DRY BULK PROFITS SURGE TO MULTI-YEAR HIGHS DESPITE PANDEMIC-RELATED DEMAND AND DISRUPTIONS

March 13th, 2022 Peter Sand Leave a comment

Heading into the 2021 holiday shopping season (a.k.a. the strongest part of the year), dry bulk owners could already celebrate a very profitable year with the temporary factors helping the market stay strong expected to continue providing support in 2022.

DEMAND DRIVERS AND FREIGHT RATES

The dry bulk shipping industry continued in late 2021 to enjoy a bumper year, with average earnings continuing to outshine any profits made in the past couple of years. As is often the case, Capesizes (the largest dry bulk ships) are taking the spotlight, with recent earnings peaking above $50,000 per day. A much more consistent and stable increase is recorded for Handysize and Supramax ships. These saw average earnings rise to $33,087 and $36,832 per day on Sept. 3, 2021. On the same day, a Panamax ship could expect to earn $32,445 per day.

Time charter rates underline the current strength of the market, with charterers currently paying double, if not 2.5 times as much, at the end of August compared with the start of 2021. A one-year time charter on a Capesize ship at the start of the year would have brought owners $16,500 per day. By Aug. 27, the figure was $32,750. Supramax ships have recorded the largest increase, with one-year time charter rates rising by 179.3% since the start of the year to $29,500 per day.

The high freight rates can be partially attributed to the restrictions and problems at ports due to the pandemic, which are tying up ships for longer than usual. On Sept. 1, 2021, 674 dry bulk ships had been waiting in China for two days or more. On the same day in pre-pandemic 2019, only 287 dry bulk ships had been waiting this long (source: Oceanbolt).

As an example of what this means for an individual trade, Oceanbolt data for ships sailing from Port Hedland, Western Australia, to Qingdao, China, shows that the average time for the journey (including waiting time at the load and discharge ports) has risen by 22.7%. In July 2021, it took an average of 33.5 days, while in July 2019 it could be completed in 27.3 days.

As well as congested ports, the recent pick-up in Brazilian iron ore cargoes to China has helped lift the Capesize market. In August, 21 iron ore cargoes were offered on the spot market, compared to 11 in July and the highest weekly number of cargoes since April (source: Commodore). During the first seven months of the year, Brazil exported 198.8m tons of iron ore, a 10.8% increase from 2020 and up 1.0% from 2019. However, it remains 15.0m tons lower than the record-high exports of 213.7m tons that were recorded in the first seven months of 2018.

China has received 65% of Brazilian iron ore exports during the year to date (through September 2021), with volumes on this trade growing by 6.2% over this period. Here, volumes of iron ore have grown compared to 2018, as China has taken a larger share of the total. This is clearly good news for dry bulk demand; the larger the share heading to China, the higher the ton mile due to the long distance.

There has also been strong growth in grain exports from the world’s largest exporters. Grain exports from the biggest exporters grew by 6.3% to a record 162.0m tons in the first six months of 2021. The driver of this growth was the U.S., which has seen its grain exports rise by 39.3%, jumping from 51.3m tons in the first half of 2020 to 71.5m tons. In contrast, exports from Brazil and Argentina have declined. Brazilian exports are down by 0.3% to 61.5m tons, while those from Argentina have fallen by 26.3% to 29.0m tons.

American coarse grains exports have seen the highest growth, up 19.2m tons (+67.1%) in the first seven months of 2021 compared to the same period in 2020. These additional volumes are the equivalent of an extra 257 Panamax loads (75,000 tons). Just behind in terms of volume growth are U.S. soy bean exports, which had a strong off-season, with exports in the first six months of 2021 amounting to 17.8m tons, a 7.8% increase from last year.

The new U.S. marketing year began in September, and exports of soy beans will have once more increased. Compared to the start of the 2020/2021 marketing year, outstanding sales are much lower, currently standing at 17.8m tons, compared with 29.4m tons on Sept. 1, 2020. While more sales will soon be added to the current level of outstanding sales, it is unlikely that volumes in the 2021/2022 season that is now under way will reach the 60.3m tons of soy beans that were exported in the 2020/2021 season.

FLEET NEWS

Around three-quarters of the dry bulk deliveries expected for 2021 arrived, adding 26.7m DWT of capacity and bringing the total fleet to 934m DWT. BIMCO expected the fleet to grow to 940m DWT over the subsequent months, result in fleet growth of 3% for the calendar year.

Of the 26.7m DWT delivered so far this year, half came from the 61 new Capesize ships, of which 51 have a capacity of 180,000 DWT or more, with 10 of these exceeding 300,000 DWT.

At the other end of the lifecycle, only 4.8m DWT of capacity has been demolished. BIMCO expected demolition by the end of 2021 to reach around 7m DWT, less than half of what was removed from the market in 2020, as the earnings potential for ships has incentivized owners to keep their ships sailing. This once again proves that the strength of the freight markets has a much greater influence on demolition than steel prices.

The summer months saw the dry bulk orderbook grow by 67 ships, as 5.7m DWT was ordered in June through August. All but one will be delivered in 2023 and 2024. The orders include 2.3m and 2.5m DWT of Capesize and Panamax ships, respectively.

Including all orders, the orderbook currently stands at 53.9m DWT, a significant decrease from 71.6m DWT in August 2020 and 97.8m DWT in August 2019, as ships have been delivered faster than new ones are being ordered.

OUTLOOK

In what was seasonally the strongest part of the year for dry bulk—fall/winter—the market looked promising, and operators had already been recording solid profits for the year.

While countries enforce quarantine and testing requirements, and ports face sudden disruptions due to local and regional outbreaks, the congestion that is draining the market of capacity will continue to support earnings in the dry bulk market. The market is expected to stay strong into 2022 until the factors that are currently beneficial to the market such as congestion and pandemic related delays, spill-over from the red-hot container market, stimulus driven demand and strong growth in the manufacturing sector become less so.

In the longer term, however, the underlying volumes may be less supportive. After strong growth in the first half of 2021, the Chinese government seems keen to clamp down on the steel and other heavy industries to limit emissions. One big question is how strictly these measures will be enforced and whether they will start to constrain economic growth. The two largest dry bulk goods imported by China in terms of volume, iron ore and coal, both fell year-on-year during the first seven months of 2021. Iron ore imports fell by 10.5m tons (-1.5%) and coal imports were down by 30.4m tons (-15.0%). Imports of both of these goods stood at a record high in 2020, and as government restrictions come into play, it seems increasingly unlikely that these levels of imports will be repeated.

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Peter Sand had been the chief shipping analyst for more than 10 years when Copenhagen, Denmark-based BIMCO, which is one of the largest international shipping associations for shipowners, published this report in September. That same month, Xeneta announced that Mr. Sand had joined the Oslo, Norway-based market analysis company.

Archives, Global Logistics, Global Trade Daily, Special Reports

Helping the World is Good for Business

March 13th, 2022 Steve Beda Leave a comment

There aren’t many times in any industry when going the extra mile to do the right thing is actually really good for business too. But it does happen.

Skeptical? You’re not alone. After two years of juggling, pivoting, problem solving, reimagining and then doing it again – all of which have drained energies and operational budgets – any transportation logistics executive in charge of budgeting, could be forgiven for taking a hard line on non-essential expenditures.

Proactively protecting the environment? That’s a must-do for every industry, but it’s low on a priority list that has been exclusively focused on finding and retaining carrier capacity and keeping the flow of goods moving across the country and around the world.

As we all continually re-examine ways to cut costs and realize even greater operational efficiencies, improving environmental protocols – and reducing C02 emissions specifically – presents a rare win-win dynamic in which operations leaders can preemptively align around incoming regulations, optimize network efficiencies and reduce C02, an increasingly problematic contributor to greenhouse gasses (GHG’s) and overall environmental impact. If all of that sounds a little like having your cake and eating it, you’re not wrong. Let’s dig in, get some broader perspective and take a closer look at the issues and strategic steps to lowering emissions and raising profits.

The Global Perspective: efforts to reduce emissions

Protecting the environment seemed more an extreme activist position a few decades ago but it’s rightly now a global perspective – and with good reason. The Paris Accord – an agreement by countries around the world to reach net zero carbon emissions by 2050 – mandates a target of no more than a 1.5 degree Celsius change in global temperature beyond pre-industrial levels. According to Stanford University, as of March 2021, 64 countries signed the agreement but the race is on. While pandemic lockdowns and other confinement measures cut global emissions by 2.6 billion tons of CO2, about seven percent below pre 2019 levels, experts say that level of control cannot be maintained and the world is on track to increase global temperature by 3-5 degrees Celsius by the end of the century: a world-changing problem.

The good news is that change is being affected at the global, national, corporate and individual levels. Or at least initiatives are in place to fast track new behaviors. At the international level, 27 countries have implemented a carbon tax, imposing fees on industries for carbon emissions in an effort to incentivize a switch to improved practices and both green technologies and power sources. Pro-tax countries include Argentina, Canada, Chile, China, Colombia, Denmark, the European Union (27 countries), Japan, Kazakhstan, Korea, Mexico, New Zealand, Norway, Singapore, South Africa, Sweden, the United Kingdom, and Ukraine. Others considering joining include Brazil, Brunei, Indonesia, Pakistan, Russia, Serbia, Thailand, Turkey, and Vietnam. In addition, 64 carbon pricing initiatives are currently in force across the globe on various regional, national, and subnational levels, with three more scheduled for implementation, according to The World Bank. Together, these initiatives have been estimated to cover 21.5% of the global greenhouse gas emissions in 2021.

A gradual shift to renewable energy worldwide is also underway with solar-generated power leading the way. While coal and gas still account for around 60% of the world’s energy, renewable forms of energy production are growing fast. According to Earth.org, worldwide solar power production has grown 25% year-on-year with overall renewable energy now accounting for 29% of the global power supply and the first countries, like Iceland, being close to 100% renewable-energy-powered. This pace of change will pick up, but it’s also going to require the major industries that generate large amounts of C02 – for example manufacturing and livestock-based meat production – as well as other private sector companies and every team within them – to affect change from the top down and bottom up. While the earth’s agriculture goliaths tackle damaging methane gas emissions (9.6% of all U.S. greenhouse gas emissions), a society-wide movement is beginning, with the adoption of consumer and coming commercial electric vehicles, single use plastics, ride sharing and plant-based food production.

The C-Suite Perspective: targeting the supply chain and improving visibility

While all of that is tremendously encouraging and needed, corporate America and its global counterparts are being asked to do more. Forbes reports leaders now recognize the need for their companies and organizations to drive more proactive environmental change through C02-limiting practices across the organization but particularly in relation to the supply chain. According to the Environmental Protection Agency (EPA), company supply chains now account for a staggering 90% of an organization’s greenhouse gas (GHG) emissions.

While changes to other emissions-reducing strategies, including business travel practices, electric vehicles and renewable energy use, all help corporations lower their carbon footprint, tackling supply chain emissions from manufacturing to the transportation, handling and management of goods is the single greatest impact generator for many businesses. Kevin Sneader, global managing partner, McKinsey & Company hits the nail squarely on the head about exactly what’s needed to affect this level of network-wide change:

“While there wasn’t much debate about the science [of necessary reduction of C02 emissions], executives and investors were concerned about the lack of reliable data on the efforts companies and society are making, not to mention their impact. Greater clarity is required in order to speed development of new standards to help markets act more efficiently and reward progress.”

The answer lies, as with many operational efficiencies initiatives, in clear access to data across your supply chain operation. How much C02 is being emitted at any given time? What are the major causes, modes or geographies and other contributing variables? Only by tracking this data, by embedding an enterprise-wide approach to ongoing C02 monitoring, can we build effective strategies to manage and reduce emissions and realize greater efficiencies at the same time. This is especially critical post global pandemic as many industries re-set and examine better practices to mitigate risk and manage challenges.

Creating Sustainability Practices in Transportation Logistics

When it comes to creating sustainable practices in logistics transportation, the great news is that the train has already left the station. Meaning shippers are already organically looking for better ways to improve execution and lower costs. And typically those changes – optimizing network and mode, carrier/LSP selection via advanced routing as well as packaging strategies to reduce dimensional weight and trim cost – will all contribute to emissions reduction. The challenge, of course, comes in how to measure any impact from these actions as part of an overall carbon reduction program.

How do we begin thinking about C02 monitoring and measurement? How do we acquire quantitative proof of progress or KPI’s that can demonstrate we’re delivering against our footprint- reduction goals? Measurement needs to include everything from the role warehouse management, packaging, product sourcing all play in emissions as well as, of course, the movement of inbound materials or inventory delivery and outbound transportation of goods across mode, region and geography.

Tracking CO2: Supporting a Broader Sustainability Initiative

As we set about to review sustainable practices within an operation, it’s a good idea to adopt a broader view of sustainability. Yes, transportation will be a major driver of C02 emissions and require monitoring, but let’s review other contributing factors too. Do your carriers across your network practice emissions-reduction strategies? Things like load consolidation, which will typically lower cost per unit weight, reduce your number of shipments, reduce fuel needs and lead to an overall reduction of C02. If they’re not using basic emissions-reduction practices or considering doing so, it may be time to find new carriers.

Unfortunately, there is no global standard to measure CO2 in relation to transportation logistics which makes comparison across the industry extremely difficult at present. In the United States, the EPA’s Smartway program is attempting to standardize CO2 coefficients but not all companies have adopted a single source of CO2, nor a common definition as it relates to transportation logistics. Until this happens, the best course of action is internal measurement: consistently monitoring and measuring across your operation and benchmarking emissions- reduction against your own goals and initiatives to affect them. Only by doing this and having the data-driven proof points can we set new goals as well as broader sustainability targets that can all be reported to customers, partners, investors and other stakeholders.

It’s All About Data: FAP’s Role in CO2 Measurement

Visibility is the key to delivering on your targets for sustainability and emission reduction, and that can only come from data collection, curation and analysis. Two fundamental components for measuring CO2 emissions in transportation logistics are weight and distance. How large and heavy are my goods? How far and by which means do they need to travel, what’s the fuel required and how efficient is consumption? A good quality Freight Audit and Payment (FAP) system tracks weight and lane, which can help calculate distance, plus additional variables, making it a foundational step and required tool for any CO2 measurement and reduction effort.

While there is no single source or method to deriving CO2 yet, distance, weight, and mode of transportation are all key fundamental elements that support the calculation of CO2 related to transportation logistics. The bottom line is that by combining these input values with CO2 coefficients, it’s possible to calculate the CO2 associated with any shipment, regardless of mode of transport and geographic region.

A natural place to begin is where carbon emissions reduction has a material impact (transportation logistics) and where transportation spend management data is available (historical record of shipping activity with specific distance, weight, mode of transport available). Dashboards and trends along with KPIs for both cost to serve metrics (cost per unit, cost per shipment, cost per unit weight) and carbon emissions (CO2 by lane, by LSP) create awareness and can be used to establish baselines and alignment for both carbon reduction and transportation spend optimization. This same dashboard can be used by logistics, procurement, operations management, and executives to align on, and report, progress at all levels of the organization at any given time.

Getting the Most from Your KPI’s

According to Forrester, 59% of all companies worldwide now follow data-driven strategies and that number is growing as even small-to-medium sized organizations realize the benefits of data analysis. As you build your sustainability protocols and measurement practices to get the most from your KPI’s, two things are important.

Continuous Process Improvement

Set goals and use appropriate KPI’s and influencers (cost per unit of distance, CO2 per unit of distance) which will deliver ongoing process improvements: proper supplier and LSP management across your operation as well as more informed decision making for everything from mode of transportation and packaging choice all the way to corporation level decisions around emissions control strategies.

Optimized Strategies

Build carbon emission reduction strategies into your overall optimization strategies. They’re one and the same. Putting in place operational changes to improve efficiencies will reduce emissions. Setting emissions reduction goals will necessitate changes that improve efficiency. And consistent, standardized and high quality data is essential for both.

Do both of these things: continually drive improvement across every process and embrace data- driven decision making to optimize strategies, and you’ll put in place the steps and tools to not just lower C02 emissions, but related operational costs too.

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Steve Beda is executive vice president of customer solutions for Trax Technologies, the global leader in Transportation Spend Management solutions. Trax elevates traditional Freight Audit and Payment with a combination of industry leading cloud-based technology solutions and expert services to help enterprises with the world’s more complex supply chains better manage and control their global transportation costs and drive enterprise-wide efficiency and value. For more information, visit www.traxtech.com.

3pls, Archives, Global Logistics, Global Trade Daily

4 Ways the IoT Helps Optimize Cold Chain Logistics

February 24th, 2022 Emily Newton Leave a comment

Industry 4.0 technology can help to make cold chain logistics much easier to manage. Internet of things (IoT) devices are already used in a wide range of industries to gather real-time information on business processes.

In the cold chain, IoT technology can help businesses track important data on shipments — potentially allowing them to prevent temperature excursions and provide better data to stakeholders.

Here’s how businesses are already using IoT to optimize their cold chain logistics.

1. Temperature Monitoring

A key feature of IoT devices is their ability to monitor the temperatures that cold chain shipments are exposed to.

By attaching an IoT temperature monitor to the outside of a package or pallet, sensors can be used in a variety of transportation modes — including trucks, rail freight or air cargo — to continuously track the temperature of food items, important pharmaceuticals and other items that need cold chain logistics.

These sensors will gather and report this data in real-time. Because IoT sensors can automatically store data on the cloud, all relevant stakeholders can have access to the temperature data that they collect.

In the event that an IoT sensor detects a temperature excursion, an alert system can automatically notify managers, drivers, administrative staff and other workers — allowing them to take action to prevent spoilage.

Stored data can also be used to improve processes, identify bottlenecks and determine fault in the event that an excursion causes spoilage. At any time after a sensor collects temperature data, stakeholders can review captured information and trends — or use analytics software to automatically extract valuable insights from historical temperature data.

IoT temperature tracking devices can also monitor other aspects of a shipment’s journey — for example, a combination vibration, light and temperature sensor can monitor for heat as well as exposure to light, shocks, vibrations and sudden stops.

Many cold chain products don’t just require low temperatures. Many vaccines that need cold chain logistics, for example, may spoil or lose potency if exposed to light. Sudden shocks can also risk damage to vaccine containers and packing materials.

IoT devices that monitor for temperature can also help to monitor for these potential threats.

2. GPS and RFID Shipment Tracking

IoT devices are also excellent at tracking the current location of a shipment or individual product. By using technology like GPS or RFID, it’s possible for an IoT device to gather information on a shipment’s movement.

With GPS, this information will be in real-time. With RFID, the system will depend on RFID readers installed at important locations that continuously scan for RFID tags. These systems will provide instant updates whenever an RFID tagged shipment arrives at a warehouse, fulfillment center, retail location or delivery destination.

These systems can automatically alert stakeholders when an item is on the move, allowing them to track the position of all their shipments, 24/7. The same IoT device can be used to monitor both temperature and location.

The same technology can also help businesses and logistics providers offer better delivery estimates to their clients. With real-time tracking, it’s much easier to accurately forecast when an item will arrive at a destination.

3. Automated Reporting and Cloud Data Storage

Because IoT devices are connected to the internet and can collect data continuously, they can also be used for automatic report-generation and cloud data backups.

For example, data from an IoT device can be automatically delivered to relevant stakeholders or stored for monthly documentation of important information.

In addition to delivering data to the cloud, an IoT device can send information to logistics management platforms, where the information can be analyzed by stakeholders with the help of dashboards and other data visualization tools.

The device can also stream information to AI-powered analytic tools, allowing businesses to use the IoT data to power delivery time or temperature excursion prediction algorithms.

These algorithms can help businesses see a crisis coming based on patterns in IoT data, potentially long before the issue would be obvious to a manager or analyst following the data on their own.

4. Equipment Health Monitoring and Predictive Maintenance

In addition to monitoring shipments directly, IoT devices are also an excellent tool for tracking the performance and health of cold chain equipment — including delivery vehicles, warehouse machinery and even HVAC systems.

Existing IoT performance monitoring systems can track a wide variety of performance and environmental variables. Information from these systems can help businesses track machine performance and health.

For example, an IoT fleet may capture information on a machine’s timing, vibration, temperature and lubrication. If one of these variables leaves its safe operating range, the system can automatically notify site technicians.

IoT devices may also measure local temperature, humidity and CO2 levels, allowing managers of a warehouse or fulfillment center to know if local environmental conditions may be negatively impacting the performance of a site machine.

Equipment monitoring is already a popular application of IoT devices in many industries, meaning that cold chain logistics professionals wanting to adopt the technology have access to a large and growing market of IoT equipment monitoring solutions.

Experts predict that the market is on track to grow quickly over the next few years, meaning that logistics companies will have access to even more options in the near future.

With enough data, businesses can also use IoT devices to lay the foundation for a predictive maintenance system. These are systems that use AI and IoT machine performance data to predict a machine’s maintenance needs.

By analyzing information collected from IoT devices, it’s possible to predict when a machine will need maintenance or repairs.

These systems can also alert managers when they predict that machine failure is imminent — allowing for an emergency shutdown that can help to prevent significant damage to a machine that may result in more expensive repairs and greater downtime.

How IoT Devices May Help to Transform the Cold Chain

With new IoT devices, cold chain logistics providers may be able to streamline their operations. A fleet of IoT devices can provide crucial information on both shipments and the equipment used to move them.

Cold chain professionals are already using IoT devices to prevent spoilage and more effectively monitor shipments as they move from location to location.

IoT devices can also lay the foundation for predictive analytics algorithms that can accurately predict delivery times or machine maintenance needs

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Emily Newton is an industrial journalist. As Editor-in-Chief of Revolutionized, she regularly covers how technology is changing the industry

Archives, Global Logistics, Global Shippers 101, Global Trade Daily

GLOBAL SHIPPING CRISIS: NO QUICK FIX

February 22nd, 2022 Chris Jones, EVP of industry and services at Descartes Leave a comment

With spring only a short time away, the shipping and logistics crisis continues to wreak havoc throughout the global supply chain, showing little sign of relenting. While recent data from the Federal Reserve Economic Data (FRED) and Descartes Datamyne™ point to a slight softening of economic indicators (although not enough to suggest a change in the levels of disruption), U.S. import volumes continued to break records in January and amplify supply chain and logistics challenges.

The big picture reveals ports are still struggling to handle the increased import volumes, as the pandemic continues to limit consumers’ service-based expenditures in favor of durable and non-durable goods purchases. Factors such as lengthy port wait times, labor and container shortages, the backlog of containers waiting to be emptied or transported, and the uncertainty of the impending International Longshore and Warehouse Union (ILWU) contract negotiations continue to disrupt the supply chain.

With no clear indicator of when the pressure on supply chains and logistics operations will begin to lift, importers and logistics service providers (LSPs) must hold the line as they contend with ongoing supply chain challenges.

SHIPPING VOLUMES SHIFT TO EAST COAST PORTS

While November and December 2021 showed a slight decline in U.S. import container volume, January 2022 rebounded to post a record volume of 2.47M TEUs. Compared to January 2021 and pre-pandemic January 2020, January 2022 volumes increased 3% and 14%, respectively, placing further strain on an overwhelmed global supply chain.

In an attempt to mitigate the impact of record-breaking import volumes, LSPs and importers continue to shift volume eastwards, away from the major West Coast ports. Container import processing declined for the third month in a row at the Port of Los Angeles, down 1.3% in January 2022—and down 25.4% since its high in May 2021.

On the opposite coast, the Port of New York/New Jersey processed the most containers for the second consecutive month. Similarly, the Ports of Savannah and Houston experienced increases of 6.8% and 17.4%, respectively, and their highest volumes of the last nine months.

RETAIL SIGNS

The FRED retail inventory-to-sales ratio illustrates the relationship between the end-of-month inventory values and monthly sales and is an important indicator of retailers’ ability to keep goods on physical and virtual shelves to meet consumer demands.

The latest update (November 2021) showed a slight improvement—an increase of 0.02 to 1.09—and may provide a faint glimmer of hope for importers and LSPs. Unfortunately, the ratio is still hovering near historical lows, as retailers grapple with empty shelves and frustrated customers. While there’s a possibility that retailers will be able to catch up on depleted inventory positions during the “slower” winter sales months, it’s too early to tell.

THE CULPRIT: CONSUMER DEMAND FOR GOODS

The amount of goods purchased by consumers is one of the most significant drivers of heightened global shipping volumes. Accordingly, the ratio of consumer expenditures on goods vs. services is one to watch. For the latest reported month (December 2021), the goods-to-services ratio dropped 1.8% to 51.6%.

This slight downward shift may signal softer import volumes going forward; however, January container import volumes remained in the massive 2.4M to 2.6M TEU range that persisted throughout 2021, contributing to the ensuing chronic supply chain disruptions (e.g., delays, variability, etc.).

With the pandemic still dampening expenditures on service and experienced-based businesses (e.g., travel, restaurants, entertainment), consumers will continue to spend more on goods than services—but for how long?

PANDEMIC STILL A FACTOR

As the U.S. and Europe start to make the shift towards living with the Omicron variant, China has taken a different approach; Beijing’s zero-COVID strategy could exacerbate global supply disruptions. China has strict lockdown protocols in place when a local outbreak occurs. If (when) lockdowns occur, the flow of goods could slow to a crawl or stop altogether, directly impacting manufacturers that rely on parts from China to produce their goods.

With Omicron cases receding across most of the U.S., half of the states have abandoned mask mandates and other pandemic-related protocols which could lead to a temporary spike in COVID-19 transmission, intensifying worker shortages and supply chain bottlenecks.

On an optimistic note, the Omicron surge did not dampen the employment market as anticipated. A low Federal Reserve Unemployment Rate is another economic indicator of a continued strong economy and higher demand for goods. Unemployment in the U.S. rose by a nominal 0.1% to 4.0%, according to the early February jobs report. Approaching the historical non-wartime low of 3.5%, the unemployment rate is down from 6.2% in February 2021—and down from the dizzying peak of 14.7% in April 2020. In addition, a surprising 467,000 jobs were created in January, a much larger increase than the roughly 150,000 forecasted new jobs.

NEXT STEPS

With shipping capacity constrained, importers should maximize profitability in the short-term by rationalizing SKUs to ship higher-velocity and higher-margin goods. If feasible, companies should shift volumes away from West Coast ports to alternate, less congested ports to reduce wait times.

LSPs should focus on keeping the supply chain resources they have, especially drivers. Leveraging route optimization technology, shippers and LSPs can help retain drivers by building trips to reduce stress and improve drivers’ quality of life.

To build resilience into the supply chain, importers and LSPs should focus on supply chain predictability. By shifting the movement of goods to less congested transportation lanes, they can improve supply chain velocity and reliability.

Looking a bit further out, companies can mitigate reliance on over-taxed trade lines by evaluating supplier and factory location density. Although density enables economies of scale, the pandemic-related logistics capacity crisis exposed the downside of this operational strategy.

THE FINAL WORD

While the slight reduction in the personal consumption of goods might be a positive sign, other indicators, such as the retailer inventory-to-sales ratio, need to measurably improve to take the pressure off the U.S. logistics infrastructure in 2022. And with January’s container import volume at record levels and shipping and container prices skyrocketing, importers and LSPs are facing a congested and frustrating year ahead. Companies must prepare for more lasting impact by implementing tactics to address capacity constraints in the short-term, while taking steps to build long-term supply chain resilience.

wagner circle third-party logistics market

3pls, Archives, Global Logistics, Global Trade Daily

A Comprehensive Guide to Picking a Third-Party Logistics (3PL) Partner for Your Business

February 21st, 2022 David L. Buss Leave a comment

The right third-party logistics partner can help your organization improve customer service, control costs, and increase efficiency. It’s important to properly vet possible logistics partners to ensure your brand and services are well represented and the partner can deliver according to your needs.

Establish Communication

Logistics have gotten more sophisticated in recent years, and logistics partners need to maintain high levels of communication and data sharing between the provider and the company. It’s important to find a third-party logistics provider that you can trust and one that shares your brand’s culture and values.

Do Your Due Diligence

Not all logistics providers are created equal. If you’re selecting a new provider or changing to a different provider, it’s important to look for logistics partners with the resources and capabilities you need to reach your business goals. Providers should also be able to integrate with your existing systems, or be willing to work with you to find an agreeable solution.

Ideally, look for outstanding service across financial history, brand stability, experience working in your industry, experience in specific geographic regions, owned vs. rented assets, and compliance with regulations.

Along with talking to the providers themselves, do outside research and read reviews from other companies that worked with them. If possible, ask the provider to connect you with satisfied customers. If they stand behind their service, they will be happy to showcase happy customers.

Look for Diverse Offerings

Logistics providers typically specialize in a few domains, including commodity services, industry services, and logistics services. Their offerings can range from sourcing, shipping, transporting, and customs management to multi-function supply chain management and oversight for specific industries or specialization in particular sections of the supply chain.

Service add-ons are valuable to both parties. A single provider can supply several services to make your supply chain scalable and seamless. You can look for value-added amenities like IT asset management, quality control, and high-tech logistics solutions. Some common service add-ons may include rush order or emergency order handling, product kitting, reverse logistics programs, and returned material authorization agreements.

Choose Partners with Advanced Technology

A third-party logistics provider’s IT infrastructure is vital to your needs and their own. Your possible provider should own and operate the contemporary technology needed for their side of the partnership, including warehouse management systems, fleet tracking systems, and inventory analytics and controls. You could also look for order fulfillment systems, freight theft or damage management, and wares tracking using RFID or EDI.

The logistics industry is undergoing rapid change. It’s important to find providers with advanced technology solutions to address your needs as the business evolves.

Look for Customization

Depending on your industry, you may need additional customization options for your business. An experienced third-party logistics provider can help you optimize inventory and deliver excellent service for your customers. Building to order, rather than relying on stock, allows you to reduce inventory and production costs.

Opt for Omnichannel Expertise

Omnichannel is essential in the modern business world and necessary for enhanced customer experience. Your third-party logistics provider should understand the ins and outs of omnichannel commerce and how to provide that exceptional experience for customers.

Look for partners with repeatable business models, proven performance with previous customers, and experience with your business type, industry, or customer base. Depending on your needs, you may want to opt for a dedicated provider that focuses on one part of the supply chain or specific product types.

Work with a Network of Locations

Effective logistics partners have strategic network configuration with optimized distribution centers. It’s vital to understand the third-party logistics provider’s warehousing asset ecosystem, such as rented or proprietary storage facilities. If your products will need multiple storage stops on domestic or international routes, you will need a provider that owns and manages these warehouses for quality control and security.

You should also investigate more details about the warehousing assets, including the facility sizes and capacities, scalability, and future expansion plans. Are the warehouses close to ports, airports, highways, and railways? How many trailers and containers do they typically handle in a day? Is there anything you need to be aware of regarding service during the busy seasons or in the event of high shipping demands?

Prioritize Excellence in Service

An experienced logistics partner is dedicated to service excellence and quality management. Your third-party logistics partner will have a significant impact on how your own business and customer service functions, so you want to be sure you’re choosing a provider that’s committed to delivering for you and improving their own product.

A provider with a dedication to service excellence will continue to optimize their own processes and will look for opportunities to implement better solutions whenever possible. They should be invested in their service and its success, like you are to your own company and product, and always looking to excel.

Find Brand Alignment

Your logistics partner reflects on your brand and impacts your business. To ensure your brand and your vision are represented, you need to look for a provider with a long history of success, adherence to compliance and regulations, financial stability, and a continued interest in investing in the company, facilities, equipment, systems, and resources for optimal logistics.

With the right partner on your site, you can grow into a solid relationship with a third-party logistics provider that can grow and evolve with your business. While switching to different providers occurs as business needs change, it’s much simpler to find the right provider at the start and work on developing a long-term partnership.

Key Takeaways

The supply-chain management industry has undergone radical changes in the last decade. Many third-party logistics providers emerged on the market in response to this boom and the increasing opportunities with a global marketplace. Not every provider has the tools, resources, and expertise to deliver for you, however, so do your due diligence and find a provider with a positive reputation, proven processes, and a willingness to adapt and grow.

__________________________________________________________________

David is CEO of DB Schenker USA, a 150-year-old leading global freight forwarder and 3PL provider. David Buss is responsible for all P&L aspects in the United States, which is made up of over 7,000 employees located throughout 39 forwarding locations and 55 logistics centers.

3pls, Archives, Global Logistics, Global Trade Daily, Special Reports

Stakeholder Influence on Sustainable Supply Chain Management in 2022

February 21st, 2022 Daniel Martin Leave a comment

Sustainability is the new catchphrase in processes around the development of goods or products. The aim is to protect the earth so that future generations can enjoy it. It requires a concerted effort to avoid anything that can damage the environment.

The UN sustainable development goals (SDGs) highlight 17 key areas of concern. These include clean water and sanitation, clean and affordable energy, and reduced inequality.

And, the world is already adopting sustainability. There is, for example, a shift towards using renewable energy sources.

Solar and wind are replacing the need for fossil fuel. Industries must be more stringent about not polluting the environment during manufacturing.

It is without a doubt a process that requires the input of all stakeholders within the supply chain. That is why it is important to understand how they influence supply chain sustainability.

Understanding Supply Chain Sustainability

Supply chain sustainability is any step to reduce negative impacts. It covers both the environment and humans.

It looks at the whole supply chain process. That is, from the raw material stage to the delivery of the final product to customers.

These include manufacturing and production, storage, and transportation. So it is not only about minimizing harm from the process. It should also include the positive impact on the communities.

The advantages of embracing sustainability are many. These include positive brand perceptions amongst customers. Investor relations can also improve because of sustainability efforts. On the other hand, a negative media report on supply chain practices can hurt stock prices.

Some investors would even cut ties with the company. It will depend on how strongly they believe in sustainability. And, of course, there is the aspect of compliance with regulatory guidelines.

The Impact of Sustainability on Stakeholders

The term stakeholders cover a wide variety of people. They may, directly or indirectly, influence a company’s development plans and strategies.

These include employees, customers, shareholders, and the community at large. And within these groups, there are two distinctions. There are the primary stakeholders who have a complex relationship with the company. They do have some similarities in expectations, rights, and responsibilities.

Secondary stakeholders can influence the company. But, they are not essential for its continued existence.

A study on how stakeholders can influence sustainability in the supply chain shared interesting insights.

-Pressure from stakeholders on sustainability can result in greater awareness.

-Stakeholders have a critical role to play in the adoption of sustainable goals.

-The impact of stakeholders is dissimilar in key decision areas.

-The sustainability issue influences the weight of what the stakeholders have to say. It could, for instance, have more impact depending on whether the issue is social or environmental.

Without a doubt, stakeholders have a crucial role to play in sustainability. After all, the organizations depend on them for business success.

And, there is the important role of employee or worker feedback. How do they feel about what the company is doing with regard to sustainability? Are they facing issues around human rights or labor practices they would want to share?

But, a huge challenge remains. Many workers may not be willing to speak up for fear of reprisal. Finding a way to allow them to communicate anonymously can help.

Some companies will use suggestion boxes. But, employees may shy away for fear of watchful eyes. To counter this, tech-forward companies are automating this feedback process by investing in tools like Ulula.

Ulula is a mobile-enabled platform that can help with anonymous surveys. It sends digital questionnaires to the stakeholders’ phones. Thus, it enables real-time data collection, while respecting the respondents’ preference for privacy.

The anonymity helps in collecting more honest feedback. And, the system can identify fraudulent activity, thus ensuring better data quality.

Clarifying The Role of Stakeholders in Influencing Sustainability

The role of stakeholders in influencing sustainability has three characteristics. These are power, legitimacy, and urgency. Stakeholders have the critical role of control and accountability.

Accountability makes the company liable for processes that happen within the supply chain. Control is the ability of the stakeholders to regulate some of the company’s activities.

Let’s explore these by looking at some stakeholders.

The Government or Regulatory Authorities

Take the example of the government as a stakeholder. They have power, legitimacy, and urgency. They can pressure the company into sustainable practices.

Non-adherence to sustainability guidelines can lead to the loss of operating licenses. The company can also find itself facing stiff penalties from the regulatory authorities.

Customers

Let’s start by saying that modern customers are very conscious. They know the important role of sustainability and are more demanding of it.

Customers have a great deal of power. Their influence can be the reason for a company adopting sustainable practices. Like the government, they have power, legitimacy and can create a sense of urgency.

Take the example of a community demonstrating against pollution by a company. The resulting pressure can force the company into taking the right sustainable action.

Industry giants like Kellogg’s, Coca-Cola, Unilever, Nestle, and PepsiCo understand this well. Behind the brand’s campaign allowed customers to demand sustainability from companies. These included demanding greater accountability from those within the supply chain.

The customers also wanted the ten drink companies to tackle gender inequality. Other areas of interest were climate change and land grabbing. Many of the companies changed their process due to the campaign.

They established zero tolerance to unethical practices within the supply chain. Others like General Mill and Kellogg’s paid keener attention to reducing emissions.

The Media

What about the media as a secondary stakeholder? Well, you may have heard that the pen is mightier than the sword. They have power, legitimacy and can create urgency.

The media are a key driver when it comes to sustainability. Not only can they get the companies to change their practices.

But, the customers look to them for information. Do you know up to 60% of customers consider the company’s sustainability practices when purchasing a product?

One-third of customers have no problem paying premium prices for sustainable items. It could explain why organic products, despite being more expensive, are so popular.

Final Thoughts

We all want to leave our kids and their kids a healthy environment. And that, in its simplest, is what sustainability demands. In fact, embracing sustainability within the supply chain may no longer be a choice. That is, if you want your company to remain relevant.

You see, modern customers are very demanding of ethical and clean processes. And the same applies to other stakeholders within the supply chain.

Archives, Features, Global Logistics, Global Trade Daily

GLOBAL MANUFACTURERS THAT ROLL PLANET PRESERVATION INTO THEIR BUSINESS PLANS

February 16th, 2022 Jonathan Dyble Leave a comment

Sustainability is undoubtedly the critical issue of our time.

With the global population expected to reach 9.6 billion by 2050, the United Nations estimates that the equivalent of almost three planets would be required to provide the natural resources needed to sustain that many modern lifestyles.

While consumption and production are critical to the global economy, current volumes and unsustainable practices are placing a massive strain on the environment and its resources, leading to some already catastrophic impacts.

For instance, Deloitte reports that between 2000 and 2020, CO2 emissions released by global fossil fuel combustion and industrial processes rose by roughly 35%, to 34.07 billion metric tons. Given the need to address climate change and meet net-zero targets, this trend must be reversed.

Thankfully, many manufacturers are now recognizing the strong business case behind pursuing more sustainable practices. Indeed, operating in a sustainable manner can improve energy efficiency, reduce waste, lower costs, increase operational efficiency, enhance brand reputation, boost recruitment and staff retention practices, provide competitive advantages, futureproof for regulatory constraints and opportunities, and unlock access to government grants and funding.

Of course, sustainability is not a case of one-size-fits-all. Every manufacturer is different, and each will have to make sustainable changes that match unique criteria. Yet this diversity is resulting in an abundance of commendable innovations.

What follows are some leading global manufacturing companies that are taking proactive and progressive approaches toward sustainability.

CANADIAN PACIFIC

Canadian Pacific (CP) is one firm leading the sustainability charge in the rail arena, having introduced a hydrogen locomotive program back in December 2020.

Many railway operators globally use diesel-powered locomotives at present, representing the industry’s most significant source of greenhouse gas emissions.

Recognizing this, CP has introduced a host of sustainability initiatives that have been successful in improving its fuel efficiency by more than 40% in the past three decades. Should the hydrogen program prove to be successful, it will help the firm take a further leap toward sustainable practices and serve to revolutionize energy consumption for the industry as a whole.

CP is in the process of retrofitting a line-haul locomotive with hydrogen fuel cells and battery technology to power the locomotive’s electric traction motors. The company will then conduct rail service trials and qualification testing to evaluate the technology’s readiness for real world use.

To accelerate the program, the company also recently received a CA$15 million (US$12.1 million) grant from Emissions Reduction Alberta to increase the number of hydrogen locomotive conversions from one to three, as well as developing more hydrogen production and fueling facilities at CP’s rail yards in Calgary and Edmonton.

The former will comprise an electrolysis plant that will produce hydrogen from water, this process powered by solar panels at CP’s headquarters campus to keep emissions at zero. The latter, meanwhile, will see a small-scale steam methane reformation system being used to generate hydrogen while tapping into Alberta’s abundant natural gas resources.

RIO TINTO, POSCO, METSO OUTOTEC

Over in the mining and metals sector, organizations are also tapping into the potential of hydrogen to unlock similarly transformative solutions.

Rio Tinto, the world’s third largest mining company, has partnered with POSCO, the largest steel producer in South Korea, for the exploration and development of technologies capable of contributing to a low-carbon emission steel value-chain.

Both firms have outlined ambitions to reach carbon neutrality by 2050, the integration of Rio Tinto’s iron ore processing technology and POSCO’s steelmaking technology set to be pivotal in helping them to each reach such their intended sustainability targets.

In addition, Finnish metals specialist Metso Outotec is equally championing sustainability in the sector thanks to its unique Circored process, this involving the use of hydrogen to decarbonize the production of steel.

The flexible Circored process produces highly metalized direct reduced iron or hot briquetted iron which is then in turn used directly as a feed material in electric arc furnaces for carbon-free steelmaking.

Not only does this not require any fossil fuels, but it also helps Metso Outotec to minimize its costs by eliminating the need for energy-intensive pelletizing.

PACCAR, DAIMLER TRUCKS NORTH AMERICA, VOLVO GROUP

Back in the transportation sector, automotive manufacturers PACCAR, Daimler Trucks North America and Volvo Group recently sealed $127 million of $199 million in U.S. federal funding made available for the development of advanced battery-electric and fuel cell electric truck projects.

According to the International Energy Agency, transport accounts for approximately one fifth of all CO2 emissions, with 74.5% of this contribution stemming from passenger vehicles (45.1%) and road freight vehicles (29.4%).

Known as SuperTruck 3, the federal funding initiative is a five-year dollar-for-dollar investment matching program designed to accelerate the development of pollution reducing electrified medium- and heavy-duty trucks and freight system concepts that will either achieve zero emissions or improve energy efficiency.

PACCAR secured $33 million of the funds to develop 18 class 8 battery-electric and fuel-cell trucks, as well as a megawatt charging station.

Daimler Trucks North America has received $26 million to develop two class 8 fuel cell trucks that have a 600-mile range and 25,000-hour durability–providing similar operational output compared with a diesel vehicle.

And Volvo Group North America will use $18 million in SuperTruck 3 funding to manufacture a 400-mile class 8 battery-electric tractor trailer that will focus on optimizing performance in relation to aerodynamics, tires, braking, automation and route planning. Further, the firm will also develop a megawatt charging station.

This is not the only commitment the manufacturers have made towards sustainable automotive solutions. Equally, Daimler and Volvo previously signed a joint venture to develop fuel cell vehicles during the current decade that would be sold under both brands.

THE MARISURF CONSORTIUM

Pharmaceutical and chemical manufacturing might seem like a sector less ripe for sustainability initiatives. However, the MARISURF Consortium is demonstrating that this is equally an area where much progress can be made.

The Consortium, backed by several companies and funded by a grant of 4.8 million euros (or about US$5.4 million) from the European Union’s Horizon Europe research and innovation program, aims to develop alternatives for petrochemicals in pharma products using marine microorganisms.

It comprises a selection of esteemed academic institutions, end-users and industrial companies, including manufacturers such as Bio Base Europe Pilot Plant VZW, EcTechSystens Srl, Nanoimmunotech and Marlow Foods Ltd.

The goal is to produce marine microorganism-based products for personal care, food and pharmaceutical formulations, with promising progress having been made in the five years since the research project first launched. Given that the consumer industry accounts for more than 70% of demand for all petrochemicals, this is significant.

Indeed, common petrochemical use cases include drug production, soaps, plastics, fertilizers, pesticides, paints, and build materials such as flooring and insulation. However, it is hoped that marine organisms will become a viable, natural replacement, owing to the consortium’s research.

EN+ GROUP

While En+ Group is renowned as the world’s largest producer of low-carbon aluminum, it is also an active player in green energy solutions through several environmentally conscious initiatives.

Many of these are driven by the firm’s New Energy program, focused on expanding clean energy generation and access. This seeks to modernize En+’s power plants through the implementation of new technologies capable of achieving greater hydropower energy efficiency and a reduced environmental impact, without increasing the water volumes passing through its hydropower turbines.

Further, the program aims to reduce En+’s environmental impact in other ways–namely through curbing the emissions of its coal-fired power plants. Initially launched in 2007 in tandem with the company’s plans to conduct the large-scale overhaul and replacement of core equipment at its largest hydropower plants based in Siberia, the project will continue to run until 2046.

Through New Energy, it has also become the first Russian firm and just one of 28 companies globally to achieve a UN recognized Energy Compact–an initiative launched by UN Energy to acknowledge voluntary commitments by countries, businesses, and cities in supporting the Sustainable Development Goals by accelerating the transition to clean energy and improving energy access.

TRAFIGURA GROUP AND NYRSTAR

In Australia, global metals manufacturer Nyrstar and physical commodity trading company Trafigura Group have committed to a joint investment that will see the construction of a commercial scale green hydrogen manufacturing facility in Port Pirie, in partnership with the State Government of South Australia.

Currently the project is in the midst of an AUD$5 million (US$3.65 million) front end engineering design study that is expected to be concluded come the end of 2022, with construction then set to commence in 2023.

In total, the project will cost an estimated AUD$750 million (US$534 million), set to be rolled out in phases. Initially it will produce 20 tons of green hydrogen per day for export in the form of green ammonia, with plans to ramp up to 100 tons per day at full capacity, powered by a 440MW electrolyzer.

The manufacturing facility will become a key backbone of green hydrogen for Port Pirie and the surrounding region, providing significant benefit to local businesses while propelling the decarbonization of transport and industry.

The oxygen created in the hydrogen production process will also be utilized by the Nyrstar Port Pirie smelter. As part of the agreement, Trafigura will source 100% renewable energy to deliver the electricity needed to run the project’s electrolyzer, which will also contribute to decarbonizing the existing smelter’s power supply.

DEMATIC AND ASPIRE FOOD GROUP

Intelligent automation specialist Dematic and Aspire Food Group have partnered on a unique venture, constructing a flagship, state-of-the-art facility that will be used for the purpose of enhancing the production and manufacture of food-grade insect protein.

Anticipated for completion in Q1 2022, the facility will be the world’s first fully automated food-grade insect protein manufacturing site, powered by Dematic’s innovative technology.

Its Unit-Load Automated Storage/Retrieval Systems will be implemented through the 11-story building and use 96,000 totes to breed crickets, ready to be processed for either human or pet consumption.

Industrial IoT sensors, and artificial intelligence will also be deployed to unlock key data and insights that will be used to help optimize the conditions for cricket maturation, breeding and incubation. The project will also mark the inaugural use of such technologies in the enhancement of indoor vertical agriculture with living organisms.

In total, it is estimated that the totes will be able to produce up to 20,000 tons of cricket protein and waste for fertilizer and soil supplements annually.

HONDA AND KUEHNE+NAGEL

In China, logistics specialist Kuehne+Nagel and Honda have worked together to cut 16,000 tons of CO2 out of the supply chain of the automotive manufacturer through an ambitious road-to-rail project, reducing the regional division’s carbon emissions by as much as 70%.

Developed through KN Sincero–a joint venture between Kuehne+Nagel and Chinese logistics specialist Sincero–the initiative has seen Honda China move significant portions of its domestic long-haul trucking operations to train lines.

Tapping into regional hubs to optimize the performance of its supply chain, the manufacturer has unlocked several benefits. It has drastically reduced supply chain efficiencies and dramatically enhanced productive reliability, the project also delivering a range of value-added services spanning sorting, scanning, repackaging, GPS track and trace, and recyclable container management.

As a key partner, the project aligns with Kuehne+Nagel’s Net Zero Carbon initiative that was launched in 2019, geared toward not only lowering its own footprint but equally those of other organizations. Indeed, the firm resultantly achieved carbon neutrality globally in 2020, further turning attentions to supporting its partners thereafter through initiatives such as these.

Archives, Global Logistics, Global Trade Daily, News

Traxens Raises 23M€ and Acquires NEXT4 To Become the World Leader of Shipping Container Tracking

February 14th, 2022 CHARLIE PESTI, marketing and PR Leave a comment

TRAXENS, the leading smart-container service provider for
the global supply chain industry, announced today a new financing round of €23 million ($25+ million) from the company’s existing shareholders. The funds will be used to fuel Traxens’ international expansion starting with the acquisition of NEXT4, a fast-growing French supplier of removable and reusable shipping container trackers.

Traxens’ Internet-of-Things (IoT) solution is based on a breakthrough technology that enables access to the most comprehensive, precise and timely data for managing assets in transit anywhere in the world. In addition to tracking container geolocation, it detects shocks and monitors temperature and humidity, as well as the open-or-closed status of container doors.

The acquisition, confirmed today, will allow Traxens to streamline and merge NEXT4’s offering into its suite of solutions, providing customers with the best of both solutions — including shipments scheduling, collaborative risk management, and analysis reports. The newly consolidated company is now the market frontrunner in providing overseas cargo visibility and offers Traxens’ customers a technological edge in container tracking solutions.

“Integrating NEXT4 into our company dramatically increases our ability to serve the growing needs of our customers as they digitalize their business processes, while adding freight visibility, cargo security and goods integrity,” said Traxens CEO David Marchand.

Founded in Toulouse in 2018, NEXT4 provides trackers that can be attached to containers from point of origin to the final destination. This provides freight forwarders with a premium tracking solution and gives customers 24/7, real-time data on the status and location of their goods via sensors inside the containers.

Tens of thousands of NEXT4 trackers have been adopted by leading freight forwarders such as Bolloré Logistics and DB Schenker. Airlines have also approved the latest version of its trackers, a smaller and more versatile device, that allows them to be adapted to the needs of the air freight industry.

The €23 million round of financing follows a Series C funding round of approximately €20M ($22.7M) raised in 2019. This new acquisition will enable the consolidated French company to continue deploying its smart-containers worldwide, while building new relationships with major players in the supply chain, including companies focused on container leasing, insurance and
transport management systems.

As it moves into new markets in the U.S., South America and Asia, Traxens will also use the funding to further expand its portfolio of solutions to address the increasing needs of freight forwarders and beneficial cargo owners (BCO) for supply chain transparency.

“Joining the Traxens group enables us to market our innovative solution on an internationalNEXT4 will operate as a wholly-owned subsidiary of Traxens with offices in Toulouse. In addition
to remaining as CEO of NEXT4, Rosemont will serve as Traxens’ chief marketing officer. scale and to jointly develop new products and solutions with their team,” said NEXT4 CEO and founder Cédric Rosemont. “Our highly complementary solutions will meet the current and future challenges of shippers and their logistics providers. This means NEXT4’s customers also can benefit from Traxens’ solutions, which are now being widely deployed by container owners.”

NEXT4 will operate as a wholly-owned subsidiary of Traxens with offices in Toulouse. In addition to remaining as CEO of NEXT4, Rosemont will serve as Traxens’ chief marketing officer.

Both CEOs will be available for interviews about this strategic merger at the TPMTECH (Feb.24-25) and TPM22 (Feb. 27-March 2) trade shows in Long Beach, Calif.

Archives, Global Logistics, Global Trade Daily, Trade Cycle

Fortifying the Supply Chain Against Seasonal Challenges: 7 Scenarios

February 9th, 2022 Dylan Berger Leave a comment

As the seasons change, so do the risks businesses face. That’s true of any industry, but these seasonal challenges can be even more impactful in a sector as complex and interconnected as the supply chain.

Resilience is key to success in an increasingly competitive industry. Supply chains must anticipate and prepare for shifting seasonal obstacles to become as resilient as possible. With that in mind, here are seven common seasonal scenarios supply chains should plan for.

1. Demand Shifts

One of the most consistent seasonal challenges supply chains face is shifting demand. For many logistics companies, like UPS, peak season lies between November and January, while others are busier in the summer. Regardless of when it occurs, supply chains face uneven demand throughout the year, which can be disruptive.

Failure to adapt to these shifts quickly or accurately can result in shortages, delays or surpluses. The solution to this challenge is to promote more transparency throughout the supply chain and its partners. Logistics companies must communicate quickly and thoroughly with their clients and vice versa to reveal demand shifts as they occur.

Data analytics can help predict future seasonal demand shifts based on historical trends. Supply chains can utilize Internet of Things (IoT) sensors to gather this data and predictive analytics algorithms to analyze it and stay on top of these changes.

2. Extreme Temperatures

Another seasonal challenge supply chains must account for is extreme temperatures in the winter and summer. Heat and cold add urgency to operations by endangering sensitive shipments and raising maintenance concerns.

Since most trailers aren’t temperature-controlled, extreme cold and heat could damage products if they take too long to ship. Logistics companies can mitigate this risk by prioritizing time-sensitive shipments like these and employing climate-controlled trailers. IoT trackers can help monitor product health to inform any needed route changes, which is especially helpful in food supply chains.

Supply chain organizations must also ensure all vehicles meet high maintenance standards as temperatures shift. Extreme heat and cold take a toll on trucks, so businesses may have to schedule upkeep more often to prevent breakdowns.

3. High Rainfall and Flooding

Supply chains may have to deal with high rainfall in some areas during spring and summer. This can make road transportation risky, limiting drivers’ visibility and reducing trucks’ grip on the road. It can also lead to flooding in extreme cases, further delaying shipments and damaging goods.

Logistics companies must ensure they train drivers on how to be safe in the rain. Telematics systems can help monitor speed and behavior to enforce driving policies. Supply chain managers can also incorporate weather analytics into their route planning to help drivers avoid heavy rain if possible.

Supply chains with locations near coasts, lakes or rivers should assess their flooding risk. Facilities in high-risk areas should install early warning systems and flood barriers.

4. Winter Storms

Winter storms bring snow and ice, and these conditions can also threaten supply chains. Ice will expand inside cracks in the road, creating potholes and making roads slippery, and snow may limit air travel.

Like with many weather conditions, winter storm preparedness starts with monitoring. Supply chains that see a storm approaching should develop a contingency plan if one route becomes inaccessible. Companies may need to ship items from a different warehouse as roads and airports shut down.

Communication is also essential. Every point along the logistics network should communicate with others about developing road conditions and incoming storms. That allows supply chains to respond faster to inclement weather.

5. Increased Traffic

Some seasonal challenges have more to do with behavior trends than weather threats. Increasing traffic in the warmer months can be an obstacle since 71.6% of all freight in the U.S. travels by truck. Ground shipments will likely take longer to reach their destination, and vehicles may face more hazards from other drivers.

Most traffic peaks occur in warmer months, with August consistently featuring the most miles traveled and July falling close behind. Supply chain organizations should prepare for increased transit in these months and give themselves more time for road shipments than usual. Adjusting shipment methods to prefer shorter routes can also help.

A significant portion of addressing traffic delays is managing clients’ expectations. Logistics providers may not be able to deliver on quick shipment times, so they shouldn’t promise them during peak months.

6. Fluctuating Workforces

The supply chain industry faces a fluctuating workforce throughout the year. Some months may be more challenging to find workers than others, making expansion or adjusting to meet seasonal demands more difficult.

The number of young people looking for work increases dramatically between April and July as schools and colleges let out. These may be the best times of year for supply chains to hire new workers, but they may struggle to acquire them in the fall by comparison. Understanding the context behind these shifts can inform more effective hiring decisions.

Seasonal availability may increase in the summer, but if supply chains want permanent workers, they should favor new college graduates. Hiring in the summer will give companies a broader pool of applicants to choose from, making it easier to expand.

7. Shifting Maintenance Needs

Equipment maintenance needs will also shift between seasons. Proactive maintenance is essential any time of year, but different components will wear at varying speeds depending on the weather. Understanding these uneven repair needs can help companies plan more effective maintenance schedules.

For example, dirt, insects and other contaminants may accumulate in truck engines faster during the summer. Consequently, logistics companies may have to schedule oil and filter changes more frequently in the warmer months. Similarly, since vehicle batteries consume twice as much power to start in the cold, battery checks may have to be more frequent in the winter.

Supply chain organizations should review these repair needs to create maintenance schedules that vary between seasons. Using IoT devices to enable predictive maintenance, which alerts workers to repair concerns in real-time, may be even more effective. That way, companies can address issues as they become a concern but before they become a bigger problem.

Create a Supply Chain for all Seasons

Changing weather and shifting human behavior can challenge supply chains if they don’t prepare for it. However, if logistics companies understand how their obstacles change throughout the year, they can become as resilient as possible.

These seven scenarios are not the only seasonal challenges supply chains may face, but they are common threats. Businesses that prepare to mitigate these obstacles ahead of time can maintain peak efficiency regardless of the season.

Archives, Global Logistics, Global Trade Daily, Ocean Carriers

Supply Chain Predictions for 2022

February 8th, 2022 Lee Smith Leave a comment

After the numerous supply chain issues of the last two years, businesses are hoping for an improved logistics landscape in 2022. While there is somewhat smoother sailing on the horizon, international trade waters will remain choppy in 2022 as logistics issues and government actions continue. Some pressure on the logistics portion of the supply chain may ease, but the cost of shipping will continue to increase. Moreover, new issues are expected to arise in 2022 resulting from government action that will continue to put pressure on the supply chain.

Logistics Issues Will Remain

Logistics-related supply chain pressures may ease during 2022 as a result of lessons learned. During 2020 and 2021, the pandemic upended the logistics industry. Supply chain pressures stretched ports to maximum capacity, and there was (and continues to be) a shortage of truckers. Companies sought to side-step the delays by paying extra to take another company’s spot-on containerships and take other creative actions. Some logistics-related issues likely will ease in 2022 due to companies learning from their experiences during the pandemic. Companies have learned to adapt to the ‘new normal’ and will continue to do so. Recognizing that “just-in-time” supply chains will not return to their prior efficiency, companies will continue to adapt in 2022 by warehousing essential inventory (when possible), diversifying supply chains, and selecting to manufacture closer to the consumer base.

Diversification and relocation will be incentivized in 2022 by high logistics costs and governments (as discussed later). Trucking companies and other logistics companies are experiencing higher costs, such as higher salaries resulting from the tight labor market. Similarly, prices for ocean shipments are expected to reach record highs under annual contracts. Logistics costs are expected to remain high through 2022 and likely 2023. However, many expect that more supply capacity will come on stream and the demand-side pressures should ease this year.

Congress seeks to address logistics issues with the Ocean Shipping Reform Act of 2021, which overhauls federal regulations for the global shipping industry. This bill seeks to ensure a more competitive global ocean shipping industry, protect American businesses and consumers from price gouging, and establish reciprocal trade to promote U.S. exports as part of the Federal Maritime Commission’s (FMC) mission. It also prohibits ocean carriers from declining opportunities for U.S. exports unreasonably and provides additional enforcement tools to the FMC to address injurious ocean carrier practices.

Any ease in logistics supply chain pressures will be countered if there is a COVID-19 outbreak in China. China’s zero COVID policy has kept most of the country operating under normal conditions. However, more infectious variants such as Omicron could be a factor, and China’s domestic vaccines reportedly offer less protection than vaccines used in the West. An outbreak and the consequent shutdowns could cripple many companies that rely on goods from China.

Government Action Likely Will Cause Friction

Additional trade friction can be expected in 2022 as a result of action by Congress and the Biden Administration. The Uyghur Forced Labor Prevention Act (Forced Labor Act) will cause ripples through the supply chain once implemented in June 2022. A similar result will occur if the Biden Administration decides to initiate an investigation into China’s industrial subsidies under Section 301.

The Forced Labor Act prohibits the import of goods made with forced labor and implements a rebuttable presumption that all goods produced in China’s Xinjiang Uyghur Autonomous Region (XUAR) are made with forced labor. Although the focus is on the XUAR, the presumption of forced labor will extend to entities that are not located in XUAR. Moreover, the import ban extends upstream to capture finished goods that use inputs from the XUAR, regardless of where the finished good is completed. Companies will be required to prove with “clear and convincing” evidence that forced labor was not used at any point in their supply chain. U.S. Customs and Border Protection is expected to issue compliance guidance.

In order to make changes to the Section 301 Intellectual Property tariffs (beyond eliminating them), USTR will need to conduct a new investigation. The potential Section 301 action on industrial subsides in China would authorize the Biden Administration to place tariffs on additional products from China, but also lower (or remove) tariffs on other items. Signals suggest that certain factions of the Biden administration want to impose additional tariffs, but USTR Katherine Tai wants to continue the dialog with her Chinese counterparts. While a breakthrough is possible, China has historically used a dialog to prevent action against it rather than take meaningful action in response to U.S. and other Western government’s requests. Moreover, outside of China, it is not disputed that the Chinese Government provides significant subsidies to a number of industries – including green energy, semiconductors, and automobiles. An investigation will demonstrate as much, relying on Chinese government documents. If action is taken under Section 301, it is likely that the tariffs will be targeted to assist the Administration’s supply-chain and re-shoring goals.

These actions, however, will cause additional disruption on goods from China. China likely will take retaliatory actions in response, including tariff and non-tariff actions on U.S. imports into China. China could also take action on exports leaving China. It is unclear how China will react, and retaliation may occur in China’s domestic market. The Government could encourage a boycott of certain U.S. companies via Chinese press and netizens. Similarly, the Government of China could take unfounded regulatory action against U.S. and other western countries, as it has done in the past. Even if China does not take retaliatory action, recent regulatory upheaval in China suggests that additional restrictions could come, if China’s leaders think an industry is becoming too powerful or influential.

Business Leaders Should Brace For Higher Costs And Consider Taking Action

Business leaders should brace for higher costs in the near-term, even if goods begin to flow more easily. Inflation will continue to push input prices up, and compliance will add administrative costs and burdens. Nevertheless, supply chain due diligence – although costly – should be conducted to ensure there is no forced labor at any point in a company’s supply chain, because the cost of non-compliance will be far greater, particularly for companies operating in or purchasing goods from China and importing merchandise to the United States. Even if a company is not operating in or purchasing goods from China, due diligence should be conducted to ensure no part or input includes forced labor.

Given the increase in shipping costs and other frictions, business leaders may consider relocating their supply chains. The Biden Administration and Congress are incentivizing business leaders to do just that with two pieces of legislation currently moving through Congress: the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (America COMPETES) Act in the House of Representatives, and the United States Innovation and Competition Act (USICA), in the Senate. The central component of these two bills is the funding for the Creating Helpful Incentives to Produce Semiconductors Act (CHIPS), which provides incentives for companies to build semiconductor production facilities in the United States. The bills also appropriate significant funds aimed at countering China’s influence domestically and abroad. These bills have bipartisan support and portions have been labeled as “must-pass” legislation. Included in these bills are proposals to expand the role for the federal government in “strategic sectors” – including semiconductors, drones, wireless broadband, and artificial intelligence – with increased funding, supervision, and regulation of various industries. Other components include tackling supply chain vulnerabilities to make more goods in America, turbocharging America’s scientific research and technological leadership, strengthening America’s economic and national security at home and abroad, and bolstering President Biden’s Buy American agenda. The Biden Administration also will use executive power to provide incentives to business seeking to relocate to the United States, and federal agencies have been directed to assist business in any way they can.