New Articles

NEW CSCMP AWARD: Gail Rutkowski Transportation Excellence Award

cscmp The Containerization & Intermodal Institute (CII) is seeking nominations for the 2022 Connie Awards. Named for the container, the Connie

NEW CSCMP AWARD: Gail Rutkowski Transportation Excellence Award

Nominations accepted through May 8, 2022

The Gail Rutkowski Transportation Excellence Award (GR-TEA) recognizes companies or individuals that have excelled in using their knowledge, connections, and industry expertise to educate, support and create long-term impact through excellence in transportation-related fields.

The GR-TEA is named for the former Executive Director of NASSTRAC, Gail Rutkowski who has dedicated a lifetime of service to the trade as a shipper, carrier representative and consultant; also serving as a champion and advocate of the transportation industry. Gail Rutkowski’s passion and dedication have inspired so many, and she epitomizes what it truly means to be a transportation professional.

You can find the detailed criteria and eligibility details here. The Gail Rutkowski Transportation Excellence Award winner will be recognized on stage during Monday’s opening general session at EDGE 2022, September 18-21, in Nashville, Tennessee.

About CSCMP
What is supply chain management?

The supply chain is a complex and sometime fragile endeavor dependent on a network of independent, yet interconnected, moving parts.

Vendors supply raw materials, producers convert those raw materials into products, warehouses store that product until it’s needed, distribution centers pick up and deliver that product, retailers, online and in-store, bring that product to you

Global partners collaborate across time zones and oceans to decrease costs and increase performance in ways no single company ever could. It requires professional management.

Supply chain management encompasses everyone involved in maintaining the supply chain. Behind every product, there are supply chain management professionals making it possible to get your products better, faster, and cheaper.

CSCMP is…

The Council of Supply Chain Management Professionals (CSCMP) is the leading global association for supply chain management professionals. We have been helping our members, their careers, and their companies since 1963. Nine thousand members worldwide receive unparalleled networking opportunities, cutting-edge research, and online and on-site professional educational opportunities.

CSCMP members are…

From all disciplines within the supply chain management profession, nearly 70% of our members are key decision makers at the executive level. CSCMP members represent a wide range of supply chain management industries, including: consulting, demand planning, finance, logistics and transportation, manufacturing operations, purchasing and procurement, real estate, sales and marketing, technology, third party logistics services, and warehousing.

 

economic mapping Global supply strains that started to ease in early 2022 are worsening again as headwinds strengthen from the war in Ukraine and China’s

Global Supply Lines Brace for Economic Storm to Widen

Global supply strains that started to ease in early 2022 are worsening again as headwinds strengthen from the war in Ukraine and China’s COVID lockdowns, threatening slower growth and faster inflation across the global economy.

After the pandemic hit Asia-U.S. trade routes the hardest over the past two years, the latest turmoil is being acutely felt in Germany, which is heavily reliant on Russian energy and suppliers across Eastern Europe. Business expectations in the region’s biggest economy during March posted the steepest one-month drop on record, factories across the continent face diesel and parts shortages, and delays moving cargo through key North Sea gateways such as Bremerhaven are lengthening.

“We thought Russia was just a resources story that was going to push energy prices up — that it would make supply chains more expensive but it wouldn’t disrupt them,” said Vincent Stamer, a trade economist with Germany’s Kiel Institute for the World Economy. “It appears a little more threatening than we initially anticipated.”

On top of the wartime setbacks, omicron outbreaks are widening China’s use of strict lockdowns in major trade hubs, the latest in Shanghai. A.P. Moller-Maersk A/S, the world’s No. 2 container carrier, said March 28 that some depots serving local ports have closed indefinitely, and trucking to and from terminals will be “severely impacted.”

Chinese exports were already tailing off from an October peak — a trend that might continue for the next few months if Beijing maintains the hard line on fighting the virus, Stamer said. That’ll add shipping delays, sourcing problems and costs for businesses from the U.S. to Europe.

According to supply constraint indexes developed by Bloomberg Economics, pressures in the U.S. and Europe intensified in February after several months of improvement. Anecdotal evidence through March suggests the strains won’t abate.

Stamer cited the example of electric wire assemblies made in Ukraine for German automakers. “These cable trees are actually custom-made for individual cars” and aren’t easily or cheaply sourced from other countries, he said. Another rare input that’s suddenly even more scarce is neon gas used in semiconductor production. Ukraine produces 50% of the world’s purified neon, Stamer said. Russia’s output of raw materials extends even deeper into the global economy.

More than 2,100 U.S. firms and 1,200 in Europe have at least one direct supplier in Russia, and the total reaches 300,000 when indirect suppliers are included, according to Arlington, Va.-based Interos, a supply chain risk management company.

“Multiple industries are reliant on the same raw materials and a large percentage of them are coming out of Russia,” Interos CEO Jennifer Bisceglie said. “You’re seeing a massive cascading effect on an already limping system of the global supply chain.”

The economic and political stakes are far more consequential than the developed world’s biggest worry in 2021 — the concern that slammed global logistics would spoil Christmas for retailers and consumers.

Fears are now rising about food shortages. The cost of living is rising in rich and poor regions alike. Soaring energy prices are spawning street protests from Albania to the U.K.

Costly, longer-term shifts are accelerating, too: Goldman Sachs economists say the new geopolitical risks are forcing companies to reinforce their operations against global disruptions through reshoring, diversification and overstocking inventories.

“At the moment, the storm clouds on the horizon look quite menacing,” Citigroup Global Chief Economist Nathan Sheets said in a research note March 25, explaining why “a major adverse supply shock” from the Russia-Ukraine conflict led the bank to cut its outlook for world GDP growth this year and increase its inflation projections. “Bottom line, an already complicated picture has become even more complex.”

Trade is already feeling the sting of sanctions on Moscow and blocked transport routes. According to FourKites Inc., a supply chain visibility platform, Russian imports across all modes of freight transportation dropped 62% over the first month of the conflict, while shipments into Ukraine plunged 97%.

Though Russia accounts for 5% of the world’s seaborne trade and Ukraine just 1%, a heightened risk of a global economic slowdown has emerged.

Economists at Barclays on March 28 said the world is entering a new era of higher volatility for growth and inflation. Allianz Research on March 25 warned of a greater risk of a “double whammy” in world trade — lower volumes and higher prices — in 2022. Clarksons Research, a shipping analytics firm in London, last week trimmed its projections for global trade this year and next, saying its port congestion indexes are rising again and the latest shocks are “amplifying an already disrupted maritime transport system.”

According to data compiled by Bloomberg, the German ports of Hamburg and Bremerhaven saw new highs in ship congestion this month, while Rotterdam, the continent’s busiest gateway for container traffic, saw its vessel backup at the start of the month reach an 11-month high.

The snarls make any return to normal unlikely this year unless demand unexpectedly craters. Ocean shipping, the workhorse for some 80% of global trade, was stretched so thin that the spot rate to send a 40-foot container of goods to the U.S. from Asia averaged more than $10,000 in the second half of last year — about seven times higher than the pre-pandemic level. Those rates have come down in recent weeks, but experts say the reprieve probably reflects a seasonal lull before transport demand and costs pick up again.

“It’s going to get worse as we move through the second half of this year and into peak season,” Mark Manduca, the chief investment officer of GXO Logistics, told Bloomberg Television on March 25. “You don’t initially feel the pinch in the first few weeks of a supply chain shortage — people have inventories.”

Even greater than the risks Russia’s war in Ukraine pose to global supply fluidity are the COVID-19 cases and targeted lockdowns in China, according to economists Ana Boata and Françoise Huang at Euler Hermes, a unit of Allianz Group. They see a risk that container freight prices approach or even exceed their previous peaks, before returning to current levels by year end.

“Overall, even if not returning to the peaks of 2021, the cost and congestion levels of global supply chains are likely to remain high for most of 2022,” Boata and Huang wrote in an email. “The normalization may start more visibly only from 2023.”

Trying to anticipate how two years of supply constraints affect consumer prices has already challenged central bankers, with Federal Reserve Chair Jerome Powell saying at a press conference earlier this month that Russia’s isolation from the world economy is “going to mean more tangled supply chains, so that could actually push out the relief we were expecting.”

Some of that relief was reflected in the New York Fed’s Global Supply Chain Pressure Index, a gauge launched in January that most recently showed some easing from peak strains late last year. While it’s too soon for the New York Fed to quantify any wartime effects, there are signs that the index’s recent improvement will be limited.

“There’s been a decrease in the pressure, but the level of the pressure is still very high. It’s an improvement but it doesn’t mean the problems are resolved,” New York Fed economist Gianluca Benigno said about the direction of the index in its latest update in early March. “Anecdotal evidence suggests there might be further pressure ahead.”

Recent delivery passage in the U.S. Senate of comprehensive legislation aimed at boosting domestic manufacturing of semiconductors is helping to Stemming from the COVID-19 pandemic, the logistical bottleneck continues to reverberate around the world as carriers, shippers and third

Congressional Negotiations Ramp Up on Supply Chain, Semiconductor Package

Recent passage in the U.S. Senate of comprehensive legislation aimed at boosting domestic manufacturing of semiconductors is helping to set in motion formal negotiations with House lawmakers.

As the House prepares to consider the Senate-passed bill, bipartisan debate on a final version of the bill appears imminent.

The objective from sponsors of what’s termed as the Bipartisan Innovation Act is to resolve differences in versions of the Senate- and House-passed bills to arrive at legislation capable of receiving President Joe Biden’s signature before summer. A previous version of the bill was known as the U.S. Innovation and Competition Act (USICA).

A key provision sponsors plan to include in any final version is dedicating more than $50 billion to facilitate production of semiconductors. Supply chain bottlenecks have contributed to a slowdown of such semiconductor chips, which are said to be essential in everyday electronics and the commercial transportation landscape.

Sen. Maria Cantwell (D-Wash.), chairwoman of the Commerce Committee on freight affairs, repeatedly has urged colleagues to negotiate on the semiconductor, supply chain-centric measure.

“We have an opportunity to help establish, on a continued basis, American leadership in technology, to employ more people to help our country compete in the economy of the future. But we can’t do that if we don’t get legislation passed, and we can’t continue to wait for people who don’t want to go to [legislative] conference [negotiations],” Cantwell said prior to the Senate’s action on the bill.

“By 2030, there could be more than 10 million new jobs in clean energy, advanced manufacturing, communication and in computing. All of those, guess what, depend on us making sure that we do the right amount of [research and development] and making sure that we help in bringing U.S. manufacturing back to the United States,” the senator continued.

Expected to be tucked in the semiconductor bill are provisions from the Ocean Shipping Reform Act, versions of which have recently been approved by the House. A version sponsored by Sens. Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) takes aim at the Federal Maritime Commission by requiring carriers to issue certain reports to the commission each quarter. The bill also would authorize the commission to self-initiate certain investigations partly related to late fees, and it would pave the way for the registration of shipping exchanges.

“Congestion at ports and increased shipping costs pose unique challenges for U.S. exporters who have seen the price of shipping containers increase four-fold in just two years, raising costs for consumers and hurting our businesses,” Klobuchar said in a statement. “Meanwhile, ocean carriers that are mostly foreign-owned have reported record profits.”

The White House has endorsed negotiations on the semiconductor legislative package on Capitol Hill. Press Secretary Jen Psaki affirmed, “We look forward to the House of Representatives moving quickly to start the formal conference process.

“We’ve made remarkable progress over the last year in rebuilding our industrial base, including by creating more manufacturing jobs last year than in any year in almost three decades, and by making a historic and long-overdue investment in our nation’s infrastructure.”

She added, “Competitiveness legislation like the Bipartisan Innovation Act is our chance to build on that success and create good-paying jobs, make more in America and lower prices for working families.”

Pressing lawmakers from the sidelines are key industry stakeholders. Tech and freight transportation firms have been sounding the alarm on the need to revamp domestic semiconductor production.

“Time is of the essence: American businesses in every sector across the economy are facing a semiconductor shortage, and the only way to alleviate the current supply-demand imbalance long term is to increase manufacturing capacity,” Intel Corp. CEO Pat Gelsinger told Cantwell and her colleagues on the Commerce Committee recently. “Polls consistently show Americans understand the importance of the chip-making industry to the U.S. economy and national security, and widespread support for congressional action to allocate federal funding for the industry.”

Recent delivery passage in the U.S. Senate of comprehensive legislation aimed at boosting domestic manufacturing of semiconductors is helping to Stemming from the COVID-19 pandemic, the logistical bottleneck continues to reverberate around the world as carriers, shippers and third

Supply Chain Disruptions Likely to Continue in Near Future

Economists and industry experts widely believe supply chain disruptions will continue to greatly impact the transportation industry for the first half of the year, and possibly into 2023. Stemming from the COVID-19 pandemic, the logistical bottleneck continues to reverberate around the world as carriers, shippers and third-party logistics providers attempt to deal with the impact on their operations.

Although AP Moller-Maersk reported record revenue and profits earlier this month, the shipping line said it expected supply chain problems to persist into the second quarter.

“We spent tremendous efforts in mitigating bottlenecks by expanding capacity across ocean [freight], improving productivity in terminals and growing our global logistics footprint,” said CEO Soren Skou. “We will continue these efforts as we see the current market situation persist into Q2.”

Despite the supply chain woes, high consumer demand continues to fuel record sales growth and profits for several major retailers. Amazon reported a 22% increase in net sales in 2021. Late last year, Kroger and Walmart also reported strong sales as they prepared for the approaching holiday season.

In its Q3 2021 earnings call, Kroger President and CEO Rodney McMullen said the company chose to incur some significant costs to bolster its supply chain. For example, additional warehouses originally brought on to support its business through COVID were kept open through the holiday season.

Walmart also made efforts to mitigate transit and port delays, such as adding extra lead time to orders, chartering vessels for goods, rerouting deliveries to less congested ports and expanding overnight hours at key U.S. ports. Brett Biggs, chief financial officer and executive vice president of Walmart, stated during the company’s Q3 2021 earnings call that the retail chain is also working with suppliers to mitigate supply chain congestion.

“We are seeing inflationary cost pressures in some areas, and our merchants remain laser-focused on taking the necessary steps to mitigate supply chain congestion while working with suppliers and monitoring price gaps to manage margins appropriately,” he said.

Doug McMillon, president, CEO and director of Walmart Inc., said in this latest cycle, the pandemic caused shifts in how customers and members shopped and what they purchased. The long period of sustained demand for goods has stretched supply chains, resulting in out-of-stocks and inflation.

Source of Problems

Council of Supply Chain Professionals interim President and CEO Mark Baxa believes the origins of the supply chain disruptions occurred nearly 18 months before the COVID-19 pandemic hit. He cited the implementation by the Trump administration of increased tariffs on Chinese goods in September 2018 as a turning point.

In reaction to the tariffs, many suppliers moved their sourcing from China to nations such as Indonesia, the Philippines, Vietnam, and South Korea, Baxa added. Those suppliers soon found themselves mired in issues surrounding infrastructure challenges, trade compliance and the legal processes around declaring where their goods were now made.

“Vice presidents and EVPs of supply chain did not understand the magnitude of risk within their supply chains, at least to the extent that they thought they should, or that they thought they had,” Baxa said, adding that when the pandemic hit, it caused even bigger reverberations. “Not only was Wuhan suspect for the origin of COVID, but on top of that Wuhan was and is a major industrial location for the world, not just the automobile industry, but many other industries.”

Through the pandemic, many companies soon realized their earlier attempts at diversification of their tier-one suppliers had simply led them back to the same core manufacturers, he said. A prime example is the semiconductor industry, where manufacturers in Taiwan eventually became the suppliers for 85% of the world’s semiconductors.

The pandemic also drove a nail in the coffin for just-in-time production and inventory management, he added.

“If we have two people sharing, ‘how are you getting through this?’ and the words ‘just-in-time inventory’ came out, you probably got the wrong person, you’re talking to the wrong person,” Baxa said. “Because that’s a fallacy right now. It’s almost make-believe. Nothing is just-in-time. It might be ‘crisis-in-time.’ ”

These supply chain disruptions have also led to some fundamental changes in the relationships among suppliers and their carriers and 3PL providers, Baxa said. One of those changes comes in the form of their agreements, he added.

“In the dark of night, [shippers, carriers and 3PLs] are writing long-term agreements [three-, five- and even 10-year agreements], and they’re in business,” Baxa said. “They’re embedded in business together.”

Baxa referenced key performance indicators involving finances plus growth and risk factors that companies are sharing for a better business relationship.

“So cost isn’t the only play,” he said. “It’s high reliability and risk mitigation today and for the foreseeable future. And that carries a value.”

Technology Solutions

Anshu Prasad, CEO of Leaf Logistics, said while the next couple of quarters are going to be tough because of inventory build and shortages and capacity constraints, he believes the tide for fleets is shifting toward greater use of technology in its freight management. Leaf Logistics provides carriers, shippers and third-party logistic providers cloud-based applications for building routes and freight management.

Prasad said it can take as much as 20 interactions — such as calls and emails among the shipper, the receiver, third-party logistics provider, carrier and driver — to move a truck from point A to point B.

“We think that through better data and better service planning and orchestration, we can reduce the amount of work that’s required to move trucks around the country by 80-85%,” he said.

Prasad added that cloud-based solutions can reduce the amount of work needed to manage freight movements as well as lower driver turnover by finding less wasteful ways to manage trucking capacity.

Jim Guthrie, director of operations for Springfield, Mo.-based Prime Inc., said technology has certainly made some improvements in the trucking industry. But in order for technology to fully resolve supply chain issues, “you’ve got to have good information from everybody, every piece of the supply chain,” Guthrie said. “You’ve got to have really seamless communication [among the customer, the shipper, the carrier, the receiver, and in most cases a 3PL] and every piece of that chain is impacted by COVID. And every piece of that chain at this point is probably short-staffed.”

Prime Inc. ranks No. 18 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

Guthrie said over the next five years, there will be substantial technological advancements in freight management. The carrier is working with Mastery Logistics System to implement a cloud-based transportation management system into its own operations to address soaring logistics complexity and improve driver engagement, he added.

Working With Suppliers

Another way shippers and carriers have successfully dealt with supply chain disruptions is by taking a more collaborative approach.

“The more attractive you can make yourself to carriers, then I think the better you’re going to do at gaining capacity and moving your product and so we’re heavily focused on that,” said John Janson, senior director of global logistics for apparel and accessories supplier SanMar Corp.

Janson said SanMar’s philosophy has been to develop deep relationships with its carriers. SanMar operates 10 national distribution centers in the United States and imports from more than 24 countries. From its distribution centers, SanMar distributes its products to customers and stores via small parcel or less-than-truckload shipments.

“We’re trying to do mostly drop-and-hook and to be a good steward of both our carriers and other drivers so that drivers would want to come to our facilities because they know they’d be treated with respect, and they wouldn’t be tied up trying to load or unload,” he added.

Jason Williams, senior account manager for Trinity Logistics, said there are still some shippers that aren’t doing certain things to ease tensions with carriers. The firm, which ranks No. 20 on Transport Topics list of top freight brokerage firms, provides brokerage services in dry van truckload, LTL, refrigerated, intermodal and flatbed/heavy-haul freight among others.

“And those are the ones that I think are paying the most money to move their freight right now, because they’re not doing the little things they should, like being a little more flexible when it comes to appointments,” he added.

Williams said rather than opening up all of their contracted lanes to a bidding process and losing experienced contracted carriers, some shippers are providing them an opportunity to submit new rates on a quarterly basis without having to go through a full bidding process. With the carriers’ ability to revise their rates quarterly, some shippers find that they are more likely to receive responses on their load boards without having to go to the spot market, he added.

In describing his own company’s business strategy in acquiring new business, Rob Kemp, president and CEO of DRT Transportation, said his company still participates in the spot market. Lebanon, Pa.-based DRT Transportation assigns its freight load capacity to a blend of dedicated and contract as well as spot markets, he added.

“We try to keep X percentage of our capacity freed up at all times for whatever growth opportunity there may be out there. So, as contracts are finishing, and we’re renegotiating a fair number in a renegotiation, we move the needle on revenue per load with that,” Kemp said. “And as contracts are expiring, the capacity involving those that weren’t the most friendly customers, we’ll throw that into our open pool. And that’s moving the revenue per truck needle substantially as well.”

As for shippers looking at the impact of the capacity crunch on their carriers, Kemp believes a third of them aren’t doing enough to reduce pain points such as detention times.

“I don’t know why that is, it seems inconceivable,” Kemp said. “But it’s been our experience that they’ll still delay you five hours loading and four hours unloading and wonder why no one wants to haul their freight.”

Kemp said the shippers who are working with his company are taking steps such as changing shipping hours or going from live load to drop-and-hook to improve their drivers’ experience. Kemp appreciates those efforts not only because they help control costs, but also they make a big difference in driver retention.

“If I’m bringing on a new account, we’re asking a lot of different questions on how it will impact our drivers that we’re going to stick in there than we ever did before,” Kemp added. “And I think that’s something the shipper community should pay attention to, if they’re going to be the ones getting their freight hauled at a reasonable amount.”