Copyright 2002, Traffic World Magazine
Quote of the week: "You have to reach what they call a 'Valley of Despair' before things improve." -- Consolidated Freightways President and CEO Pat Blake on prospects for CF's economic recovery.
Founded in the depression year of 1929, Consolidated Freightways knows a bit about survival. CF President and CEO Pat Blake is moving swiftly to try and bank $125 million a year in cost savings to help stanch a $104.3 million net loss last year. CF, which hasn't been profitable since it posted $2.7 million earnings in 1999, will be profitable the second half of this year, Blake vowed. An uptick in the national economy also would help Roadway Corp., which said it would lose as much as $2 million in the first quarter because of the slow operating environment for truckers.
The U.S. Postal Service's business model is "unsustainable" and its financial outlook is "increasingly dire," according to a wide-ranging report issued by the General Accounting Office. The report, which stemmed from a congressional request a year ago to look into the precarious finances of the Postal Service, paints a bleak picture for the quasi-governmental institution. The GAO's report came in the same week the Postal Rate Commission agreed to an emergency rate increase for all postal services effective June 30. The rate increase, the third in the last two years, is expected to generate $1 billion this summer and $4 billion annually, not enough to offset projected losses for fiscal 2002 and beyond.
What goes around comes around. In the semiconductor industry that means inventory gluts as channel masters push the pain of supply-demand imbalances onto other trading partners. A study of these strategies published by the Rancho Santa Margarita, Calif.-based Semiconductor Supply Chain Association shows how entrenched such practices are and provides some sobering lessons about the practicalities of supply-chain collaboration.
Ford Motor Co. is automating its manufacturing with supply-chain software from GE Fanuc Automation North America, a joint venture between GE and FANUC Ltd. of Japan. The application suite will automate production scheduling, routing and tracking for Ford facilities around the globe. Ford will use Cimplicity Collaborative Production Management software with additional functionality from GE. The software will be integrated with 10 to 12 existing plant systems, with the project taking multiple years for full implementation.
Teamsters union President James P. "Jimmy" Hoffa is offering a plan to raise dues for his 1.4 million members in a move that could raise as much as $34 million for the Teamsters' depleted strike fund. The move raises the stakes in the Teamsters' ongoing negotiations with United Parcel Service and also for the unionized freight carriers, whose National Master Freight Agreement expires next March 31. Hoffa has called a special convention for the end of April in Las Vegas to vote on the dues increase. The Teamsters' dues structure has gone unchanged for about 20 years and the international's share of the dues is the lowest among all national labor unions of comparable size, Hoffa claims.
Kansas City Southern Railway confirmed that it has resolved its lawsuit with Mexican partner Grupo Transportacion Maritima Mexicana "pending procedural matters" that still have to be finalized in Mexico. In addition, the lawsuit may have forced TMM and KCS to resolve matters regarding joint ownership in each other's companies. KCS said it could not comment specifically on what needed to be worked out and what the settlement included. "All I can say is the two partners are very closely aligned and there are no disagreements right now," said a KCS spokesman.
Fueled by tremendous growth at FedEx Ground, FedEx Corp. roared through its fiscal third quarter with improvements in sales and earnings despite a very weak operating environment. The third quarter, ended Feb. 28, produced revenue of $5.02 billion, a 4 percent increase over last year, operating income of $237 million, a 24 percent increase, and $120 million in net profit, an 11 percent improvement over 2001. The third quarter, seasonally the slowest quarter of the year, was the last for long-time auditor Arthur Andersen, which was dumped as FedEx's auditor in the wake of the Enron scandal and will be replaced by Ernst & Young in the fourth quarter.
Starting about two years ago, tea maker Lipton Ltd. set out to transform its global, complex, multimodal supply-chain network, which relied on 24 different shipping lines, into a more streamlined and modern system. "What we want from the shipping companies is for them to take more responsibility for the supply chain," said Lipton's John Wotherspoon. Wotherspoon manages the shipment of about 350,000 tons of tea each year valued at about $600 million. Today, Lipton contracts with five shipping lines but about 70 percent of its volumes are handled by Maersk-Sealand and P&O Nedlloyd, which have signed on as Lipton's global partners.