Week In Review:

Hello,
Colliers Research will be publishing a weekly review of current news highlights. Here is the lastest from last week.


Mortgage Rates Rose in Latest Week
WASHINGTON -- Rates on home mortgages continued their climb this week, with the 30-year fixed-rate mortgage hitting its highest level since September, Freddie Mac said.
CLICK FOR MORE


Grubb & Ellis’ Transactions Chairman Leaves Firm
Robert Osbrink has left his post as executive vice president and chairman of transaction services for Grubb & Ellis, the company said Tuesday.
CLICK FOR MORE

Blackstone Wants to Invest in China, Japan Property Companies
June 26 (Bloomberg) -- Blackstone Group LP, manager of the world's biggest buyout fund, plans to invest in property companies in China and Japan struggling to get financing as the firm seeks to benefit from rising borrowing costs.
CLICK FOR MORE

Commercial-Mortgage Bond Sales May Reach 12-Year Low
June 26 (Bloomberg) -- Sales of bonds backed by commercial real estate loans may fall to the lowest level since at least 1996 as investor demand for the debt slumps.
CLICK FOR MORE

Fed Sounds Inflation Alarm, Moves Toward Rate Rise
June 26 (Bloomberg) -- The Federal Reserve is sounding the alarm on inflation without committing to raise interest rates.

CLICK FOR MORE

A Gas Station For Every 2,500 People

From the Census Bureau

Texas, California and Florida accounted for more than 20 percent of the nation’s 116,855 gas stations with paid employees in 2006, according to the U.S. Census Bureau. That’s about one gas station per 2,500 people.

These economic numbers come from County Business Patterns: 2006, an annual report that contains data covering the more than 7.6 million businesses with paid employees at the national and state levels, and more than 3,100 counties. The report provides data on the number of establishments, number of employees, and quarterly and annual payroll for most of the 1,100 industries according to the North American Industry Classification System.

Gas stations employed more than 910,000 people, with a total annual payroll of $15 billion. At the county level, Los Angeles (1,723); Harris (Houston), Texas (1,397); and Cook (Chicago), Ill. (1,090); had the highest number of gas stations.

Nationally, the average annual payroll per gas station employee in 2006 was $16,449. Hawaii ($27,669), Connecticut ($21,927) and Alaska ($21,890) had the highest average annual payroll per employee in this industry. Among larger counties, Honolulu, Hawaii ($32,142), Troup, Ga. ($31,833), and Hunterdon, N.J. ($28,869), were among those that reported average annual payroll per employee higher than the national average.
Other key findings for all industries:

• Of the nearly 120 million employed by businesses with paid employees, more than one third were employed in three sectors: health care and social assistance, retail trade, and manufacturing.
• Three states accounted for one-fourth of all establishments with paid employees – California (878,128), Florida (517,069) and New York (515,950).
• Among counties with the most employees in 2006, New York had the highest average annual payroll per employee at $92,138. Santa Clara, Calif., was second at $76,234.
• Los Angeles County had the largest number of business establishments at 249,977, employing nearly 3.9 million. Cook County, Ill., had the second largest number of business establishments at 131,433, employing 2.4 million workers.
• A sampling of the 50 most populous counties in the United States shows average annual payrolls per employee of $59,220 in Fairfax, Va.; $50,398 in Harris, Texas; and $41,038 in Franklin, Ohio

I wonder what the gas-station per capita is for other developed countries. You would imagine that if fewer people drove, less gas stations would be necessary since there would be fewer cars to fill.

If gasoline prices continue to increase at their breakneck pace, you would expect that filling stations would be in less demand, the more marginal ones would be pushed out of business. I have started to notice some stations dusting off their old Cash Price - Credit Price signs that I remember as a child. This is in response to the surcharges that credit card companies charge gas merchants to use their service. The gas stations would pass these costs onto the consumer, hence the need for the two separate prices.

When gas prices are low, consumers are less sensitive to a change in price, and I imagine that everyone was charged the credit card price. Now that people are very sensitive to prices, in order to compete, gas merchants are going back to the two tier program, since it allows them to sell gas a few cents cheaper than the guy across the street.

19th annual State of Logistics Report

From Modern Materials Handeling:

Driven by the relentless rise in fuel costs, American businesses spent a record $1.4 trillion on logistics last year. That was equal to 10.1% of the nation’s gross domestic product, a percentage not equaled since 2000.

That’s the crux of the 19th annual State of Logistics Report released by the Council of Supply Chain Management Professionals in Washington D.C. on Wednesday.

Inventory carrying costs outpaced transportation costs, rising 9% last year. Transportation costs rose 5.9% last year and now account for 6.2% of nominal GDP.

Higher inventory carrying costs and transport costs combined to outpace the flagging U.S. economy, pushing logistics as a percentage of GDP into double digits for the first time since 2000. Still, logisticians deserve credit for productivity. In 1985, for example, logistics costs amounted to 12.3% of GDP, before enjoying a steady improvement through the early years of this century. The all-time low percentage was in 2003 when logistics costs were a mere 8.6% of GDP.

Unless the cost of crude oil retreats back under $80 a barrel, those days may be gone forever.

“We will not see a return to prosperity for some time,” Wilson predicted. “I think logistics costs will claim an even higher percentage of GDP in 2008.”

Although Washington refuses to say the nation has entered recession, as Wilson said, “Neither have we entered a recovery. I expect more of the same for the rest of 2008 and then a very slow recovery into 2009. Traffic levels will rebound ahead of rate and revenue levels until supply and demand level out.”

The good news for shippers is multifold. First, there is plenty of capacity—at least for now. Secondly, heightened competition for fewer loads has severely constrained rates, particularly in trucking.

“Pricing power is firmly in the hands of shippers now, not the carriers,” Wilson said.
Shippers would be advised to enjoy it while it lasts. It may not be forever. Because more than 2,000 trucking companies have closed in the first quarter alone—Jevic Transportation, the nation’s 71st-largest carrier, ceased operations last month, for example—there is less capacity now in trucking than in the early part of this decade.

“The diminished industry capacity will have serious repercussions when the economy turns around,” Wilson predicted, “probably returning us to the crisis situation we experienced just a few years ago with backlogs and bottlenecks.”

Total logistics costs have risen in each of the last five years, rising 52.3%. Transportation accounted for 52% of the rise last year. For the fourth straight year, inventory carrying costs rose faster than transportation costs, and accounted for 44% of last year’s increase in logistics costs. The cost of warehousing rose 9.9% last year while transport costs rose 6%.

Trucking costs increased $36 billion last year, an increase of 6% over 2006 levels. The cost of rail transportation rose 7.4% as the rails posted their second-best year on record despite a 2.5% drop in carloadings. Freight revenue for the Class 1 railroads rose $3.6 billion last year, mostly through fuel surcharge increases. Rail operating ratios again were healthy, dropping to 78.3 last year from 78.6 in 2006 and 82.1 in 2005.

Transportation costs as a percentage of GDP is just about where it was 20 years ago. Logistics costs as a percentage of GDP crossed 10% for the first time in seven years. Still, this does not mean that logisticians are not doing a good job, Wilson said.

“One of the realities of a global supply chain is that delivering the goods now costs more,” she said.

Some shippers were not as pessimistic.

“I refuse to join the pity party,” says Kevin Smith, senior vice president of supply chain and logistics for CVS Corp., the drugstore chain. “We have a much more optimistic outlook than what is being presented.”

Rick Jackson, chief operating office for Victoria’s Secret Direct, agreed. “It’s a great time to be in supply chain. The spotlight is being turned on us a bit.”

One trucking company executive said his industry is about to emerge from a two-year slump with a vengeance because of bankruptcies and other factors that may create a capacity crunch in trucking when the economy rebounds.

“My sense from the truckload side is we are right on the precipice of a significant recovery,” said Jim O’Neal, president of O and S Trucking, Springfield, Mo. “You are going to see a very significant capacity situation that’s going to make 2004-2005 (undercapacity) look like a cakewalk.”

Redlands Laz-E-Boy Plant to Show off changes

From the Press Enterprise:

Similar to the system developed over the past five decades by Japanese automaker Toyota, it replaces the traditional assembly line process with one where several individual teams or "cells" build products from start to finish.

Company officials have not specified exact numbers, but the conversion at the Redlands plant and four other U.S. facilities took about two years and several million dollars.

"The process here used to be very departmentalized," said Redlands plant General Manager Jovie Dabu. "You would have a group of upholsterers in one place, the sewing people in another section, the framing people in another area, and everyone would just work in the same place all day.

"Now we work in teams," he said. "In each team, there's at least one person who already knows each of those different areas, but everyone is now cross-trained."

La-Z-Boy West employs about 400 people and has been a fixture in Redlands since 1966. Workers at the 189,000-square-foot plant produce reclining chairs and sofas that are shipped to retailers across the western United States and several Asian countries.

Operators say the system streamlines quality control, matches production more closely to daily demand, cuts down on waste and minimizes the amount of unfinished product that needs to be stored before completion.

Because of its efficiencies, Dabu said, the system is expected to help the facility maintain steady employment, as it has for several years, rather than having to resort to drastic workforce reductions during tough periods like the current economy.

Terry Begnoche, industry relations manager with the Michigan-based Society of Manufacturing Engineers, said the concept has proved effective across several business sectors as well as the military -- in the building of aircraft, for example.

He said it has also been credited with helping some companies avert closures and mass layoffs.

My Take: Manufactures are in a tough position when demand declines a.k.a recession. They want to produce less stuff; otherwise all this product would sit around in warehouses and who knows if it will be wanted once the economy picks up again.

Since it is unknown when the bad times will end, what the demand will be when things pick up again and what the job market is likely to do, manufacturers engage in "worker slowdown", they cut the number of hours people work rather than lay people off, they perform maintenance and upkeep tasks (painting, training etc.) to keep their existing workers busy.

Once the economy rebounds and production picks up again then the factory will be running at full force and all the gains made during the recession will be realized.

So believe it or not, now is the time to think about how you want to grow the business and how to expand in the slow times to take advantage of the fast times.

Unless you outsource most of your production process, the worst thing that can be done is to reduce plant size and layoff workers. You will be running around trying to get workers and trying to re-tool or expand your facility on the rebound, which is costly because this is the only time in the business cycle than maintenance actually make serious money.

Variable Speed Limits - Test Case on the East Coast

An unstable speed limit:

ALEXANDRIA, Va. -- Should a computer tell you how fast or slow you should be driving on the road? Pretty soon that will be the case around the Woodrow Wilson Bridge.
A variable speed limit system will be set up on the Capital Beltway between the Springfield Interchange and the Telegraph Road Interchange, WTOP has learned. It will be turned on in late July.

Sensors and cameras will monitor traffic flow, then alert an operator in a control center to adjust speed limits to allow for a more gradual flow through the area. The basic concept is that by slowing traffic down, traffic will move in unison -- as opposed to a rush of cars hitting the same area all at once.

A recent report about this kind of system done for Utah's transportation department states, "Reducing the speed of individual drivers is important, however, reducing the variation of speed of all drivers in a section of roadway has an even greater safety enhancing effect. Crashes are not related as much to speed as to the range in speeds from the highest to the lowest. Studies show that, regardless of the average speed on the highway, the more a vehicle deviates from the average speed, the greater its chances of becoming involved in a crash."

There are similar variable speed limit systems in place in other parts of the country and in Europe, but the system around the Wilson Bridge is expected to be much more complex.



I always though Singapore had a pretty good traffic system:

The city center of Singapore is a restricted zone. This means that you will have to pay additional road tax to enter this area during working hours from Monday to Friday. Also, some sections of highways are restricted during rush hours. The additional road tax is paid by a system called Electronic Road Pricing, or ERP (so not Everyday Rob People as the occasional taxi driver would have you believe). Every car has an IU, or In-vehicle Unit, which is a device attached to the windscreen and which contains a cashcard. When entering the restricted zone, the ERP gantries will automatically deduct the tax from your cash card. Depending on which time you enter the zone, these charges can be anything from $0.50 to $2.50. More information about ERP can be found here.

From what I understand, each car has a monitor on it, similar to the Fastrak system here in Southern California. The exception being that you are charged per mile, and you are charged for every mile you go over the speed limit. And the speed limit and per mile charges adjust to how many cars are on the road.

Traffic congestion is costly, and freeways are not free.

First Pick A Port - Decision Tree for Logistics Companies

From DC Velocity:


The downturn in the U.S. economy may have slowed the tide of goods arriving from overseas, but according to just about everybody who looks at these things, imports will still grow faster than the economy as a whole for some time to come.

And that means importers will have to find ways to handle the seemingly endless waves of incoming goods. In recent years, companies both large and small have been looking to build warehouses and distribution centers near ports along the U.S. coastline. As imports continue to grow, many more will do so.

What should an importer look for when selecting a site for an import distribution center? To get some insight, I asked a couple of experts in the business how they advise their clients. Kristian D. Bjorson is a Chicago-based managing principal with the logistics practice group of the Staubach Co., a global real estate advisory firm. Mike Peters is first vice president of ProLogis, the world's largest developer and manager of distribution facilities. Both have long experience in site selection.

Pick a port
Bjorson and Peters agree that the site decision is about much more than the real estate; it's also about what lies outside the dock doors—the area's network of highways and rails, the community's labor pool, and more. But the first order of business is to choose the right port.

"The first discussion we have is whether to locate on the West Coast or the East Coast," says Bjorson. As part of this determination, he and his clients review the importer's traffic patterns— where the goods are coming from and where they're headed. They also look at which shipping lines serve the various ports on a given coast as well as what kinds of outbound transportation services are available.

Once they've narrowed the search to a specific geographic region, the process of evaluating and comparing ports begins. "Then we will focus more on what port services are [available] now and will be in the future," says Bjorson.

With the emphasis on speed these days, the top-of-mind consideration for most importers is the quality of port services. To evaluate service levels, Bjorson recommends that his clients ask four key questions:

1. What is the ocean transit time from their shipments' port(s) of origin?
2. How long does it take to get shipments onto trucks or the rails once they arrive at the port?
3. How flexible and efficient are the port operations?
4. What kind of record does the port have for security and shipment damage?

But it's not enough just to consider current port capabilities, Bjorson warns. Importers also need to think about how things will look five, 10, or 20 years out. "Most ports can meet [shippers'] requirements today. They can handle this type of ship and have that type of capacity," he says.

"The question really is—and this is a betting man's question—what will it look like in 2015?

That's where you get into the capital investment at the ports. Do they have deep water and sufficient berths and terminals? Which carriers are making or not making investments? What are the contract conditions of the carriers in port? The hardest thing is predicting tomorrow. What investments are they making that will give you a comfort level in 2015?"

Peters agrees with Bjorson. ProLogis looks closely at future potential when choosing markets for development, he says. "As a developer for shippers, you want to make sure to invest in a market that has continuing opportunity for growth. For the shipper, it is a similar issue. If the port is capacity-constrained, you want to be cautious about that."

But what will it cost?
As they compare port services and capabilities, importers are sure to be looking at the variable costs as well. Oftentimes, the port decision will come down to those variable costs, says Bjorson.

With import operations, transportation is inevitably the largest variable cost. Not only does the importer have to consider the cost of ocean freight, but it also has to factor in the cost of domestic transportation. Peters cautions importers not to overlook the expenses associated with shuttling containers between ports, intermodal terminals, and DCs in their calculations. "Look at the drayage cost from the port and how that impacts outbound transportation costs," he says.

The second-largest variable cost, especially on the East Coast, is labor, Bjorson says. Because wage scales can vary widely up and down the coast, it behooves importers to do some comparison shopping whenever possible, he adds. "The question is, what is your flexibility?" Bjorson says. Labor costs are higher for unionized workers in, say, New Jersey than in Charleston, S.C., he reports, which could be a factor in a location decision if that option makes sense.

It's important to note that variable costs can be mitigated somewhat by incentive packages offered by local governments eager to attract business. These, too, can vary widely from port to port, Bjorson says. "You will not get the same incentives in Atlanta as you will in Savannah."

An ocean view?

As the search moves from picking a port to choosing a specific site, the focus turns to facility requirements.

"The second thing is what do you want the role of the facility to be," says Peters. "Is it truly a transload facility, just to get goods out of the international container and into domestic trucks and get them to your DC network?" he asks. "Or is the plan to replace a regional DC and have this facility in the port market serve as a regional DC and ship to stores or on to your customers?"

The facility's role will have a direct bearing on how close to the port it needs to be—and by extension, on land costs. If the importer intends to open a sizable distribution facility that will serve, say, the LA/Long Beach area, Peters says, its best bet might be the Inland Empire some 40 miles east of the ports rather than in the high-rent area immediately surrounding the San Pedro Bay ports.

If, on the other hand, the importer simply needs a small, narrow transload facility, a site near the port may be worth the expense. Choosing a site close to the port will keep down drayage expenses. It will also help assure fast container turnaround, which has become more important in recent years. As demand for containers around the world has soared, shipping lines have turned up the pressure on shippers to return containers promptly.

Picking a corner
With the question of the port and type of facility settled, it's time to get specific. "Once you [have a] handle on that," says Bjorson, "you can begin to get to the 'street corner' questions. That is, what street corner will you be on, what is the labor availability, what are the other costs? What are the [local] taxes and incentives?"

For most importers, the number one "street corner" question is about access to transportation.

"At the end of the day," says Bjorson, "the transportation side really drives the decision."

Transportation needs will vary for manufacturers, consumer goods importers, and retailers.

"Those three categories require different infrastructure based on the distances they are sending stuff," Bjorson says. Retailers on the East Coast will likely want to send products by full truckload out of the port, making highway access paramount. But a manufacturer may need proximity to rail service.

Peters notes that there are other issues that might seem peripheral to DC operations but that may ultimately prove to be important. These tend to be highly individualized matters, he says.

"If you have a facility with 300 employees, access to public transportation might be a priority, but if you have just 30 workers, it might not be much of a concern. It is not one size fits all."

Another consideration might be the area's political climate. "One of the things we try to be very aware of is community opposition," says Peters. "We want to be sure that we are in an area where what we do fits well with the community. ... We do not want surprises down the road."

That said, Bjorson and Peters agree that no site is likely to have a perfect balance of attributes. Tradeoffs are inevitable. But careful consideration of port costs, services, and infrastructure capacity in light of your current and future needs will boost your chances of picking the right site.

Jones Lang LaSalle Buys Staubach

Huge merger, Jones Lang LaSalle will pay $613 million -- with $123 million in cash and $100 million in stock paid at the transaction close and the balance paid out in cash over five years -- for all of the outstanding capital stock of Staubach Holdings Inc. The transaction is expected to close in the third quarter subject to regulatory approval.

The move will give Jones Lang LaSalle access to 700 brokers with local client-lists that include the likes of law firm Hunton & Williams, Booz Allen & Hamilton and SAIC, said Robb Johnson, president of Staubach Co. Northeast, one of the regional entities in Staubach Holdings. "Our client list is literally a Who's Who of the Fortune 500," Johnson said.

The deal marks the 28th acquisition for Jones Lang LaSalle since 2006. In late 2005, it bought Spaulding & Slye, a Boston-based company with a large D.C. office, for $150 million in cash. The companies had a relatively smooth transition, but Spaulding & Slye was much smaller than Staubach, which has 1,600 employees in 70 offices and completed $28 billion in transactions in the fiscal year that ended in June 2007, according to the release.

The combined company will have 33,700 employees around the world and 11,500 in the Americas with the addition the Staubach employees. The transaction also will add 14 new corporate offices to Jones Lang LaSalle's 54 in the Americas, bringing the total in the Americas to 68 and globally to 184.

The transaction does not include Staubach Retail Services or Cypress, Staubach's investment development business, both of which will continue to operate under license agreements.

Portrait of a Dray Truck Driver

From DC VELOCITY

Portrait of a drayage driver

The drivers who shuttle ocean containers to and from ports work hard for their money, as a March 2007 report on truckers serving the ports of Los Angeles and Long Beach attests. The report, prepared by CGR Management Consultants for the Gateway Cities Council of Government, includes these statistics:

• The vast majority of port drayage drivers are independent owner-operators (IOOs). Some IOOs work as contractors for local trucking companies.
• The average tractor operated by IOOs is a 1994 model purchased for $21,500.
• The average IOO survey respondent grosses $73,900 per year. Fuel costs eat up more than one-third of that revenue—more than $25,000 on average. (Note: These figures were based on a cost of $2.87 per gallon, the price of diesel at the time the report was prepared. Diesel currently exceeds $4 per gallon.)
• The average net income reported by IOOs is $29,600, a figure the researchers believe may be overstated.
• IOOs worked 50.7 hours per week on average.
• Port drayage drivers who are full-time employees of local trucking companies earn an average hourly rate of $16.13 and receive limited benefits.
• Nearly 90 percent of the interviews with IOOs who contract with trucking firms were conducted either partially or entirely in Spanish.

To read the report, Survey of Drayage Drivers Serving the San Pedro Bay Ports, go to www.gatewaycog.org.

Another report on drayage drivers is Big Rig, Short Haul: A Study of Port Truckers in Seattle, which was based on a 2007 study conducted by the nonprofit organization Port Jobs. The report is written in a very accessible, nonacademic style. Especially interesting are the personal profiles of individual drivers and the challenges they face. The full report can be found at www.portjobs.org/bigrig_shorthaul.pdf.

New Inland Empire Columnist

The Inland Empire has two major papers; The San Bernardino County Sun and the Riverside Press Enterprise.

Here is the latest article that I wrote about logistics in the Inland Empire.

They want this to be a monthly piece, so hopefully I can be more controversial in upcomming editions, this first piece was just a primer to get the whole thing started. The last sentance wasn't mine, I guess that is the bio they branded me with. I am not complaining at all of course, it is just that I havn't had a ton of time to develop a sound econometric model yet, but it is in the works.


I.E.'s a silent partner to the global economy
Article Launched: 06/12/2008 06:44:20 PM PDT

Most people do not realize the vital importance of the Inland Empire in worldwide commerce, because the goods-movement industry works silently behind the scenes to keep the nation running smoothly.

Major firms have distribution centers here to store and consolidate products from multiple overseas and domestic producers. Around a third of these goods will stay in Southern California with the rest being shipped out of the region.

The Inland Empire has a high concentration of transportation and material-moving jobs, jobs that account for around 3.3percent of the work force, much higher than the national average.
Since 2000, improvements in logistics technology, increased global trade and improvements in supply-chain management have led to record demand for high-tech warehouses and distribution centers.

Industrial tenants have migrated from Los Angeles and Orange County to be in the Inland Empire because of lower rents and newer buildings.

Having enough land to build modern warehouses within close proximity to our nation's largest ports has been a huge boon to industrial development in the Inland Empire, which in 2007 accounted for more warehouse completions than Chicago and Atlanta combined.
The industrial market in the Inland Empire is beginning to change, negatively impacted by macroeconomic forces in the greater economy.

The collapse of the residential home building market and decreased demand for foreign goods has reduced demand for warehouse space.

Revaluation of risk in the credit markets has made it tougher for developers to finance large projects, and smaller warehouse users, who typically own their buildings, are starting to feel the pinch of reduced consumer demand and more stringent lending standards.

Vacancy rates for industrial space are starting to rise due to construction completions and tenants either consolidating space or going out of business (Wickes Furniture, for example. This is putting downward pressure on lease rates and causing an increase in landlord concessions.
Conditions in the Inland Empire industrial market will improve as the economy at large improves and warehouse demand increases.

However, high fuel prices, dislocations in the credit markets, falling home prices and tepid consumer demand remain hurdles to a quick recovery.

Thomas Galvin is a research associate at Colliers International commercial brokerage firm in Ontario who uses econometrics to study Inland Empire real-estate trends and produce theory models.

Things Could Be A Lot Worse Pt 2

Things in Spain went from bad to worse.

Truckers there are protesting high fuel prices by blocking the entry to gas stations, factories and clogging the highway with their vehicles.

Two truckers have died so far from commuters driving over picketing drivers (one of the dangers of protesting on the freeway).

The strike is being waged by self-employed drivers, who represent an estimated 20% of Spain's 380,000-vehicle trucking industry. They say big companies can cope better with fuel price hikes by lowering their hauling rates to land more jobs.

The independent drivers are demanding a minimum guaranteed rate for their services. The Socialist government refuses, saying that would interfere with free-market competition.

In other apparently strike-related violence, fire destroyed four trucks and damaged a fifth at an industrial park near the eastern city of Alicante before dawn Wednesday. Officials said they did not rule out the possibility that the fire was set deliberately. A driver who was sleeping in his vehicle when it caught fire suffered serious burns.

The Spanish government agreed Tuesday night with a large, non-striking trucking union on a package of tax relief and other measures to help the industry. The package was presented Wednesday to three unions representing the strikers, but they rejected it, said Julio Villaescusa, president of one those unions, called Fenadismer.

In Portugal — where gas pumps were near empty and supermarkets warned that some produce stocks were low — the truckers want the government to subsidize gas prices for transport companies.

Wow.

Most (not 51% most but 99% most) of the goods consumed in America are shipped via diesel truck at some stage in the production process. Unless you grew it yourself, you can thank a trucker.

This would be an interesting case study of what happens when supply chains freeze up and the velocity of goods movement is hampered. Commerce is still happening, just at a restricted pace, and when goods start to trickle to the marketplace you can expect the prices to rise to balance out the supply and demand.

Behind the Scenes At UPS

Ultimate Factories: UPS, will premier Thursday, June 12 at 9 p.m. on the National Geographic Channel

The hour-long program gives viewers a behind-the-scenes look at the 4.4 million-square-foot sorting facility, which processes an average of 304,000 packages per hour. It also gives insight into Louisville-based UPS Airlines and the UPS Global Operations Center, which provides scheduling and weather forecasting services for the 284-plane operation.

I added this to my Netflix, since I don't have cable.

There are so many good shows on the Discovery Channel right now that deal with economics and the supply chain. I am truly blessed to live in age where television broadcasting has evolved to the point of capturing a micro audience. I mean how many other people are fascinated by the inner workings of UPS or the Ports of Los Angeles / Long Beach?

It Could Be Worse, Right?

Truckers in Europe are striking to protest high fuel prices. They are blocking the highways and boarder crossings. A total shutdown of most goods movement within Spain, and some fear that grocery stores will deplete their stock of food by the middle of the week. Consumers are already beginning to hoard goods in anticipation of the worst.

Amateurs debate tactics, professionals debate logistics

Forbes has an interesting piece on the role logistics has in warfare. Here is a little snippet.

Since the beginning of organized warfare, logistics have been one of the biggest headaches of any commander. Even the best army, without adequate supplies, will quickly collapse. Few people understand or appreciate the problems the logistician has to face. But behind every successful army there have been some great logisticians.
American military logisticians have had to face a complex variety of problems. The 1st Infantry Division, also known as the Big Red One after its distinctive shoulder patch, was established in 1916 and is the U.S. Army's oldest divisional organization. It has served in every major American conflict since World War I. These snapshots of the 1st Infantry Division taken over a century illustrate the typical problems Americans have had to face. One thing is for certain: A good logistician has to adapt to a constantly changing environment.

Here is a list of quotes about logisticians and their role in winning a war. Here are some of my favorites.

Logistics...as vital to military success as daily food is to daily work. - Captain A.T. Mahan, Armaments and Arbitration, 1912

The supreme excellence is not to win a hundred victories. The supreme excellence is to subdue the armies of your enemies without even having to fight them. - Sun Tzu, The Art of War

My logisticians are a humorless lot...they know if my campaign fails, they are the first ones I will slay. - Alexander

The Green Loan: A New Leaf?

Summarized from National Real Estate Investor

With all the talk of "greening" commercial real estate, now there is one more group jumping on the sustainability bandwagon; lenders.

Green loans are special loans for the development of LEED certified buildings. Such loans usually originate with community banks and offer generous loan to value ratios and slightly better interest rates than conventional projects.

From the article:

Green lending is still in its infancy because there are few sustainable multi-tenant buildings, according to Scott Muldavin, executive director of the Green Building Finance Consortium in San Rafael, Calif. “Even as recently as a few months ago, there was only a handful of small banks and no life companies — to my knowledge — that offered green mortgages,” Muldavin says. “In the last three or four months, driven by good borrower customers’ growing participation in sustainable investment and development, many larger banks and insurance companies have started to explore offering green mortgages.”

A challenge for green finance is the ongoing struggle among appraisers and underwriters to understand the value and risk of sustainability, Muldavin says.
Because the appreciation for energy savings and marketing is increasing gradually, lending programs are expanding incrementally as well. “The smaller lenders that have programs and the larger lenders that are planning programs are focusing on relatively incremental steps including preferential review, quarter-point interest rate discounts, longer amortization and similar relatively small changes in return for LEED or EnergyStar certification,” he says.

Real change occurs on the margins; small changes at first until enough momentum is reached and ideas break through a tipping point. Once the standard is set and appraisers start to value in green developments, then these changes become institutionalized.

In the infancy stage of what many people still consider to be a fad, these rules for the green movement are being set and it pays to know how the system is likely to change and what the future is likely to look like.

Airlines To Treat Customers "As Freight"

Because of rising fuel costs, you may be charged by the pound next time you want to fly.

From Reuters:

After U.S. airlines reported combined first-quarter losses of $1.7 billion and crude oil jumped to a record $133.17 a barrel on May 21, almost double from a year earlier, fares based on a passenger's weight may be a logical step, said Robert Mann, head of R.W. Mann & Co., an aviation consultant based in Port Washington, New York.

``If you look at the air-freight business, that's the way they've always done it,'' he said. ``We're getting treated like air freight when we travel by airlines, anyway.''

``Laughter aside, the airlines are just in a desperate situation,'' said David Swierenga, president of consulting firm Aeroecon in Round Rock, Texas, who dismissed weight-based ticket sales and steep price increases as unrealistic.

Since December, eight companies have ceased flying, largely because of fuel costs -- MaxJet Airways Inc., Big Sky Transportation Co., Aloha Airlines Inc., ATA Airlines, Skybus Airlines Inc., Eos Airlines, Silverjet Plc. and the charter- flight operator Champion Air. Air Midwest, a division of Mesa Air Group Inc., is ceasing operations this month.

Cheese Plant For Sale

One of the more interesting listing my guys are working on is a former cheese processing facility in Corona. Here is the website.

The reason why the cheese plant is closing is simple economics.

The supply of milk to make cheese has been severely reduced.

The supply of milk has been reduced because farmers are having a tougher time dealing with the environmental treatment of cow waste. It is not economically feasible to raise cows anymore, at least not here in California.

Plus, land prices have increased dramatically and many cow farmers are selling their land for residential and commercial development. Many of these farmers used to live in Chino, which has been turned into a major industrial warehouse hub. These industrial warehouses are employing more people at higher wages; any jobs that have been lost have been replaced 10-fold.

With the cow pastures, it was fairly easy to find alternative uses. You just have to remediate the soil and then build something else. The land was worth more than any existing buildings.

With the cheese plant, things are more complicated. It is not viable to tear down a multi-million dollar facility and start from scratch. The trouble is finding a user who will benefit from the existing infrastructure and who would also benefit from being in California.

The facility would be ideal for a "green" food manufacturer. Being located in the center of the market would reduce the number of food miles, plus their is an existing co-generation plant on the premises that produces steam and electricity for the facility, reducing carbon emissions.

Putting the right user in place is why the Dairy Farmers of America hired us to sell their property, they knew it would be a challenge and it pays to have great people working for you.

I will let you know who we (or somebody else) sells this building to.

For a walk-through of the plant, here is a good site. It was created by the Golden Cheese Company of California, the previous tenant.

King Kong Attraction Catches Fire At Universal Studios

Driving on the 101 today I noticed a large plume of black smoke in the air. Turns out it was the King Kong attraction at Universal Studios.

Here is the story from Reuters.

The same fire occured in 1990, costing the studio $50 million dollars to rebuild.