Perspectives on Various Issues of Interest

Only in Texas

Aging Infrastructure

1. The I-35W bridge in Minneapolis used by 141,000 daily, was first deemed "structurally deficient" by state engineers in 1990, a designation that requires repairs but doesn't mean the bridge is unsafe.
2. Nearly one-quarter of the 600,000 bridges in the

U.S. are listed as structurally deficient or obsolete, down from one-third in 1992, according to the American Society of Civil Engineers.
3. One-third of some 40,000 highway fatalities every year result from substandard road conditions, according to the American Society of Civil Engineers.
4. American Society of Civil Engineers warn that one-third of major roads are in poor or mediocre condition.
5. According to the Texas Transportation Institute, congestion delays in the 85 largest metropolitan areas cost the average traveler 47 hours in 2003, up from 16 hours in 1982.
6. The American Society of Civil Engineers estimates that the improvements to the nation's roads, bridges, dams, water systems and airports would need approx. $1.6 trillion. Out of this estimated figure, $188 billion will be needed over 20 years to repair deficient bridges.
7. Highway construction costs have risen 50% since 1999.
8. The federal Highway Trust Fund is projected to run a deficit of nearly $4 billion in 2009\
9. In 2005, highways carried three-quarters of all freight by weight and 92% by value.
10. While the Interstate Highway System comprises just 1% of public road miles, it carries 41% of the country's large-truck freight traffic.
11. Poor road conditions cost motorists some $54 billion in repairs every year, about $275 per motorist.
12. The number of dams deemed unsafe has risen by 33% to more than 3,500 since 1998.
13.  About 1,500 bridges collapsed between 1966 and 2005, and about 60% of those failures resulted from the erosion of land around the bridge support, according to Jean-Louis Briaud, a research engineer at the Texas Transportation Institute.
14.  The I-35W bridge stood 64 feet above the

Mississippi River and stretched 1,900 feet, but it had no piers in the water. It was built with one 458-foot-long steel arch to avoid interfering with river navigation. There are about 700 similar steel-deck truss bridges in the country.
15.  The worst highway bottleneck in the country is the

Los Angeles interchange of U.S. Highway 101 and Interstate 405, according to the American Highway Users Alliance.
16.  Americans spent an average of 81 minutes behind the wheel everyday in 2001. Rush-hour motorists in the nation's largest cities spend up to eight work days stuck in traffic each year.

Source: Timiraos, Nick. 2007. Aging Infrastructure: How bad is it? Wall Street Journal, August 4, pp. A5.

Port Automation & Concerns of Supply Chain Disruption

Terminal operators and shipping lines have to negotiate a new contract with the International Longshore and Warehouse Union which constitutes 14,000 workers along the entire West Coast. This could pose big problems as a clerical union threatened strike at these same ports. A deal was struck with the clerical workers, but many big retailers are worried about the looming talks with the longshoreman’s union. In 2002, a 10 day strike by the union caused major delays in deliveries and a rise in prices.

A trade group representative says that a possible walkout is disruptive because it causes unpredictability with retailers and complex supply chains. The west coast ports handle $500 billion in cargo each year.

One of the problems with the negotiations is the planned automation of ports in these areas. Union representatives fear job losses as a result of modernizing the ports, but retailers favor it as it leads to more efficient supply chains. The union’s workers are one of the highest paid in the U.S. with 60% of them making $127,000 a year and receiving full benefits.

West Coast port operators look to modern ports in Asia and Europe and say that they too need to modernize. East coast ports are already modernizing and will see improvements in the speed of loading and unloading at the docks.

Demand for increased capacity is foreseen at the West Coast ports and updating to more automated processes will enable the ports to handle the increase. Automated systems will eliminate the need for many workers with only a few involved at the beginning and end of loading and unloading.

Canadian and Mexican ports can benefit from strained work relations with suppliers having to find alternative routes for shipments to the U.S.

Source: Machalaba, Daniel. 2007. “Retailers Warily Await Port Talks.” Wall Street Journal, 03 August.

Supply Chain at Benetton

Benetton presents an example of how logistics is as important as style in fashion business. The company recently invested more than $160 million to streamline the supply chain of its brands. With the help of a leaner logistics, Benetton posted its best results in years in 2006. Revenues were increased by 8.4% to about $2.5 billion and net profits increased to $167 million from $150 million in 2005.

There is a growing trend among fashion companies to improve their manufacturing and distribution processes in order to quickly respond to customer demand. High-end fashion labels such as Louis Vuitton, Gucci and Versace have all recently revamped the functions of purchasing supplies and delivering goods.

Benetton's Historical Evolution

Luciano Benetton, now the company's chairman, and his sister, Giuliana Benetton, founded the company in the 1960s. In the earlier years the company sold sweaters to Italian department stores. Over the course of time Benetton expanded by forming a retail network that operated similar to a franchise. The Benettons focused on trendy product design, marketing and advertising and the day to day retailing was left to the store owners. In the mid 1990s, the company had gross profit margins of more than 40%. The supply chain practices, such as global factory location, postponement by means of dyeing the sweaters in the final step of manufacturing process thereby reducing inventory and avoiding markdowns, played an important role in Benetton's success.

However, in late 1990s the profits eroded with the emergence of several rivals like Zara and H&M who had leaner operations than Benetton. During these years Benetton's retail orders plummeted leading to the closure of several stores. As an illustration, as compared to more than 600 stores in 1980s today Benetton operates around 150 stores. To counter the declining sales, Benetton bought brands such as Rollerblades, Prince and Nordica. However, the strategy failed miserably leading to a net loss of about $10.6 million in 2002.

In 2003, Benetton sold off the sporting-goods brands and hired Mr. Silvano Cassano, a former executive from Italian auto maker Fiat SpA, as chief executive with a mandate to overhaul the company's supply chain. Under Mr. Cassano's stewardship, Benetton worked to improve its relationship with store owners by selling them products at cheaper wholesale prices so they could make higher profits. This hurt Benetton's own bottom line, but the company figured it was worth it in terms of longer-term loyalty.

To offset the hit to its own profitability, Benetton outsourced production of high-margin accessories to China. Mr. Cassano also broke up inventory into smaller shipments that could be dispatched to stores according to the ebb and flow of consumer demand. Today, at Benetton's warehouse near Ponzano, where hulking cranes have been replaced by laser-guided lifts, more than 7,500 boxes can be shipped in an hour -- four times the amount just a few years ago. The warehouse also acts as command center, directing traffic along Benetton's world-wide distribution network, including three centers in China. Benetton can reroute merchandise as it is being shipped, if one store suddenly needs more clothes.

Benetton now ships clothes every two weeks and has the capability of speeding up delivery to seven days, if required.

Along with the supply chain innovations, Benetton hired Vincenzo Scognamiglio (who has worked for U.S. fashion house Ralph Lauren and German based Escada) as Head designer to revive the product designs.Today, Benetton replenishes retail racks with new designs as often as once a week as compared to the earlier rare of once a month.

Benetton's future strategy is unclear. The brand's controlling family last month names former Warner Music Group Corp. executive Gerolamo Caccia Dominioni as its new CEO.

Source: Meichtry Stacy. 2007. Benetton picks up the fashion pace. Wall Street Journal, April 10.