Brands and retailers have been tightening inventories and reducing orders in response to a weakening global economy and a marked slowdown in consumer spending, but despite these cost-cutting efforts, the cost of getting goods into the country and onto store shelves is likely to rise as pressures along the supply chain mount.
The most visible threat to transportation costs has been surging energy prices. Gasoline prices reached highs over the summer and spurred more cutbacks in consumer spending. Truckers were particularly hard hit when diesel fuel reached a peak of $4.76 a gallon during the third week of July. According to the American Trucking Association, fuel costs for a 2,000-mile trip were approaching nearly $3,000 this summer compared with $1,680 during the summer of 2007. The ATA said it currently costs about $1,400 to fill a typical tractor trailer’s fuel tanks.
While fuel costs have since come down some, those in the transportation industry understand that competition for energy will only grow in a global economy.
“In developing countries, prosperous exports have brought wealth to a small portion of the population who are then able to pursue Western lifestyles,” wrote Paul Bingham, managing director of Global Insight’s trade and transportation group, in a report released on Sept. 12. “If just 30 percent of the Chinese and India populations reach Western levels of consumption, then world consumer energy consumption will be doubled, not to mention the billions of people still aspiring to this lifestyle. So, long-term energy price increases are not surprising.”
States are also searching for ways to bring in money to fund massive overhauls of roads and bridges that are deteriorating or have exceeded their life spans. The likely option for many states will be to institute toll systems or to raise existing tolls.
The Pennsylvania Department of Transportation and Pennsylvania Turnpike Commission have sought to put tolls on the state’s 311-mile stretch of Interstate 80 since late last year. The groups are calling for a “ground up” reconstruction of I-80 in the state and believe a toll system would quadruple capital spending to $2.5 billion over the next decade. In July, the Turnpike Commission said more than half of I-80 had exceeded its design life. After a six-month engineering analysis, an improvement plan was developed that called for refurbishing 80 percent of the roadway and replacing 60 bridges.
The nation’s ports are also facing increased pressure to improve environmental practices and reduce truck-related traffic and emissions. The ports of Long Beach and Los Angeles, the country’s largest port complex handling 40 percent of imports, are leading the way with the implementation of the first phase of its Clean Truck Program. The ports are seeking to lower air pollution 80 percent by 2012. On Oct. 1, all truck models older than 1988 will be barred from the port. Truck models between 1989 and 1993 and models from 1994 to 2003 that haven’t been retrofitted will be banned as of Jan. 1. A fee of $35 per 20-foot equivalent unit, or TEU, will also be assessed on containers beginning on Oct. 1 to help fund financial assistance for truck replacement.
The ATA filed suit against the ports in July, alleging that the program would result in fewer trucking companies being able to service the ports and would therefore reduce competition. On Sept. 9, a federal judge found in favor of the ports and ruled that the program could move forward. The ATA contends that it supports the ports’ environmental goals, but believes systems have not been implemented to properly manage the program and that congestion is likely to result.
“Unfortunately, it is clear that the ports are now in no position to put in place the systems needed to collect the ports’ clean truck fee and administer the ban on pre-1989 trucks by the Oct. 1 program start-up date,” said the ATA, adding that it would continue to challenge the program.
Congesting ratings for Los Angeles-Long Beach were raised to medium in the National Retail Federation’s September Port Tracker report. The report also expects container traffic at the nation’s major retail ports to fall 6 percent in 2008. In August, NRF had projected a decline of only 4 percent.
Bingham believes the Los Angeles-Long Beach port system will continue to lose discretionary cargo as costs rise.
“[Brands and retailers] will ask themselves ‘Is this still the gateway I want to use,’” said Bingham. “If I’m feeding a store in Orange County or anywhere in California I’m still going to do it, but if I’m feeding by intermodal rail to Chicago, then I start to look at other options.”
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews