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.”
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews