site-selecting suitors —as much as luring Amazon becomes an economic development magnet.
Others see Texas’ and South Carolina’s hard-line stances as a win for smaller brick-and-mortar merchants and companies perceived to be at a competitive economic disadvantage. Some state lawmakers are looking at introducing federal legislation that would make the playing field “less pitched.”
For instance, Senator Dick Durbin (D-Ill.) intends to introduce a bill that would force online retailers to collect local sales tax for online purchases. Currently, U.S. Internet consumers don’t always pay the same taxes as they do when buying products from retail stores.
Durbin’s Main Street Fairness Act, a doppelganger to legislation previously introduced in 2010, is joined by a number of other smaller measures percolating at the state level. California, for example, has an e-fairness law on the docket —AB 153 —that follows New York’s existing “Amazon Bill.”
As long as online sales tax remains a state issue, companies such as Amazon will locate where the burden is less. For U.S. businesses, the current Amazon situation offers yet another reminder of the due diligence and forward planning necessary when identifying manufacturing, distribution, and retail operations —weighing transportation and labor costs, as well as ancillary factors such as sales tax and a location’s resume of past successes and failures.