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Archives for July 2013

Logistics Clusters Offer Job Creation, Innovation and Sustainability

By Joel Anderson | 07/25/2013 | 7:03 AM

Yossi Sheffi, Ph.D., professor of engineering systems at Massachusetts Institute of Technology (MIT)
knows the importance of logistics clusters in driving growth and commerce. While his Winter 2012 article in IWLA’s 3PL Americas magazine provides an overview of his research, Sheffi also published a book about clusters that is essentially a long-term analysis of the societal value-add of government pursuing and enabling these hubs.

“Logistic clusters are able to lower transportation costs and improve customer service, advantages that attract more companies. And, as the member base expands, costs diminish even further and service levels continue to improve, luring more companies to the community,” Sheffi writes in the article, “Realizing the Economic Potential of Logistics Clusters.”

IWLA-member companies are a major player in growing logistics clusters: They provide needed warehousing and offer a diverse array of value-added third-party logistic services, including returns processing, light assembly, kitting and packaging. Manufacturers, distributors and shippers outsource warehousing services to save money on costly real estate and to take advantage of the efficiencies associated with well-managed inventories.

For IWLA advocacy purposes, Sheffi’s work demonstrates a long-term sustainability of logistics jobs (you cannot outsource local distribution work) with fulfillment operations that are located in metropolitan markets in close proximity to the end-consumer. In fact, Sheffi’s research is validated by U.S. Bureau of Labor Statistics’ employment data, which show year-over-year increases in the warehouse and logistics sectors from 2010 to 2012.

However, despite the positive impact, the government (at all levels) continues to challenge our industry with undue tax reforms. Case in point: Minnesota recently included a service and sales taxes on warehouse service providers in the state. These misdirected extra costs on warehouse-based 3PL companies hinder the flow of transportation of goods and commerce. The long-term impact will be detrimental if the course is left unchanged.  

Of similar importance is the growth of the semi-skilled workforce development in logistic clusters. As policy makers, particularly in urban areas, look to high-tech industries to rebuild taxes and employment, they overlook logistic clusters as a growth area. And, unlike other professions that employ a semi-skilled and entry-level workforce, logistic companies have a fully developed and upwardly mobile managerial career structure.  

Below is a video of Sheffi in his own words describing his research. My recommendation is that every practitioner of logistics secure his book and use it a reference manual for your own workforce to provide them the big picture of what we do, and make it available to your zoning commissions, your elected officials and others who seek create jobs in urban areas.

 

 

Filibuster Reform: Good or Bad, It Moves Power from the Senate to the President

By Joel Anderson | 07/18/2013 | 8:24 AM

U.S. Senate tradition and rules make it the branch of government where, unlike the House of Representatives, the minority can have significantcontrolling influence. This power of the minority is most pronounced in the power of advice and consent on presidential appointments.

Conservatives long grimaced at the Democrats’ refusal to approve the appointments of Presidents Ronald Reagan, George H.W. Bush and George W. Bush.  Equally, President Obama’s second term has seen the ire of liberals over the Senate’s refusal to approve presidential appointments. 

However, rules have changed because of a procedural amendment, brokered by Sen. John McCain (R-Ariz.), with respect to non-judicial presidential appointments of the executive branch.

The agreement (which can be undone by future Senates, but only as a rejection of their tradition of compromise and courtesy) limits the filibuster on executive branch appointments by returning power to the executive office and removing power from the Senate. This compromise came from frustration of both parties, and not from a deep analysis by the sitting senators of the power they just gave away.

I tend to agree that there should be very limited rejection of a president's executive branch appointments, but that has not been the case and practice of the opposition party in the Senate for many, many years. The Senate has now removed power from itself and set a new tradition that  centralizes more power in the executive branch and removes a check on the individuals the president appoints.

Time will tell whether it will be good or bad.

Update on Minnesota Warehouse Services Tax

By Joel Anderson | 07/05/2013 | 2:31 PM

This column provides the case that must be made by the Minnesota public and contract warehouse industry to successfully repeal a newly enacted 6.5 percent tax.  This tax will take effect April 1, 2014, unless otherwise delayed or repealed by the state legislature and such delay or repeal is signed by Gov.  Mark Dayton.


First, it is much, much more difficult to repeal enacted legislation than to amend, kill or delay pending legislation.  Once a bill has been passed through the legislature and signed by the governor, the task of reversing a decision is huge. 


One example of a successful repeal of a bill is the Michigan Services Tax in 2007. That experience taught us of the importance of the economic groundwork that must be done in three key areas:

  • Demonstrate that warehouse services taxes are outliers. This fact must be proved by a survey of all tax provisions state-by-state.   Government research will often claim household goods or self-storage as evidence of a warehouse-services tax.  Our industry knows this claim is wrong; but proving it from a respected third-party source is fundamental.
  • Demonstrate the tax receipts will be far less than the programmed receipts in the budget and that by moving forward with the tax, the administration is creating a structural budget deficit.
  • Demonstrate the actual impact of the tax will create a negative yield in terms of job flight and tax receipts.  IWLA was able to prove the second and third points to the Michigan Legislature via the study we commissioned from Michigan State University.

However, economic proof is actually the lesser of the mountains to climb.  The higher mountain is to create “safe” ground for the politicians who voted to impose the tax and who now need to reverse their votes.  They will look to our industry to find them that “nonpartisan” ground so that the tax’s repeal cannot become campaign fodder in the next contested election.  Again, IWLA was able to do this in Michigan through a coalition that worked to develop an alternative revenue stream to make up for the budget shortfall.

In summary, our industry has a scant five months to gather economic facts and provide a safe ground if we are to secure repeal of the tax.  We know what must be done and how it is possible to get it done.  But that is only a roadmap and the journey is ahead. We will keep you informed.


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The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Joel Anderson

Joel Anderson

Joel D. Anderson is president and CEO of the International Warehouse Logistics Association (IWLA). Based in Des Plaines, Ill., IWLA is the 120-year-old association of the warehouse-based third-party logistics industry, with 500 members in the U.S. and Canada. Before joining IWLA, Anderson spent 28 years at the California Trucking Association, the last 13 as executive vice president and CEO. An economist by training and profession, Anderson was also a past board member of Cascade Sierra Solutions. He is a frequent speaker before supply chain industry groups.



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