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THE “HOMEBODY ECONOMY” AND TRADE

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Archives, Global Trade Daily, International Trade

THE “HOMEBODY ECONOMY” AND TRADE

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Mindful Spending

An estimated 2.6 billion people – one-third of the world’s population – continue to live under some form of quarantine conditions. These are trying circumstances for individuals and businesses. From a consumer demand perspective, the longer we all engage in some form of quarantine or social isolation, the more likely our new habits will take hold.

The emergence of this “homebody economy” is becoming apparent in consumer spending. Only China seems to be rebounding in consumer spending – the rest of us are still cutting back on discretionary spending. We are focused on essentials, being cost-conscious and cutting back on services and travel. We are even spending less on apparel and footwear, which impacts millions of jobs worldwide as workers in global value chains face uncertainty in their employment.

According to the International Labor Organization (ILO), 93 percent of the world’s workers live in countries experiencing workplace closures due to COVID-19. ILO estimated the reduction in working-hours for the second quarter of 2020 as equivalent to the loss of 400 million full-time jobs. Job losses, reduced hours and foregone income are having a clear dampening effect on spending habits and demand in international trade, which in turn creates more job insecurity.

No Contact

In most countries, the vast majority of people have turned to e-commerce and other digital or contactless services such as curbside pickup and drive-throughs. Many consumers are likely to delay resuming “normal” shopping and other behaviors until after a vaccine is widely available. That includes, unfortunately, the resumption of preventative healthcare. The hidden health impacts of foregoing routine health screenings and other interventions will be felt in national economies for years to come.

On top of all this, we know that the impacts of recession – layoffs, loss of income and the growing effects of income equality are closely correlated with reduced health outcomes and life expectancy. The World Health Organization has cautioned about the long-term consequences of lockdowns and isolation on mental and physical health, noting that depression and anxiety under normal circumstances cost the global economy an estimated $1 trillion per year in lost productivity.

No doubt we’re all feeling some level of anxiety, mood swings, and changes in sleep patterns. McKinsey’s consumer sentiment survey shows, in another twist of cruel circularity, that people are spending more time inactively, consuming digital content, which could have negative implications for people’s happiness.


Trade Antidote for the Irritable, Anxious and Exhausted Among Us

Lest we leave you further depressed, might trade in some goods and services provide a much-needed antidote to the mental and physical wear and tear of COVID-19? We think so. Here are some ideas.

Yoga – Global demand for PVC has been hit hard with a major drop in demand in China. So, why not do your small part by buying yourself a fresh, new vinyl mat. The PVC-based mats are cushy, which might be nice for your next savasana. If you’ve gained a little weight during the lockdown, you can rely on American textile engineers – the same ones medical personnel turn to for durable emergency wear – to also deliver yoga pants that will hold your belly in place as you stretch in downward dog.

Guided Meditation – Evidence of meditation practice dates back to approximately 1500 years BCE, but we generally thank Chinese Taoists and Indian Buddhists from the 6th to 4th centuries BCE for developing forms of practice that spread throughout the world. These days, Andy Puddicome, a Brit who studied meditation in the Himalayas and became ordained as a Tibetan Buddhist monk in Northern India, can be credited for making meditation accessible, modern – and available online – for the masses through his app, Headspace. Through Headspace and others, you can have guided meditation through an app on your phone, a service traded across borders thanks to the Internet.

incense

Incense – The use of incense can be traced back to ancient Egypt where it was used by priests for fumigating ceremonies and tombs. It was thought to hinder the presence of demons and served as an offering to their gods during worship and ritual, which is how incense came to be used in India and throughout southern Asia and China. Resin-based incense such as frankincense traveled to Europe and the Mediterranean along a trading route known as the Incense Route. Today, you can buy very high end and exotic incense like the brand, Astier de Villatte, which is handmade on the Japanese island of Awaji by masters of aroma who have been honing their craft and handing it down for hundreds of years. Also popular is incense made from palo santo (which means holy wood), a tree that grows along the coast of South America.

A Cleanse – If you’ve tried any form of keto, paleo or cleanse diet these days, chances are you had to look online to find far-flung ingredients from around the world. Popular ingredients include Maca powder derived from root vegetables grown in the Andes mountains in Peru, carob, which is native to the eastern Mediterranean region, and the Schisandra berry, which comes from mountainous regions throughout China. Another exotic ingredient is moringa, a nutrient-rich plant derived from “the miracle tree” native to North India. If your diet has you cutting back on caffeine, you can also try teas that taste like coffee, such as from Teecino. Their herbal teas use herbs and nuts like ramón seeds harvested in rural communities in Guatemala through programs that support educational and nutritional programs for women and children in Central America.

inredients

The Struggle is Real, Trade Can Help

The WTO issued a news release in June that estimated an 18.5 percent decline in merchandise trade in the second quarter of 2020 as compared to the same period last year. By any measure, the impact on trade, on livelihoods, and on our well-being has been profoundly negative. But as we work toward collective resilience, one thing you can do is to work on being healthy at home. And, with all of the products and services available to us through trade, we have lots of ways to do just that.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program. 

This article originally appeared on TradeVistas.org. Republished with permission.

Archives, Banking, Global Logistics, Global Trade Daily, Stories

An Economic Recovery From COVID-19 in 2021 Is Possible – But Massive Uncertainty Remains

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COVID-19 has had a devastating effect on human life. But it has also caused widespread economic upheaval for both advanced and emerging market economies as countries shut down to try to stop the spread of the virus. The U.S. for instance is set to see the most severe economic downturn since GDP was first tracked in the 1940s.

This means deep hardship for many businesses of all sizes and across all industries. Shutdowns caused many firms to entirely cease operations for a time. Now, they are grappling with plummeting demand as a result of rising unemployment and uncertainty, on top of supply chain difficulties and uncertainty as to financing resources.

Bad Timing for a Global Crisis

Although there is no “good” time for a pandemic to strike, business conditions in 2020 were already a little shaky prior to the outbreak. At the beginning of the year, the global economy had just finished its weakest year since the Great Recession, global trade was turning sour, trade finance had become more restricted and continued uncertainty from the U.S.-China trade war weighed on businesses everywhere.

If the outlook was stormy at the beginning of the year, it’s now outright bleak. Atradius economists are now forecasting that global trade will decrease approximately 15 percent in 2020, while global GDP will decline about 5 percent. The U.S. will perform below average, with a 6.1 percent decrease in GDP – largely due to its lag in controlling the virus and subsequent record high in number of COVID-19 cases, in addition to soaring unemployment as well as pressure on incomes, leading to a drop in consumption.

Will Government Intervention Be Enough?

Governments and central banks the world over have enacted measures to counteract the pandemic’s economic devastation. Early in the crisis, for instance, the European Central Bank put in place a Long Term Refinancing Operations III program, while the U.S. Federal Reserve increased quantitative easing.

Countries have also put together aid packages, such as the U.S. CARES Act and a number of packages from individual EU economies and the UK. Similarly, China is providing tax relief, state-backed credit guaranteed, and delayed loan and interest payments. Altogether, global government stimulus measures amount to approximately 9 percent of global GDP, or around $7.8 trillion.

But will this be enough? Atradius economists suggest not – not unless countries also enact vigorous policies to revitalize the economy at every level. The EU Pandemic Fund provides a good example: the $750 billion initiative will bestow loans and grants to the areas and sectors hardest hit by the pandemic, allowing for a more even recovery rate across the entire EU.

Although stimulus measures are necessary, soaring government debt levels are also cause for concern – even before the outbreak, many countries had worryingly high debt levels. The most recent baseline scenario from Atradius economists has the U.S. federal budget deficit, as a proportion of GDP, increasing by more than 10 percentage points this year. The UK will fare even worse, seeing a 13 percentage point increase in deficit growth rate. China and India are the only major economies likely to maintain moderate debt ratios through the pandemic.

All that said, low interest rates will likely stick around through the end of 2021 at least – this should help offset some of the concerns over high government debt levels. Moreover, central banks like the Fed and ECB will continue purchasing government bonds, suppressing any financial market stress.

What’s Next?

While the global economy is under undue strain at the moment, Atradius economists predict a recovery could begin as early as this year, continuing into 2021. Our baseline scenario has global GDP rebounding by 5.7 percent in 2021, with the U.S. coming in just under that, with GDP growth of 4.2 percent.

This scenario, however, is shrouded in uncertainty and hinges on a few key assumptions:

-That researchers are able to develop a successful vaccine in the near-term

-That lockdowns will be limited throughout the remainder of the outbreak

-That oil prices will remain low

-That the U.S.-China trade war will remain at a standstill

-That the rise in financing cost for firms, if any, remains limited

Should these assumptions not play out, the global economic recession could be much worse than anticipated – contraction rates could be twice as damaging as those currently predicted, with global GDP contracting 12.2 percent in 2020 and U.S. GDP seeing a 7.9 percent drop. Recovering from a contraction of this size would be a slow, painful process, although we would expect 2021 to see similar growth rates.

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John Lorié is chief economist with Atradius Economic Research. He is also affiliated with the University of Amsterdam as a researcher. Previously, he was Senior Vice President at ABN AMRO, where he worked for more than 20 years in a variety of roles in commercial and investment banking. He started his career at the Dutch Ministry of Foreign Affairs. John holds a PHD in international economics, master’s degrees in economics and tax economics as well as a bachelor’s degree in marketing. 

Theo Smid is an economist with Atradius Economic Research. His work focuses on business cycle analysis, insolvency predictions, thematic research and country risk analysis for the Commonwealth of Independent States. Before joining Atradius, he worked for five years in the macro-economic research team of Rabobank, focusing on business cycle analysis of the Dutch economy. He holds a master’s degree in economics from Tilburg University.  

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Archives, Global Logistics, Global Trade Daily, Stories

4 Strategies Manufacturers Can Adopt to Increase Agility

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In turbulent, transformative times like these, the term “business agility” seemingly appears everywhere. And though it’s easy to imagine even the world’s largest tech companies or consulting firms making a sudden pivot, it’s harder to picture a manufacturer with a factory full of heavy equipment doing the same thing.

So what does business agility mean in the context of manufacturing or construction? It’s less about the speed and scope of changes being proposed and more about communicating effectively across large, dispersed organizations. When disruptions break the supply chain or cause demand to plummet, manufacturers must be able to encourage an information flow across all corners of the enterprise. Agility depends on the free flow of information and the ability to guide a team directly.

The good news is that manufacturers are used to disruptions. They regularly deal with supply chain issues, sudden regulatory changes, or shifting market dynamics. Adaptation is in their nature.

The bad news is that COVID-19 puts a unique strain on the industry that makes agility more important yet less accessible. Specifically, factories and construction sites that have had to either scale back or shut down in response to public health requirements can’t exactly pick their work up remotely. Teams are spread out more than ever and cut off from core assets — and that includes everything from machinery to data.

These are circumstances manufacturers don’t have contingency plans for. Meeting the moment will require extensive brainstorming, aligned leadership, and quick and decisive action — but none of those things will be easy with stakeholders scattered to the wind.

Today’s Realities

All of this means manufacturers need a new concept of business agility along with a fresh sense of commitment.

Since the start of the pandemic, we’ve seen heavy-duty industries forced to shut down suddenly and reopen as quickly as possible. While opening, they’ve had to integrate new social distancing requirements into all aspects of operations and vastly expand health and safety measures. In some cases, they’re even learning how to stop sharing pens and clipboards. And those are just the implications for operations.

Unstable economic forces mean that supply and demand could be in flux for the foreseeable future. Granted, some manufacturers are booming right now — but others have seen business crater, and the long-term fallout of this pandemic remains to be seen. Manufacturers must reexamine (and in many cases revise) their plans, strategies, and fundamental business assumptions. Everything is up in the air.

On top of everything, this pandemic is accelerating the shift away from in-person interactions toward digital ones. Relationships with customers, suppliers, employees, and all other stakeholders are evolving because of the need to socially distance. More than that, though, this health crisis has underscored the fact that digital environments are more efficient, convenient, and customizable than the alternatives. This could prove to be a tipping point for digital transformation throughout the manufacturing industry.

It’s hard to overstate the pace of change right now. The degree to which some manufacturers have already responded is impressive; we’ve seen liquor producers start making hand sanitizer and sports equipment manufacturers adapt assembly lines to create face masks. Agility is possible in the face of this crisis, but manufacturers must take the initiative.

“Business as usual” stopped being relevant with the first COVID-19 cases, and there are serious questions about whether we’ll ever return to normal. That means something different for every manufacturer while still placing the same obligation on all of them: Stay agile or get swept under.

Building the Basis of Business Agility

Manufacturers need to grow agile as quickly as possible. Unfortunately, moving fast while staying coordinated is never easy. Apply these strategies to help guide your transformative efforts:

1. Share information in real time. People need answers right now, whether that’s about health and safety measures, new workplace practices, changing strategies, and everything else that’s been uprooted by the pandemic.

The less accessible this information is, the more disorganized things become. Sharing information in real time so everyone has the answers they need on demand keeps communication issues from making a bad situation worse. Strive to be as transparent as possible and to make information highly accessible.

2. Identify information bottlenecks. The pandemic exacerbated the existing information bottlenecks in organizations and created a number of new ones. Analyzing how internal communication works — how information flows through an organization — identifies where these bottlenecks are and suggests how they can be resolved.

Better access to information (of all types and at all levels) helps accelerate and improve decision-making. Before COVID-19, 86% of companies surveyed said frontline workers need more insights at their disposal. That priority is even higher now.

3. Lead from the bottom up. In any fast-changing scenario, insights from the front lines are what matter most. If executives ignore the ideas and perspectives of workers who are actually in the thick of operations, they miss both the red flags that require attention and the innovative ideas necessary to meet this moment. Information needs to flow freely and broadly within an organization, from one-on-one and small group communication all the way up to corporate messaging. Instead of giving lip service to this priority, make sure there’s a direct pipeline.

4. Create new touchpoints. Information from outside the organization — from customers or suppliers — is also immensely valuable right now. It’s vital to business agility because it helps a manufacturer explore how it can pivot without alienating the partners it relies on. Take those outside insights seriously and solicit as many as possible. Convenient digital touchpoints make it easy for others to supply complaints, suggestions, and praise, all of which inform a manufacturer’s next move.

Remember that agility is all about alignment. Any company — manufacturer or otherwise — can evolve on the fly as long as it can move as one. Communication is what cements that connection and helps achieve unity across the board.

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Daniel Sztutwojner is chief customer officer and co-founder of Beekeeper, the single point of contact for your frontline workforce. Beekeeper’s mobile platform brings communications and tools into one place to improve agility, productivity, and safety. Daniel is passionate about helping businesses operate more efficiently. He has a background in applied mathematics and more than eight years of experience in sales and customer success.

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Archives, Global Logistics, Global Trade Daily, Stories

COVID-19 PANDEMIC FORCES INDUSTRIES TO RE-THINK GLOBAL SUPPLY CHAINS

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As COVID-19 continues to dominate news headlines, American cities and international businesses are showing their true colors. From innovation in recovery to redrawing the predictions model businesses have adhered to for years, the health and economic crisis has done much more than disrupt the supply chain and logistics sectors. Despite the challenges, the process of recovery has been maximized by thinking outside the box and utilizing resources available to extend a helping hand. Dozens upon dozens of alcohol distilleries across the nation have switched production to meet the demand for hand sanitizer—to the point that the Distilled Spirits Council of the United States created its COVID-19 Hand Sanitizer Connection Portal as a dedicated resource for American distillers looking to join the efforts. General Motors announced its participation in joining forces to combat COVID-19 in April by kickstarting the production of face masks at the auto giant’s Warren, Michigan, and China facilities, thanks to a joint venture through SAIC-GM-Wuling.

If this pandemic has taught us anything, it is the importance of adaptability and what the true definition of agility looks like. Although the above companies proved prepared and agile enough to weather the storm, other companies and the American economy were not.

“Though the concept of supply chain readiness is not new, that does not mean it always has been practiced correctly,” explains Ron Leibman, head of McCarter & English’s Transportation, Logistics & Supply Chain Management practice. “Companies must begin now, if they are not doing so already, to test their business continuity plans, with a goal of identifying and correcting weaknesses in the supply chain and updating their plans to avoid future out-of-stock situations.”

Leibman points to a recent Institute for Supply Management survey that showed 75 percent of the companies surveyed had been affected by COVID-19, yet 44 percent of those companies had no plan in place to deal with that type of disruption.

Supply and demand have also shifted, creating a new set of challenges for domestic and international supply chain players. Products such as toilet paper, medical supplies, and grocery meats have seen a spike in demand since the pandemic reached the United States. These and other consumer trends have defined a new wave of purchasing habits that have essentially redefined what effective production looks like.

“Few could have predicted the run on toilet paper that occurred early in the pandemic, or the meat shortage that seems to be occurring today,” Leibman says. “Regardless of how this demand plays out, manufacturers will certainly need to be able produce and modify production to meet the needs of the economy and support customers/consumers through the enhanced use of ecommerce platforms and automated processes to minimize turnaround time. Now, rather than having a business ecosystem that prizes vendor-managed inventory, the reduction of inventory holding costs, and just-in-time delivery, manufacturers may have to re-gauge their production cycles and capabilities to meet their customers’ new purchasing patterns, which could include the use of forward inventories and safety stocks and perhaps larger replenishment volumes.”

The COVID-19 pandemic has revealed a lot about the current state of the global supply chain to the same degree that it challenged traditional predictive risk models. The fact of the matter is that business continuity and risk assessment going forward will not be the same–at least for a while.

“Countless industries are saying that they used to be so good at prediction, and now all their prediction models are out the window,” explains Marc Busch, a Business Diplomacy professor at Georgetown University. “This will require learning, and the question is how long will that learning take and how much will businesses invest in it? One way or another, the ‘new normal’ is going to have to be diagnosed. Market factors need to be considered. The ability to digitally gain enough information and predictive power to handle demand or supply shocks is paramount in moving forward and recovering.”

New challenges will arise as global traders determine the next steps in sourcing and site selection as well. What will make sense in the near future to better predict disruption management is an inevitable conversation.

“In moments of crisis, there’s an opportunity for businesses to reevaluate how they’ve been operating,” Busch says. “New entrants into well-formed supply chains may find that this is precisely the moment to pitch themselves to those companies that want to diversify, but aren’t yet willing to start shuffling assets around the world (i.e. out of China). This was the case in the financial crisis and it’s likely to be an opportunity soon again. There’s going to be a lot of new discoveries and the question is: Who is going to be learning.”

As this story was being published, retail stores and restaurants had just started the process of reopening and allowing customers back into their establishments. For many, customers are still required to wear face masks and maintain social distancing while capacity limits are cut in half if not more. The relief is found through the restarting of local business operations; however, it’s a slow and steady process that requires the support of customers to kickstart our economy once again. This kickstarting means rehires for business owners and working again for the countless people who lost their only source of income amid COVID-19.

“There is no doubt that people are eager to return to usual practices,” Busch says. “Some of the ways in which we collect our goods are going to forever be different. Businesses will have to learn like the rest of us. The new etiquette in business—the way in which services and goods are sold—will depend on how quickly and how fully we all come to grips with the new normal, and there are bound to be surprises. It is going to be difficult to determine how businesses should best try to rejuvenate trust and coax people into something like their usual consumption patterns.”

Retailers, restaurants, and entertainment venues aren’t the only ones that experienced unprecedented shifts, however. Amid the COVID-19 pandemic and the economic chaos, crude oil prices plummeted to negative numbers spurred by the significant drop in global demand. Although the market is now back to what we are used to (for the most part), regulations remain a big part of the foreseeable future in navigating such disruptions.

“On the trade side, for now, the industry should expect status quo for the immediate future,” explains David McCullough, partner in the Energy & Infrastructure practice group at the New York office of Eversheds Sutherland (US) LLP. “If there is to be another price shock where physical crude oil prices go negative or very low, we will see a real push for measures such as the waiver of the Renewable Fuel Standard (RFS), the waiver of the Jones Act and imposing crude oil and potentially refined product import restrictions specifically on non-North American sources.”

Opposite of what brick-and-mortar retailers experienced, the oil industry was not nearly as caught off-guard. In fact, according to McCullough, the majority was prepared. “There were anticipations of crude prices going negative and there were negative pricing clauses built into contracts for this reason,” he explains. “When this instance occurred, several large players were prepared. The situation was largely focused on a few players that got squeezed in the market. On the refined product side of the market, there are a few sectors that still do not seem to fully appreciate the demand destruction that has occurred and the ramifications of this demand destruction. For example, there will be significantly less demand for environmental credits under the Renewable Fuel Standard and California Low Carbon Fuel Standard. Despite this, we are still seeing the environmental credits remaining relatively robust. The market may not be fully understanding that the massive drop-off in demand for gasoline and diesel will also result in a drop-off in demand for these environmental credits.”

It boils down to visibility while clearly understanding and predicting market disruptions. As mentioned previously, the ways in which business is conducted have been changed drastically (for any industry, really). This change does not have to be met with complete failure, but it must be met with resilience through the utilization of the tools already available to us. Unlike past pandemics, modern businesses have a robust technology toolbox readily deployable. Virus or no virus, technology provides more opportunity now than it has ever before for all of us impacted by COVID-19. Technology is the critical and obvious part of the equation. Technology can support all parts of the supply chain from production and distribution to consumers and the economy. Those that tap into its potential will undoubtedly be among those that recover successfully.

“When shippers, retailers and supply chain professionals fail to understand and embrace the importance of digitization in the supply chain, it shines a spotlight on the weak points of the industry,” states Glenn Jones, GVP Products at Blume Global. “This has been abundantly clear over the past several months and forced the accelerated digitization of the industry, which traditionally has been slow to adopt new technologies.”

Jones points to a recent survey in which 67 percent of shipping and freight professionals vowed to invest in new supply chain technologies due to the pandemic. “To remain competitive, organizations need digitally empowered logistics platforms that leverage data to make informed decisions quickly,” he says. “Companies need to expect the unexpected. We can anticipate a significant disruption to the supply chain almost every year, we just do not know what that disruption will be. What is critical is being prepared for that disruption, and a digitized supply chain operation is your best chance for responding quickly to what your customers need, when they need it.”

So, what have we learned? Are the lessons of COVID-19 rooted in the technology we already possess? For some, the answer will be yes while for others, proactivity and prediction will serve as major differentiators in recovery and rebuilding the nation’s economy.

“The impact of COVID-19 on the supply chain, and the world, underscores the importance of collaboration amongst colleagues, partners and with customers,” Jones concludes. “The on-demand needs of current supply chains will lead to an increase in digital supply chain platforms. These platforms will enable companies to scale up or down based on demand. This will be made possible by large networks of carrier partners across all modes of transportation providing intel in real time. A digitally empowered adaptive/flexible responsive logistics platform that leverages a global carrier network will enable companies to quickly move to alternate suppliers in other regions when needed and provide better data across multiple resources, ensuring companies can make informed decisions at every mode and along every mile—no matter the crisis.”

Each step of the recovery process will be a testament to our humanity and exactly how willing we are to support each other and the economy in times of crisis. COVID-19 continues to test our limits, our grit, and our tenacity on an international scale.

It is a testament to how much we appreciate those who protect us and continue to work on the frontlines for those who are sick, while others continue working to keep the supply chain moving. All of these workers are essential—farmers, supply chain managers, truckers, grocery workers, first responders, IT professionals, business owners, and beyond. We are all connected in some form or capacity and have been throughout this crisis. How we come out of this crisis will be the real determination of the economic future.

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David McCullough, a Partner at Eversheds Sutherland, counsels producers, refiners, commodity traders and distributors on the production, trade and movement of energy commodities, particularly crude oil, petroleum products and renewable fuels.

Glenn Jones, GVP Products at Blume Global, has a proven track record of growing businesses by building and leading product management/marketing and R&D organizations to define, develop, position, and sell highly innovative and high-value enterprise solutions delivered in the cloud. He was formerly the COO of Sweetbridge and the CTO of Steelwedge Software. He also held leadership positions at several other companies, including Elementum and E2Open.

Ron Leibman is head of McCarter & English’s Transportation, Logistics & Supply Chain Management practice. A respected leader in supply chain law with more than 40 years of experience, he brings valuable industry insights with prior experience as a senior logistics executive at Wakefern Food Corp. (ShopRite Supermarkets) and home-furnishing retailer Fortunoff’s. He is a member of Syracuse University’s Supply Chain Advisory Board at the Whitman School of Management.

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Edmund A. Walsh School of Foreign Service at Georgetown University and a nonresident senior fellow in the Atlantic Council.

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Archives, Global Logistics, Global Trade Daily, Ocean Ports

SURVEY: RISK MANAGEMENT CONCERNS RISE AT PORTS AROUND THE WORLD

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The deadly spread of COVID-19, and the economic and trade disruption the pandemic has caused, is prompting port managers to examine new ways to improve risk management and digital processes.

Those are the conclusions in the latest biennial global ports survey conducted by Remy InfoSource, which was established in 2001 in the Netherlands to provide artificial intelligence diagnostic solutions to the high-tech and transportation industries. The lifecycle contract management specialist is now based on Australia.

The “2020 iSpec Ports Industry Survey” was undertaken during the height of worldwide economic lockdowns in the second quarter of 2020 and on behalf of iSpec, the world’s leading web and mobile-based software procurement solution for buyers of capital intensive outsourced projects such as ports.

The survey revealed that 51 percent of port executive respondents now identify risk management as the key area they would like to improve on in the future, up from 32 percent in the previous iteration of the iSpec Ports Industry Survey in 2018. That year, the top two areas for improvements noted by ports and terminal executives were shorter lead times and more standardization.

“I think it’s no surprise that in such an uncertain world the importance of risk management has increased dramatically,” says Pieter Boshoff, CEO of Remy InfoSource. “Disruption to supply chains has increased across the globe causing operational and investment uncertainty and, with social distancing rules, also changing the way we all conduct our business.

“Managing that risk has become a major challenge at ports, particularly when it comes to managing outsourced equipment tender and procurement projects that are often complex in nature and frequently involve multiple vendors.”

Port operators represented 71 percent of the respondents to the 2020 iSpec Ports Industry Survey, up from 58 percent in 2018. More than two thirds of respondents are responsible for the procurement of quay cranes, reach stackers and trailers.

Asked how the COVID-19 lockdown had affected the way ports were conducting business, 41 percent of global respondents said the pandemic had required a shift to more digital collaboration, 49 percent said more projects were now on hold, and 62 percent said they were now working from home more often.

The 2020 iSpec Ports Industry Survey also found that “quality” has become the leading reason for customer/supplier disputes. In the 2018 survey, “delays” was cited most often as the cause of customer/supplier disputes.

“No matter what the business, the spread of coronavirus has forced executives to find new ways of conducting business and for the most part this means turning to digital solutions,” Boshoff explained. “There is no doubt in my mind that this is a trend that will accelerate in the future. It is becoming abundantly clear that for many businesses there are benefits and efficiencies in the new online and outsourced methods they have developed during the pandemic. I think many of the work processes adopted during lockdowns, particularly around communication, will outlast the coronavirus crisis and become part of our normal way of working.”

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Archives, Commentary, Global Trade Daily, News

Job Market Trends and Their Effects on Companies

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The ongoing COVID-19 pandemic has touched just about every part of the economy, and the jobs market as a whole has gone into alarming freefall, despite the government’s job retention measures.

Where are the jobs going?

The sectors which have struggled most are, by and large, the ones you might expect. Aviation, hospitality, and retail have had to contend with unprecedented slumps in demand, and many businesses have responded by slashing their payrolls.

Even household names like HSBC have announced thousands of redundancies, albeit spread across the globe.

What is the economic outlook like?

According to the Guardian’s redundancy counter, more than 150,000 people have been made redundant, and more than nine million remain furloughed as of the 28th of July. Moreover, the number of employees on company payrolls tumbled during the lockdown period by around 649,000.

Though economic forecasts are not widely lauded for their reliability, the ones that are being focussed on by the mainstream media remain consistently bleak. According to the Office for Budget Responsibility, the body set up to advise the treasury, unemployment levels could skyrocket by the end of the year to levels not seen since the 1980s.

With that said, certain areas of the economy are now enjoying a surge in pent-up demand. Car dealerships are making sales faster than they can restock their forecourts; estate agents find themselves inundated with inquiries. Whether this can be sustained to the end of the year remains

The best-case scenario is a ‘v’-shaped recession – a sharp decline followed by an equally sharp uptick. This is a wildly different recession to the one experienced in 2008. The financial fundamentals which underpin the modern economy remain sound, and thus there’s some reason for cautious optimism – as articulated by the Bank of England’s Andy Haldane in June.

What can be done?

What does all this mean for businesses looking to navigate the post-COVID landscape?

Among the more popular shifts has been toward e-commerce. Retailers have tried to cope with sparse footfall by making the transition to trading online. E-commerce has, in fact, been in rude health through the pandemic, and it’s likely that this shift will outlast the pandemic itself.

Businesses may also wish to anticipate a fall in demand by being more cautious with their investments. Risk assessments and strategizing are set to be more crucial than ever, as is seeking out alternative forms of commercial finance from specialized online lenders.

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Archives, Banking, Global Trade Daily

Survey Finds Dramatic Increase in Overdue Payments in North America

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Will North American businesses remain resilient in the face of COVID-19 challenges? That answer is increasingly difficult to answer in the affirmative, as virus containment measures continue to negatively impact trade, consumer spending, industrial production, unemployment, corporate debt and supply chains.

According to the annual Payment Practices Barometer survey of businesses in the U.S., Mexico and Canada by trade credit insurer Atradius, companies are facing widespread cash and liquidity pressures. Survey data was collected this spring, and conditions have likely deteriorated further. News recently broke, for instance, that the coronavirus caused the U.S. economy to contract 32.9% in Q2, the worst contraction in modern history.

Needless to say, the bleak economic outlook puts businesses in an extremely tight spot, and it is likely insolvencies will rise dramatically, further exacerbating liquidity challenges among organizations in the supply chain. Some troubling signs of deteriorating payment practices and B2B customer credit risk captured in the survey include:

-Overdue payments have increased dramatically. Across the region, 43% of the total value of issued invoices remain unpaid by the due date, a sharp increase from the 25% reported last year.

-The value of invoices overdue by 90 days or more has doubled to 13%.

-Businesses write off 4% of the total value of outstanding invoices, up from 3% in 2019.

The increase in payment defaults is particularly alarming in the U.S., which saw a 72% year-over-year uptick compared to 2019, and in Canada, which saw an 86% increase. In Mexico, the amount of trade receivables firms have written off has doubled since last year.

These trends put a troubling burden on businesses, which end up having to spend more time, resources and funds chasing down overdue invoices. It also means working capital is tied up for longer than before, limiting businesses’ abilities to pay their own suppliers and make strategic investments. In short, rampant late payments cause a bad domino effect, spreading liquidity issues all throughout the supply chain.

UMSCA Firms Are Tightening Credit Controls

Faced with heightened B2B customer credit risk, many businesses across North America are tightening their credit control procedures, the Payment Practices Barometer found.

Firms typically rely on a mix of outsourced risk management, such as credit insurance, and internal tactics such as reducing risk concentrations and increasing debt collection resources. Notably, more than half of the region’s survey respondents plan on upping the efficiency of their debt collection processes through tactics such as payment reminders or outsourcing collections to an agency.

The Payment Practices Barometer also found that while credit-based B2B sales are on the rise across the region, the trend is slowing. Self-insurance against the risk of payment defaults also saw an increase – 66% of businesses rely on this tool compared to 22% last year.

The most prevalent methods of credit control vary by country:

-Many Canadian firms are planning on adjusting payment terms to better align with the credit capacity of customers – average payment terms are now 26 days, compared to 27 days in 2019. They also widely employ payment reminders and work to avoid concentrations of credit risk.

-In Mexico, a significant proportion of businesses employ credit insurance. Additional popular credit management tactics include suspending deliveries until outstanding invoices are paid, requesting payment on cash from B2B customers and requesting payment guarantees.

-U.S. firms focus more on credit management than their peers in the region. A large majority of U.S. businesses manage customer credit risk in-house through self-insurance. Requiring payment guarantees prior to sales and offering discounts for early payment are also widely used tactics.

UMSCA Businesses Remain Hopeful?

Despite the bleak economic outlook and all signs pointing to widespread liquidity issues, the majority of businesses surveyed in North America predicted growth in the coming months, their optimism rooted in the belief that banks will continue to provide credit to cushion the effects of poor cash flow.

But again, that was a few months ago, and business conditions are rapidly changing for the worse. Consumer sentiment, for instance, has fallen back almost as low as in the early days of the outbreak – optimism that COVID-19 will go away any time soon is now a distant memory.

The only thing that can be said for sure is that the business environment in North America is rife with uncertainty with no indication of sunnier skies in the near future. More than ever, businesses need to take a strategic approach to credit management that ensures adequate cash flows and a solid liquidity position.

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Gordon Cessford is the president and regional director of North America for Atradius Trade Credit Insurance, Inc

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A Glance at Expanding E-commerce Automotive Aftermarket Amid Rapid Technological Evolution in Vehicle Manufacturing

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Technology has triggered a fundamental change across nearly every major retail domain, except for one; automotive. While digital communication, B2B sales, and retail have witnessed changing trends due to technological transformation, the automotive sector has been relatively slow on the uptake in this regard. It had remained considerably consistent for over a century since the establishment of the first car dealership in 1898 in Cleveland, however, electronic commerce is set to change the way automotive retailing works. With consumer shopping trends continuing their steady shift towards the digital domain, e-commerce automotive aftermarket is all ready to rule the roost.

One of the biggest impacts of technology on the automotive domain has been observed in the automotive aftermarket industry. Automotive aftermarket refers to the after-sale market of the automotive sector. In essence, any automotive parts or components such as vehicle equipment, collision repair, service repair, replacement tires and other accessories sold after the sale of the original vehicle, are considered to be a part of the “aftermarket”. The automotive aftermarket encompasses companies involved in the production, remanufacturing, retail, distribution, and installation of replacement car parts, service repair, equipment, and accessories.

In the modern era, the emergence of e-commerce automotive aftermarket entities, such as eBay Motors and Amazon Marketplace have redefined the automotive sale experience for customers across the globe. From a customer’s perspective, such platforms deliver the ideal solution for customers in search of non-mission-critical and other discretionary parts, where they can browse through similar products, check reviews and avail quick delivery at economical price points. This ease and convenience are among the major factors responsible for elevating digital platforms like Amazon to great heights in the e-commerce automotive aftermarket domain in recent years.

For conventional automotive retailers and OEMs, on the other hand, the rise of these digital solutions has considerably disrupted industry trends. However, this does not necessarily spell trouble for these traditional automotive entities. On the contrary, leveraged correctly, e-commerce for automotive aftermarket can actually present a vast array of lucrative avenues for these retailers to establish a strong long-term presence in the aftermarket auto parts landscape.

How is e-commerce transforming the automotive domain?

Traditional sales models for the automotive industry have been predominantly dealer-based. From gaining information, to test drives, to transactions to servicing, nearly all activities associated with automotive sales and after-sales were carried out at the physical brick-and-mortar automotive dealerships.

However, these days, many customers are turning their focus towards e-commerce automotive aftermarket for their retail experiences, given the convenience, speed, and autonomy provided by these platforms. In fact, a 2019 study conducted among 1,089 vehicle shoppers suggested that nearly 49% of consumers are open to purchasing their new vehicle completely online.

Therefore, it is unsurprising that e-commerce seems to be really coming into its own and eliciting a massive transformation across the automotive sales spectrum, for sale/lease of vehicles or parts alike.

Some automotive industry players have already begun to respond to this change in consumer interest. Porsche North America, Tesla Inc., Lynk & Co., and Rivian Automotive Llc are among the major companies that have initiated the direct sale of vehicles to the public through an online platform.

Similarly, dealers are also acknowledging the merits of e-commerce for automotive sales. For example, the Las Vegas-based Findlay Automotive Group has established an entirely digital car purchase program designed specifically for customers who prefer to shop from the comfort of their own homes rather than make a visit to the dealership. (Source: www.digitalcommerce360.com)

Traditional retail, fully-online, or omnichannel – the basic business-channel conundrum are automotive aftermarket players facing

Despite the massive digital influence of technologies such as e-commerce on automotive buying behavior, there is still a major chunk of the customer population that prefers the human element and tangibility of an in-person experience, when it comes to the actual transaction. In light of these trends, several modern online-only automotive aftermarket retailers are working towards striking up alliances with physical suppliers, service providers, and manufacturers, to deliver an omnichannel experience, otherwise known as bricks & clicks business model.

In essence, a bricks & clicks model involves the operation of a retail company via an online or digital store (clicks) as well as a physical establishment (bricks), thus combining both into a single retail strategy.

A notable example of this includes automotive part dealers delivering targeted content on their websites to ensure buyer engagement while directing them towards in-person retail centers to carry out activities such as purchase completion and test drives. Continental AG, for instance, has introduced a new e-commerce automotive aftermarket portal, which contains bundled information regarding the company’s entire product and service portfolio. The portal consists of a comprehensive digital catalog of various Continental brands and products, allowing customers to easily identify the correct part from the selected range. Furthermore, the platform also facilitates seamless integration between the customer and the right contact person for specific product and service groups. (Source: www.continental.com)

The COVID-19 impact and the road ahead

In the automotive sector, the ongoing coronavirus pandemic has triggered a tremendous, long-term disruption, creating an economic upheaval that is fundamentally different from anything observed during previous crises. Aside from the decline in GPDs, which is typical during economic downturns, the impact of this drop is considered to be two times worse than during the last recession, with a longer impact and extreme uncertainty over the upcoming years.

For example, nationwide lockdowns and physical distancing measures across the globe have marked a sharp decline in both customer foot traffic, as well as VMT (vehicle miles traveled). Also, with social distancing directives keeping populations largely housebound and the subsequently low vehicle density, collision rates have witnessed a massive decline. For instance, in Seattle alone, collisions have decreased by around 50% during the government-induced containment efforts, including travel restrictions. These conditions, alongside a potentially slow economic recovery trajectory, indicate that automotive aftermarket demand may not return to pre-pandemic levels for years.

That said, the rising affinity of customers towards online purchases may generate lucrative opportunities for novel e-commerce automotive aftermarket business models and service solutions. Several key businesses and consumers have already begun their transition towards e-commerce for aftermarket auto parts, a trend that is expected to persist in the foreseeable future.

Should automotive aftermarket players take strong long-term efforts now to enhance their business through e-commerce and adapt to the so-called “new normal”, the industry could likely make a stronger comeback from the crisis in the years ahead.

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Archives, Commentary, Global Trade Daily

Leading a Small Business Through COVID and Other Troubling Times

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With the coronavirus shaking up the economy and upending the day-to-day operations of businesses, it’s perhaps more critical than ever that corporate CEOs and small business owners summon up all their leadership skills.

Employees who usually are just down the hall are now working remotely from home. The supply chain is disrupted. And customers and clients may be changing their spending habits.

But, as important as business savvy and financial expertise can be in riding out all the economic effects of the pandemic, other traits also come into play and may be just as essential, says Marsha Friedman, a successful entrepreneur who still leads a business she launched three decades ago.

“One of those essential traits is courage,” says Friedman, founder and president of News & Experts (www.newsandexperts.com), a national PR firm. “Thirty years ago when I started my company, I probably would never have said it takes courage to lead a small business, but without it, I assure you, you’ll fail.”

Friedman, who is also the ForbesBooks author of Gaining the Publicity Edge: An Entrepreneur’s Guide to Growing Your Brand Through National Media Coverage, understands this first-hand. Her firm, like many businesses, endured tough economic times after the 9/11 attacks. Revenue dropped and bankruptcy loomed as a real possibility.

“I had to figure out how to turn my company around,” she says. “It took courage, endurance, and perseverance, but I knew I could not go back, so I had no choice but to go forward.” 

Courage is just one of what Friedman calls the 5 C’s for building and maintaining a successful business through the good times and bad. “They’re the guiding principles I’ve learned through the ups and downs and all the mistakes,” she says. “They can work during the difficulties we now face as well.”

In addition to courage, Friedman’s other C’s are:

Caring . First, care enough about yourself and your dreams to believe you can achieve success even in these daunting times, Friedman says. “Just as important is caring about your staff and creating a positive work environment for them despite the troubles we face,” she says. “Be supportive of them throughout this situation that is bringing additional stress to everyone’s lives.” Finally, a good business leader cares about customers, Friedman says. Be willing to listen to their concerns, take responsibility for mistakes, and correct them.

Confidence. Most people have faced and overcome challenges in life. The confidence that allowed them to prevail over those challenges needs to be brought into play in business more than ever right now, Friedman says. “Believing you can reach for and achieve your short-term and long-term goals is essential to getting you there,” she says. “Maintaining your confidence is important to get through these unsettling times.”

Competence. It’s critical to stay up on the disruptions in your industry that the coronavirus is causing. “If you’re forced to downsize, this may be the time to reorganize and tap into the skills and abilities of your remaining team that are different from the roles you hired them for,” Friedman says. “That’s why it’s always important to have hired competent people who you can rely on no matter what the situation.”

Commitment . Stay dedicated to your goals no matter how difficult that becomes during these challenging conditions. Friedman says there may be times when this will be not only difficult, but downright painful. That was the case for her during those tough times after the 9/11 attacks. “I had to make drastic cuts, including letting go beloved employees.” she says. “But I never wanted to suffer a failure, and so I stayed committed to the goal and succeeded in pulling the business through those rough times.” 

“As we face the current challenges, you have to stay the course, remain positive and show caring for everyone related to your business,” Friedman says. “Most of all, no matter how dismal it seems right now, you need to have confidence that you are going to get through it.”

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Marsha Friedman, ForbesBooks author of Gaining the Publicity Edge: An Entrepreneur’s Guide to Growing Your Brand Through National Media Coverage, is a successful entrepreneur and public relations expert with nearly 30 years’ experience developing publicity strategies for celebrities, corporations and professionals in the field of business, health and finance.  Using the proprietary system she created as founder and President of News & Experts (www.newsandexperts.com), an award-winning national public relations agency, her firm secures thousands of top-tier media placements annually for its clients.  The former senior vice president for marketing at the American Economic Council, Marsha is a sought-after advisor on PR issues and strategies, who shares her knowledge both as a popular speaker around the country and in her Amazon best-selling book, Celebritize Yourself.

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4 Factors to Consider Before Buying an Essential Business in COVID Times

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The shutdowns and rollbacks of businesses due to the COVID-19 pandemic continue to play havoc with the U.S. economy. But the least-affected businesses during the crisis, for the most part, have been those deemed “essential” by state and local governments, allowing those companies to remain fully operational or close to it.

Meanwhile, with the idea that essential businesses can be recession-proof and even boom during a public crisis, buying one is becoming a more attractive prospect for some people, says Chris Buitron, president of Mosquito Authority® (www.mosquito-authority.com).

“Our current economic challenges as a nation are showing that owning an essential business can be a solid financial strategy for an individual,” Buitron says. “They are practical purchases. They are not often glamorous businesses, but they make sense largely because they offer services that are currently in demand, and as such they can weather economic downturns.

“Some essential businesses, such as ours, are busier than ever as people are trying to maintain social distance by staying home and not taking many vacations. People consider protection from mosquito bites and the diseases they carry as a high priority for their family’s health and outdoor enjoyment. Like other essential businesses, our franchisees provide measures of security and comfort, allowing people to enjoy being in their yards at a time so many are cooped up inside due to the pandemic.

“And at the same time, all kinds of essential businesses provide ownership opportunities while millions of unemployed people are looking for new opportunities or new career tracks. Perhaps they’re looking to be their own boss and to have more control over their financial future.”

Buitron suggests considering the following when weighing whether to buy an essential business:

Focus on successful types of essential businesses. Among the essential businesses  that have the potential to succeed even during difficult economic times are: delivery services, grocery stores, convenience stores, e-commerce, gas stations, cleaning services, liquor stores, auto repair, lawn care, pest control, mailing/shipping services, and contracting. “The pandemic may be with us for a while,” Buitron says. “People will be home more often, and businesses that can service their needs while home will gain customers.”

Consider franchises as ownership opportunities. While some franchises are struggling during the pandemic, others are in a better position, Buitron says. “For franchises in general, much of the industry will be entering a buyer’s market, and those with the means will find some good opportunities,” he says. “People need jobs, and franchises annually employ 9 million people in the U.S. One benefit of buying a franchise is having an organizational and management team already in place to train you and help guide you. Reach out to other franchise owners to get a sense of the company’s commitment and support.”

Know a bargain vs. a bad investment. A relatively low sale price tempts some people into making a poor buying decision on a business. Buitron says it’s important to pore over the business’ financial numbers that it recorded before the pandemic and do all the research possible – especially of the market where the business is located – to determine if it was on a growth track and what the competition is like. “Two questions you need to ask yourself as a potential buyer of an essential business are: What can you bring new to the business to make it more successful, and why was or wasn’t it profitable?” he says.

Be sure you’re up to owning a business. “There are no guarantees with owning an essential business,” Buitron says. “The pandemic has put a spotlight on their importance, but they take lots of work and organizational skills to run. If you are someone who can’t deal well with uncertainty, buying a business any time, let alone during the most uncertain time in our history, isn’t the right choice. Buying a business and committing to it requires thorough research, a passion for the business, a solid financial foundation and a leap of faith.”

“Owning an essential business brings with it the satisfaction of providing necessary services for people,” Buitron says. “In these times especially, that’s a noble pursuit.”

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Chris Buitron is president of Mosquito Authority® (www.mosquito-authority.com), a nationwide leader in mosquito control with franchises serving communities across the U.S. and Canada. Buitron has an extensive background in franchise industries. He was chief marketing officer for Senior Helpers, vice president of marketing for Direct Energy (home services division), and director of marketing for Sunoco Inc., where he supported the company’s 4,700 franchised and company-owned rental facilities across 23 states (over $15B in annual revenues).