There are three significant issues that have moved to the supply chain forefront in the last couple of weeks. Although unrelated, and not final, each of them stands to affect the management of our supply chains.
The first and potentially, the most serious is the ongoing tariff skirmish between the U. S. and China. Last week, China announced that it would retaliate against the U.S.’s latest round of tariffs. President Trump immediately announced we would raise already announced tariffs on $280 billion worth of Chinese products from 25% to 30 % effective October 1. In addition, the planned 10% tariff on another $300 worth of goods would increase to 15% on September 1. Finally, he called on American companies to cut all ties with China.
It is difficult to determine who he is angrier at – Chinese President Xi Jinping or Federal Reserve Chairman Jerome Powell, who he felt could have negated tariff effects by lowering interest rates more. He actually called Powell an “enemy” of the United States. It is hard not to take political sides on Washington tweets, and I try not to. But to blame Powell for the trade war with China is a bit of a stretch. In any event, the problem with the entire trade issue is that it is so fluid. It is difficult to make sound plans when we do not know what will happen from one day to the next. It is a little like trying to nail Jell-O to a tree.
The second recent development is more interesting than critical. In June, FedEx announced it would not renew its Express contract with Amazon, and this month said its Ground contract would get the same treatment. FedEx issued a vague statement that the “change is consistent with our strategy to focus on the broader E-Commerce market”; but clearly, they are beginning to see themselves as a competitor of Amazon in the logistics area. As such, one cannot blame them for declining to help the competition through lower contract prices. The move also should bolster the important FedEx/Walmart relationship. I do not see this as a major event in the supply chain world since FedEx does not handle that much Amazon business anyway. What it is however, is a statement that FedEx intends to meet Amazon head-on, and not as a facilitator.
And finally, some constructive news about hours of service rules. The FMCSA has announced that they are gathering public comments about four changes in the current hours of service rules.
- Expanding the current 100 air mile “short haul” exemption from 12 hours on duty to14 hours on duty, in order to be consistent with the rules for long haul drivers
- Extending the current 14 hour on duty limitation up to two hours when a truck driver encounters adverse driving conditions.
- Revising the current mandatory 30-minute break for drivers after 8 hours of continuous driving.
- Reinstating the option for splitting up the required 10 hour off duty rest break for drivers operating trucks that are equipped with sleeper berths.
These changes, if approved, although not a huge change for drivers, is the first step in the right direction for HOS we have seen in years; and so far, have been well received by the various stakeholders. The approval process for such changes is long, and often tortuous; but hopefully, we will see them become law by 2010.