Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Jim Burnley doesn't mince words. after serving as Transportation Secretary under President Ronald Reagan from 1987 to 1989 and spending the next 20 years as one of the nation's most prominent transportation attorneys, lobbyists, and power brokers, he has, if nothing else, earned the privilege of candor in a town often bereft of it.
Now senior partner at the Washington law firm Venable LLP, Burnley is spending most of his time helping his transportation clients navigate the American Clean Energy and Security Act of 2009, a 1,100-page bill that seeks to reduce carbon emissions by 80 percent or more between 2012 and 2050 by imposing a national limit on greenhouse gases.
Burnley pulls no punches when the talk turns to the bill's controversial centerpiece—a complex system called "cap and trade," where emission limits are set for each industry, and industries are forced to amass credits or buy allowances equal to their emissions levels. As he sees it, cap and trade amounts to little more than a command-and-control exercise that will wreak havoc on supply chain economics. "This is industrial policy straight out of the 1930s," he said in an interview.
Yet for all its many critics, the bill continues to move forward. The legislation, sponsored by Reps. Henry A. Waxman (D-Calif.) and Edward J. Markey (D-Mass.), was narrowly passed by the House of Representatives on June 26. No companion bill has yet been offered in the Senate, though Majority Leader Harry Reid (D-Nev.) is believed to support the Waxman-Markey legislation. President Barack Obama has said he expects to sign climate-change legislation sometime this fall.
"Massive energy tax"
Burnley and others in and out of transportation contend that when the federal government creates a scarce new commodity—in this case, the right to emit carbon—and then mandates that businesses buy it, the costs will inevitably be passed on to users in the form of higher prices. Transportation interests worry the industry will be disproportionately affected by the cap-and-trade provision. For instance, the existing language calls for 85 percent of all emissions credits to be given away for free initially. However, from 2014 to 2016, the so-called "refiners" category—under which transportation is lumped—will only receive 2 percent of the credits given out during that time, even though by most estimates, the supply chain is responsible for 30 percent of all CO2 emissions in the United States.
As a result, the transportation sector would have to buy credits equal to the 28 percent differential between the free credits it receives and the amount of carbon it emits. This would cost the industry billions of dollars, lead to a spike in oil prices that would be passed through to shippers, and contribute to a severe shipping and economic slowdown, critics warn.
Based on private-sector estimates that, over 10 years, the cap-and-trade measure would cost polluters in all industries between $650 billion and $1.3 trillion, freight costs could rise anywhere from 6 to 10 percent or even higher, analysts say.
"There will be significant increases in fuel costs for all modes," says C. Randal (Randy) Mullett, vice president, public relations and government affairs for Con-way Inc.
And in what some consider an ironic twist, carbon emissions would end up being reduced as an economic contraction leads to fewer goods being shipped and fewer conveyances needed to haul them.
"It is a horrific outcome if you are in the transportation world," Burnley says.
G. Tommy Hodges, first vice president for the American Trucking Associations, said in congressional testimony in early June that the 2 percent allotment only covers refiners' emissions at the facility level and ignores emissions from the burning of petroleum products. This oversight, Hodges warned, leaves "downstream users, such as trucking companies, exposed to dramatic and sudden fuel price spikes." ATA urged Congress to craft carbon-reduction laws that treat so-called mobile sources such as commercial trucks differently from traditional sources.
There is no shortage of groups lining up against cap and trade. The conservative think tank Heritage Foundation has called the proposal a "massive energy tax" that will damage the economy, increase unemployment by about 30 percent, send energy prices soaring, and do little to actually reduce global warming. Heritage projects that cap and trade would lower temperatures by a scant 0.2 degrees by the end of the century.
Global consultant CRA International, in a study commissioned by the National Black Chamber of Commerce, predicts motor fuel prices—the study doesn't distinguish between gasoline and diesel fuel—would climb 59 cents a gallon by 2050 if the current version of cap and trade becomes law.
Some predict even bigger fuel hikes. The American Petroleum Institute, the petroleum industry's trade group, says the law could increase energy costs by 88 cents a gallon for diesel fuel, 83 cents for jet fuel, and 77 cents for gasoline.
There are international trade risks as well, critics warn. Heritage says that because India and China will not move in lockstep with U.S. environmental goals, the legislation may compel U.S. manufacturers to move operations to countries with less-stringent environmental laws.
The other side
Supporters of cap and trade argue that such a system is a more flexible option than a "carbon tax" that would fall equally on everyone's head.
Advocates of carbon-reduction mechanisms like cap and trade say they may trigger higher energy costs in the short run but will yield significant savings starting as soon as 2020, as businesses and consumers find ways to reduce their energy consumption.
In a two-year study released in May, the Union of Concerned Scientists (UCS) said the United States could by 2020 reduce emissions by 26 percent below current levels, with businesses and consumers saving $346 billion in that year. The study also predicted that by 2030, emissions could be slashed by 56 percent, with resultant savings of $465 billion.
Carbon-reduction technologies installed in freight trucks could produce net savings—savings after efficiency investments and higher energy costs are factored in—of $38 billion by 2030, while keeping emissions constant at 2005 levels, according to the UCS study.
Eric de Place, senior researcher at Sightline Institute, a Seattle-based think tank that supports the legislation, says he expects cap and trade's impact on the freight industry to be "relatively modest." He declined to provide specific numbers but said it might end up increasing fuel prices by a "few nickels" per gallon over the decades.
De Place also cited International Monetary Fund data showing that if the cap and trade provisions were applied on a global scale, they would shave only one-half of 1 percent off world economic activity over the next 50 years. He says concerns that cap and trade will trigger the greatest transfer of wealth in history are "nutty."
Asleep at the switch
As for what's next, opponents of the Waxman-Markey bill are hoping its most onerous language will be watered down or stripped away when it reaches the Senate. However, given Majority Leader Reid's support of the House bill, Burnley calls such wishes "naive in the extreme."
Burnley says the transportation industry fumbled its opportunity to lobby for its interests as the bill was being crafted and must now face the consequences.
"The transportation community was asleep at the switch," he maintains.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.