728Re: Short Sea Shipping Forum Notice and Agenda Berkeley, May 25, 2010
- May 27, 2010
I look forward to a report on this event - please, if you were there tell us how it went.
In the meantime, in Southern California, there was this meeting May 20...
California Supply Chain at Risk
A presentation from Business, Ports, Labor, and the Mayor of Los Angeles office on their plans to bring and keep international trade moving through Southern California
California ports have lost cargo and threats of big box stores leaving only discretionary freight is a reality. Retailers are working with third-party logistics providers (3PLs) to integrate sustainability practices into their supply chains and are asking 3PLs to make long-term investments in their facilities and operations. Long-term investments require a guarantee that the freight will continue to move through Southern California ports.
Shippers are looking to the supply chain to meet the needs of their own sustainability programs and are partnering with 3PLs to help them operate more efficiently without compromising profitability. Long-term investments in facilities require forecasts of long-term viability for warehousing in the region. How do we keep business in California for the long term so investments in sustainability are viable?
Port stakeholders have the opportunity now to shape and ensure future viability. Challenges to be tackled on the road to the future competitiveness of California ports include:
State-only escalation of electricity prices, estimated at 40% in the near term;
Cap and trade regulation looming in 2010 will steadily increase costs;
Velocity and throughput concerns benchmarked against competitor ports of Prince
Rupert, Seattle and Houston;
Unhappy retailers seeking cheaper and more productive alternative ports;
Our common enemy, the Panama Canal.
George Cunningham in the Cunningham Report:
California Supply Chain Risks: Regulation And Competition
Folks from both labor and management were in Long Beach Thursday, talking about ongoing threats to the California supply chain and plotting strategies about how to protect the jobs and economic benefits it provides from zealous state regulation and new competition from both north and south of the U.S. border.
It was a dialogue that is becoming common in California as business attempts to find ways to cope with ever-changing government regulation and competition from places with friendlier business climes. The Thursday meeting, California Supply Chain at Risk, was put together by the International Warehouse Logistics Association.
The conversation was both horrific and hopeful.
Lee Harrington of the Southern California Leadership Council talked about the threat posed by AB 32, the controversial program being put together by California to combat global warming. He said the threat posed by the program extended far beyond just the supply chain.
The program also targets manufacturing industries that consume large amounts of energy. Those companies use the supply chain to provide its raw materials and to move its finished product. The semi-conductor industry, which employs a lot of $100,000-a-year plus workers, generates 4.9 support jobs for each direct employee.
When you add one of those workers to the California economy, it translates to $70,800 per year in state and local taxes. When you lay one off, or move it out of state, those revenues are lost, he said. A logistics job usually generates one additional support job. Its state and local tax impact is about $38,910.
A study being put together by the Leadership Council shows that about 4,000 businesses with 10 or more employees have left the state in the past 18 months, he said. The top eight states to which California businesses are moving, he said, are Arizona, Florida, Georgia, Illinois, Missouri, New York, Texas, and Virginia.
He noted that as he spoke, there were business development folks from Texas in Long Beach talking to local businesses about the benefits of moving to the Lone Star state. Texas does not have a budget deficit, he noted.
Peter Peyton, president of International Longshore and Warehouse Union Local 63, said that the enemy for both business and labor is new competition coming on line - the Port of Prince Rupert in Canada, ports such as Lazaro Cardenas in Mexico, and the expanded Panama Canal, due to open in 2014.
Peyton said that he has been meeting with employers to talk about common interests and how management and labor can work together to protect West Coast waterfront jobs.
What he found was that many companies have adopted opposite strategies for dealing with the economic downturn and the recovery.
He acknowledged that some terminals had cut back labor to the minimum level they could and still claim to be maintaining an open gate, but said that seems to be changing as the volumes of cargo begin to rise.
Peyton downplayed questions about the ILWU's reputation for militancy driving away business, especially in critical years such as 2014 when a new contract is due to be negotiated and the Panama Canal will become a major threat to the West Coast ports.
He said labor always gets the blame, but there are many factors at play.
Peyton said that the waterfront is like a big Italian family.
"We are always fighting each other tooth and nail, even if we all really agree on almost everything."
People always look back at the 2002 contract negotiation, which included a lockout of the union and a resulting backlog that took months to dig out from under. They would be better to recall the 2008 contract, which was resolved with relatively little pain, he said.
Western States Petroleum Association President Catherine Reheis-Boyd talked about the state's climate-change law that calls for conversion to a low-carbon fuel standard. In order to achieve that standard, the petroleum industry would have to blend other ingredients into its fuel - ingredients that will dramatically raise the price for both California diesel and gasoline.
The state also plans to saddle the oil industry with extra mandates that the industry will have to pass along to the consumer, she said.
Despite all of the efforts to move away from fossil fuels, government studies show that coal, oil, and gas will remain the primary energy sources for decades to come, which is one of the reasons that ports are so critical to the state's energy supply, she noted.
Only 38 percent of the crude oil refined in California is pumped in the region. Fourteen percent comes from Alaska, but that amount is declining. The other 48 percent is brought to the state in tankers, she said.
Port of Long Beach Trade Director Don Snyder talked about the various projects underway at the port to prepare for the future and the importance of getting those projects funded. He said shippers are interested in transit speed, reliability and costs. Southern California offers numerous advantages because of its large population, its rail and highway connections to other places in the nation, its warehousing and distribution facilities, and the number of weekly services calling at the ports.
Joel Anderson of the IWLA said that the industry needs to be doing its own studies so that when state regulators come up with a plan, the industry has facts and figures available to make their case. One such study, currently underway, is the Warehouse Carbon Footprint Study being put together by the Transportation and Renewable Energy Dialogue.
That study looks at steps warehouse operators can already take to reduce both their energy use and their electric bills. Companies that take those steps now can both save money and get early-action credits when the state implements its climate change regulations.
-- The Cunningham Report
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