DOT official says transportation funding to come from changes in inventory accounting formula, tax treatment of overseas earnings | 2014-04-15 | DC Velocity
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.
The White House's plan to fund the nation's infrastructure programs for the next four years will come partly
from changes in the formula used by many U.S. firms to account for their inventory and from changes in tax breaks
for businesses to repatriate earnings generated by foreign operations, a top Department of Transportation (DOT) official
said yesterday.
Peter Rogoff, under secretary of transportation policy, told the NASSTRAC annual conference in Orlando that DOT
Secretary Anthony Foxx will propose to Congress within the next two weeks the Obama administration's four-year, $302
billion plan to re-authorize U.S. transportation and infrastructure programs. Of that, $152 billion will come from existing
tax mechanisms such as excise taxes on diesel fuel and gasoline. The remaining $150 billion will come from what the White House
has characterized as tax reform initiatives.
One of those initiatives would include changes in the "last in, first out" (LIFO) method of accounting for inventory, Rogoff
said. The technique is used to determine a company's cost of goods sold and thus its income earned. Under the LIFO method, the
most recently produced items are recorded as being sold first. By using the last sale price of inventory as a cost basis to
determine taxable profit, businesses hope to reduce their tax liability on their sales. The White House has called LIFO an
arcane formula used only in the U.S. and has tried for years to repeal it. Most nations use the "first in, first out" accounting
method where the oldest inventory items are recorded as sold first.
Rogoff declined comment on the specifics of the language in the Obama Administration proposal, referring questions
on the details to the Treasury Department.
As for the repatriation scheme, Rogoff said there is language in the proposal to address the use of repatriated overseas
earnings for transportation programs. Rogoff said the White House has a dubious view of legislation introduced last May by
Rep. John K. Delaney (D-Md.) that would create an infrastructure fund seeded by the sale of $50 billion in very long-term
bonds. U.S. corporations would be encouraged to buy the bonds by repatriating, tax-free, part of their overseas earnings
for each dollar they invest.
Rogoff said the Administration is unsure that the treatment of foreign profits would raise enough revenue for highway funding.
The Administration has in the past expressed interest in allowing repatriation of foreign-generated earnings at less than the
prevailing 35-percent U.S. corporate income tax rate. However, it has not agreed to tax-free repatriation.
FUNDING DEADLINE LOOMS
The current 27-month, $105 billion transport-funding law expires on Sept. 30. However, the Highway Trust Fund used
to finance transportation projects is expected to run out of money by August. Unless Congress acts before the August
summer recess to reauthorize funding mechanisms, the federal government will be forced to withhold matching funds
reimbursement to the states, Rogoff said.
The White House proposal, unveiled in February, is the first time in five years the White House has proposed a plan to
pay for infrastructure improvements. The proposal includes a $10 billion for a new multimodal freight grant program to fund
rail, highway, and port projects. The program would be conceived and implemented in conjunction with state and local
governments, organized labor, and the private sector.
Under the proposal, $199 billion would be spent on highway programs, with an additional $7 billion on highway safety.
About $19 billion would be allocated to rail programs. The remaining $81 billion would be allocated to mass transit programs
and to provide what the White House called "competitive funding," in the form of federal grants, to spur policy innovation.
The proposal does not contemplate any increases in motor fuel taxes, and Congress seems to have no appetite to raise them
either. Taxes on gasoline and diesel have not been raised since 1993. Shipper and carrier groups, as well as the U.S. Chamber
of Commerce, support an increase in fuel taxes as long as the revenues are dedicated to infrastructure funding.
Based on Rogoff's remarks, the Administration plan also apparently does not call for so-called carrier productivity
improvements such as the nationwide use of double 33-foot trailers or an increase in a large truck's "gross vehicle weight"
to 97,000 pounds from 80,000 pounds. The gross vehicle weight is comprised of the combined weight of a tractor, trailer, and
cargo. Rogoff said freight interests are already well represented in the Administration's proposal by the $10 billion budget
for multimodal programs.
Rogoff noted that the ambitious tax reform "discussion draft" introduced last February by Rep. Dave Camp (R-Mich.), chair
of the tax-writing House Ways and Means Committee, budgets $126 billion for infrastructure improvements. While the numbers and
their path to reaching them are different, the President and Rep. Camp "are speaking from the same zip code on this," he said.
The fact that powerful figures from different parties rolled out infrastructure funding programs at roughly the same time augers
well for the bipartisan support needed to quickly pass a long-term funding bill, Rogoff said.
Last week, Sens. Barbara Boxer (D-Calif.), chairman of the Senate Environment and Public Works Committee, and Senator
David Vitter (R-La.), the committee's ranking minority member, announced that they would begin working towards a six-year
transportation funding bill. Boxer was arguably the key Congressional figure in pushing through the current bill, which
became law in July 2012.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
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.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.