Kitty Hawk to Halt Ground Operations

Big news on the domestic cargo front today as Kitty Hawk announced that they will halt ground operations and cut 500 jobs. Kitty Hawk, which declared bankruptcy on October 15th, cited a weakening demand for air freight and a 15 percent decrease in ground services as reasons for ceasing operations.

I’m sure the announcement has left many forwarders and shippers scrambling for alternate trucking options. A forwarder I once worked for utilized Kitty Hawk’s services to truck product to their main export hubs for international airfreight.

Not surprisingly, shares of Forward Air surged on the news.

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Fuel Surcharges On the Rise

With the recent record high of oil reaching $88 per barrel, don’t be surprised to see the fuel surcharge on international airfreight shipments to increase to $0.70 per kilo in the near future.

From my recent readings, this latest increase has been caused by simmering tensions between Turkey and Kurdish separatists in Northern Iraq. Although, the record prices could ease if the conflict subsides.

Via Bloomberg.com:

“If we don’t see an escalation of the conflict between Turkey and the Kurds, we’ll see a sharp decline of $5 or $6,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich AG in Vienna. “Markets are tight, but not tight enough to justify $87.”

RFID Container Service

Last summer I was in talks with a potential ocean import customer and as I was uncovering potential needs, my customer said that he was unhappy with his current provider. When asked why, he said it was because they could not tell him with exact precision the location of his container on a vessel transiting the Pacific Ocean. Most customers understand that the transit time from China to the West Coast is roughly 12 days so they usually do not care what part of the Pacific Ocean their container is crossing as long as the container hits the port on time.

I remember thinking:

1. Why would anyone care?
2. This customer could be a nightmare.
and
3. Regardless of which forwarder moves his containers, nobody is going to have that information.

That could all change thanks to RFID. An article from Transport Intelligence details what I believe is the first use of RFID in tracking ocean containers throughout the supply chain.

According to the article, Schenkers has recently begun testing RFID container service on containers from Hamburg to Shanghai. Initially 10 containers are being equipped with an RFID device which monitors container movement via GPS tracking. The RFID chip broadcasts the location of the container as well as certain environmental conditions.

However the apparent ‘real-time’ capability of Schenker’s project highlights the potential to improve container management using this technology. It will give forwarders the ability both to manage their own container assets better as well as offer customers better ‘visibility’ for their loads. The latter is now an important aspect of both shipping lines’ and forwarders’ service-offering to large customers. It appears that this type of wireless technology offers the ability for forwarders to reduce their dependence on the container shipping lines to generate ‘visibility’ information for them, hence increasing their power.

This could give forwarders a tremendous advantage in real time tracking of cargo movement and could prove extremely beneficial to container management in container yards as well.

Weak Dollar Fuels U.S. Exports

I guess there is one benefit of a weak U.S. dollar; an increase in U.S. exports.

Via International Herald Tribune:

“The dollar is in a quasi-sweet spot,” said Joseph Quinlan, chief market strategist at Bank of America in Charlotte, North Carolina. “It’s dropped enough that it’s creating an earnings upside for U.S. multinationals, while I expect many foreign companies to hold the line on prices they charge U.S. consumers.”

Exports by General Motors, Boeing and other U.S. companies were up 11 percent in the second quarter from a year earlier, shrinking the U.S. trade deficit in goods for the first half by $14 billion, to $405 billion and helping the economy weather the housing bust.

The Port of Long Beach increased exports by 34 percent in August 2007 compared to the same period last year. If the dollar continues it’s recent slide, will it bring manufacturing jobs back to the U.S.? I doubt it…

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