John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
Is your company prepared for a flu pandemic? If you work in the food industry, you probably answered yes to that question. But if you work for an energy company, industrial manufacturer or retailer, chances are you said no. A recent study by AMR Research found wide variations among industries when it comes to disaster preparedness.
If your company hasn't made much headway in crisis planning, you're not alone. The AMR study found that nearly 60 percent of enterprises surveyed had yet to adopt supply chain risk management policies. And even among those who had begun drafting policies, many appear to be still in the evaluation stage.
A study conducted by DC VELOCITY earlier this year also found a distinct lack of preparedness among survey respondents. Some 43 percent said they did not have general business continuity plans. Of those who had continuity plans, a staggering 83 percent had not yet addressed the possibility of a flu pandemic. Nor did they intend to. Nearly 75 percent of those who hadn't yet considered the impact of a flu outbreak admitted they had no immediate plans to do so. (See accompanying graphs.)
Not surprisingly, the companies most likely to find themselves on the frontlines in an emergency had made the greatest progress with their planning. "Certain sectors are more in tune to this than others," says AMR Research analyst Mark Hillman. Transportation businesses and chemical manufacturers tend to be ahead of the pack, he says. Food suppliers are at the top of the list as well. Take Hickory, N.C.-based food distributor Alex Lee Inc., for example. Alex Lee, which believes it has a responsibility to prevent disruption to the nation's food supply, has not only drafted a comprehensive pandemic plan, but is also well along in its efforts to implement that plan.
As for which businesses lag behind, the AMR report singles out automotive manufacturers, retailers and even some pharmaceutical concerns. The aerospace and defense industries are also at risk, AMR says, because of their tendency to forge sole-source agreements with specialized suppliers. "They are sensitive to the issue," says Hillman, "but the average company doesn't understand how much risk there is in their supply chain. The supply networks that will survive in the event of a pandemic or other major event are the ones that are the most prepared."
There are companies you'd expect to find on the forefront of disaster planning—food suppliers, say, or power and pharmaceutical companies.But chances are, semiconductor manufacturers wouldn't be high on your list.
Yet chipmaker Intel has emerged in recent years as one of the front runners in disaster preparedness. Over the past decade or so, the technology giant has devoted untold resources to business continuity planning, meticulously drafting provisions for dealing with everything from civil unrest, labor strikes and hurricanes to terrorist attacks and malicious computer viruses.
But for all the threats of earthquakes and tsunamis, the buzz at the company's Santa Clara, Calif., headquarters during the past 12 months has centered on a microscopic virus—the H5N1 virus, to be precise. H5N1, a particularly virulent strain of avian flu, has spread through Asia, Africa and Europe in the past decade. Public health officials fear that the virus will someday mutate to a form transmissible by humans, triggering a global flu pandemic.
In response to mounting warnings of a flu pandemic, Intel has formed an executive management team to study the potential impact of an avian flu outbreak on its business. Over the past year, it has pulled thousands of staffers into pandemic meetings and drills. It has enhanced its information technology infrastructure so that nearly half of its 105,000 employees will be able to work from home if necessary. It has arranged to stock enough food at each of its major facilities to feed one-third of its employees for three days. It has even stockpiled hand sanitizer, face masks and respirators.
Why would Intel go to such lengths to prepare for what many consider an unlikely event? A pandemic may represent a low-probability risk, but its potential consequences are staggering, answers Jim Wick, Intel's environmental health and safety manager for the Americas. By putting measures in place now, he says, the company boosts its chances of bouncing back if a pandemic does erupt. "If indeed a phase six pandemic [the worst possible scenario] occurs, the companies that have protected their people and their assets best will be in a position to recover quickest and become a contributing part of their community again."
Intel's interest in pandemic planning is more than a matter of protecting its profits, says Wick. "There is a business component to this," he concedes, "but there is also a moral and ethical component that outweighs that." Unlike many corporations, he notes, Intel is not stockpiling Tamiflu, the only medication available for treating avian flu (if administered early enough). Many Fortune 500 companies have stockpiled the drug to use for key employees, a controversial move that has depleted supplies of the drug. Intel has instead chosen to forge close relationships with public health agencies in hopes of getting a fast response to its requests should the need arise.
"We will not undermine a national strategy for the allocation
of a scarce resource," says Wick. "We think we have [executives] who ought to have access to [Tamiflu], but we
are not going to horde it at the expense of hospital emergency rooms."
Test drive
Intel's exhaustive disaster planning efforts might strike some as overkill, but it's hard to argue with the results. In the past four years alone, Intel has successfully implemented various provisions of its business continuity plan more than 200 times, as it responded to crises ranging from civil unrest to union strikes and storms like Katrina worldwide.
"A lot of those incidents occurred at the local site level and were not a big deal. But think about events like Katrina that have occurred over the last year or so and you can see the kind of impact it might have in your logistics transportation activities," says Tony Sundermeier, Intel's customer logistics manager for the Americas. "The good news is we are not sole-source suppliers for our transportation services, so if something happens to one supplier, we can react."
Intel will not discuss its distribution network or its specific plans for ensuring product availability during a flu pandemic. However, it's clear from executives' statements that Intel plans to pull its suppliers into the effort. Sundermeier, for example, reports that Intel has already requested that its suppliers take specified steps to prepare for a flu pandemic.
"That's one of the key considerations transportation- wise," he says. "For a logistics professional, it's a daily part of doing business. About 95 percent of the time, everything runs well. It's how you manage that other 5 percent that differentiates you from the others. You need to build in a lot of redundancies in order to be able to change on a dime."
Money well spent
Despite the potentially catastrophic effects of a pandemic, it's often tough to convince management to invest time and money to plan for something like a flu outbreak, which could be six months—or six years—away. That's especially true of public companies, where management may be more concerned about the next quarter's financial results than in preparing for something as uncertain as a pandemic. And if rival companies aren't making similar investments, those managers will be all the more reluctant to spend money on pandemic preparedness for fear their earnings will look bad by comparison.
But the folks at Intel say it's money well spent. "It's like buying insurance," Steve Lund, Intel's director of security and head of its crisis response team, told a recent forum held at the Massachusetts Institute of Technology's Center for Transportation & Logistics. "Hopefully, you never have to cash it in. Yes, we are considered a cost [on the balance sheet]. And not all companies are willing to invest that money. But we provide a service that allows you to be much more profitable in the future [should a crisis occur]."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."