Dear Santa,
The long-anticipated midterm elections are behind us, and as many expected, we will soon have a Republican majority in both the House and Senate. As you know, in August, Congress once again extended the then-current transportation infrastructure funding legislation until May 2015, leaving that hot potato for the new Congress to handle. Well, in January, it will be time to start thinking about a permanent solution. Hopefully, you can help bring some logic and sanity to the process. It is not at all clear that the new Congress will be anxious to take up the matter, but at least you will be dealing with a different cast of characters. Some states are so pessimistic about the prospects of a timely resolution that they have delayed important projects until at least 2016.
A more immediate concern for both retailers and their customers is the ability of retail distribution systems and package carriers to handle this year's holiday volumes. You remember, I am sure, that last year, about 2 million packages did not make it to their destinations by Christmas morning. No doubt you were blamed for a lot of this even though it wasn't your fault. With e-commerce volumes expected to rise, UPS and FedEx are working hard to prevent a recurrence. They are hiring so many seasonal workers that you may have trouble finding additional elves this year. Perhaps you could persuade the retailers to be a little more cautious about what they promise. And watch out for Amazon. It recently posted its biggest quarterly loss since 2003, which puts it on a track to lose about $40 million this year. It may try to pull out all the stops to minimize its 2014 losses.
While the impact on Christmas remains to be seen, several situations brewing on the West Coast could complicate things a bit. Continuing logjams at the ports of Los Angeles and Long Beach, caused by a shortage of trucking equipment, have slowed operations to the point where it can take up to three weeks to get containers off the docks. In addition, longshoremen have been working without a contract since July. While negotiations are continuing, there has been some evidence of work slowdowns at the ports of Tacoma and Seattle. Finally, the huge increase in shipments of Bakken crude oil from North Dakota has seriously taxed the resources of BNSF Railway in the Northwest. While the impact is primarily on grain shipments, some intermodal movements are being affected as well. Bottom line, the entire West Coast needs some attention.
I have written you several times about the Mexican truck situation, but I am about ready to give up on that one. The Motor Carrier Safety Advisory Committee of the Federal Motor Carrier Safety Administration recently released what I call its "non-report" on the three-year pilot program that allowed certain Mexican truckers to operate on U.S. highways. The committee made no recommendations, saying the data were insufficient for analysis. What will happen now is anyone's guess, but it doesn't sound as if we'll see much progress on this any time soon.
On a more positive note, you are aware of the shift to dimensional weight pricing by UPS and FedEx, a system whereby shipments will be priced based on weight and cube, rather than weight alone. Hopefully, this will result in some package design innovations that will have a positive impact on your sleigh loadability. My guess is that you cube out before you weigh out most years. On the other hand, you don't want to add too much weight. Having to add and name another reindeer could play serious havoc with a time-honored Christmas tradition.
Merry Christmas!
Cliff Lynch
