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Green Pressure Continues to Mount for the Shipping Sector 

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Global Logistics, Global Trade Daily

Green Pressure Continues to Mount for the Shipping Sector 

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The shipping industry offered a collective applause when the International Maritime Organization set its ambitious goal of halving carbon emissions by 2050. Behind the scenes, however, the reception was mixed. While some large operators such as Maersk plan on having a carbon-neutral fleet by 2040, others are beginning to question the viability of such ambition in the face of troubling inflation and elevated operating costs.

 The price tag for new ships, alternative infrastructure, and fuel production needed to lower emissions over the coming decades is roughly $3 trillion (per shipping-services provider Clarksons). Ocean shipping is responsible for approximately 3% of global greenhouse-gas emissions and methanol has emerged as a potential long-term contender to replace fuel oil. A.P. Møller-Maersk A/S ordered 19 ships late last year that can run on a mix of methanol and traditional fuel. Cosco Shipping, China’s state entity, committed to spending $2.9 billion for a dozen methanol-fueled box ships, while France’s CMA CGM SA is set to put into motion six methanol-powered ships.

 While this would appear to be a significant step forward, not every player is on board. The people who work in procurement departments are compensated on their ability to get the best deal possible. Heavier-polluting fuels remain cheaper than their more environmentally friendly alternatives, and this is not going to change anytime soon. According to a survey by the Boston Consulting Group, 82% of firms are willing to pay more for sustainable shipping solutions. Yet, the willingness to pay more falls short of what is needed to reduce emissions in a concrete way.

 One firm that is testing an alternative model is Tapestry, Inc. The owner of the popular Kate Spade and Coach brands has partnered with GoodShipping BV, a Netherlands-based company to test out an emissions-reduction fuel purchase program. Tapestry will continue to book cargo shipments on regular container ships, but in parallel will pay additional fees for biofuels to be implemented in other ships. The company is seeking to reduce its emissions by 42.5% over the coming seven years and these additional fees to non-cargo related ships appear to be a better bet (financially speaking).

 Meanwhile, regulators are expected to pick up the pressure. California has preliminary plans in place to phase out diesel-powered trucks at the golden state’s ports, and a determined proposal of equipping 100% of its docks with battery-electric and hydrogen trucks by 2035. The European Union is moving on the introduction of carbon-emission taxes in 2024 while President Biden has proposed some onerous new standards on heavy-truck emissions.

 A growing fear is too much regulation will invariably squeeze the competition leaving the larger shipping industry in the hands of even fewer firms. This is welcome news for some, but not the greater majority. 

 

electronic shipping route import 7LFreight Expands Instant Cargo Pricing and Booking for North American Forwarders Across Both Air and Trucking  import container descartes automation
Global Logistics, Global Trade Daily, News, Ocean Ports

Global Shipping Update: Modicum of Relief as Import Volumes Fall in Line with 2019 Levels

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With the second quarter of 2023 on the horizon, importers and logistics service providers (LSPs) are wondering what lies ahead. The economic landscape is anything but predictable and there are conflicting opinions on what direction the economy will take. As for interest rates, they continue to decline but remain high. How is this uncertainty affecting supply chains? 

IMPORT VOLUMES ALIGNING WITH PRE-PANDEMIC LEVELS

U.S. container import volumes are declining and shifting back into line with 2019 volumes, to a time before the global pandemic prompted an explosion of ecommerce demand and imports soared to unforeseen heights. Indeed, import volumes saw a significant drop in February, decreasing 16.2% from January 2023 to 1,734,272 TEUs (see Figure 1). Compared to February 2022, TEU volume was down 25.0%—but was only 0.3% lower than pre-pandemic February 2019. 

While box imports continue to follow 2019 volumes, the volume decrease was the greatest of the last seven years, with the exception of February 2020 which marked the start of the pandemic (-17.9%). Notably, after an upward shift in January, Chinese imports into the U.S. returned to a downward trend in February 2023—a trend seen among all of the top countries of origin—with a volume decrease of 17.1% to 632,702 TEUs; China’s downward momentum represents a volume drop of 37.0% from the high in August 2022. 

 

It’s worth noting that February’s volumes may be influenced by multiple factors, including the shorter duration of the month (28 days vs. 31 days in January) and the impact of January’s Chinese Lunar New Year, which would see volumes materialize in late February and early March 2023. 

While overall U.S. container import volume for the Top 10 ports fell by 296,390 TEUs in February 2023 vs. January—all but the Port of Tacoma experienced declines—the volume share at top West Coast ports and top East and Gulf Coast ports remained relatively stable. West Coast ports decreased 2.8% while East and Gulf Coast ports increased 1.6% from January 2023. Compared to smaller ports, market share for the top 10 ports, however, has been steadily declining since mid-2022, with February 2023 representing the lowest share (82.8% of total volume) in the last year.

LESS VOLUME ≠ SHORTER WAIT TIMES

Despite fewer goods on the move, port transit delays increased for the top West, East and Gulf Coast ports, indicating ongoing supply chain turbulence. The West Coast ports are faring the worst, as transit times increased from 0.1 to 1.0 days in February compared to January 2023. With the exception of the Port of Long Beach, port transit delays for West Coast ports in February 2023 are now higher than in December 2022 (see Figure 2). 

Figure 2: Monthly Average Transit Delays (in days) for the Top 10 Ports 

Note: Descartes’ definition of port transit delay is the difference as measured in days between the Estimated Arrival Date, which is initially declared on the bill of lading, and the date when Descartes receives the CBP-processed bill of lading.

LINGERING DISRUPTIONS HINDERING FLOW OF GOODS

Whether it’s the long arm of COVID impacting manufacturing supply chains, or labor shortages and uncertainty complicating transport logistics, importers and LSPs continue to face barriers to supply chain performance. COVID continues to impact available supply chain and logistics resources and operations globally. China, in particular, has seen widespread COVID infections after rolling back its zero-COVID restrictions. While the loosening of the country’s pandemic policies was intended to minimize the longer-term disruptions to society and business, the Chinese population has little-to-no immunity and the impact of COVID on manufacturing supply chains could continue for quite some time. 

On the labor front, members of the International Longshore and Warehouse Union (ILWU) have been working without a contract since July 1, 2022. While ILWU and the Pacific Maritime Association (PMA) recently announced that they “continue to negotiate and remain hopeful of reaching a deal soon,” negotiations for a new collective bargaining agreement—encompassing more than 22,000 dockworkers at 29 West Coast ports—has been dragging on since May 2022. 

Adding further complexity to the uncertain labor situation, California’s new labor legislation AB5 remains a thorn in the side of the trucking industry, with the risk of future AB5-related stoppages at California ports. This continuing labor uncertainty may be a significant reason why import volumes are not shifting back to major California ports, despite their reduction in transit delay times over the last year plus. 

Importers and LSPs would be wise to keep close tabs on the progress of the ILWU contract negotiations and monitor the impact of AB5 on owner-operators serving California ports for potential disruption or any degradation of container processing performance at the ports.

KEEPING AN EYE ON INFLATION INTO Q2

Companies are watching inflation rates closely as 2023 unfolds. Although the Consumer Price Index (CPI) rose 0.4% in February—slightly less than January’s 0.5% increase—inflation fell to 6% year-over-year, inching in the right direction towards the Fed’s 2% target. However, supercore inflation—representing the cost of services—rose by 0.2% last month and is up almost 7% from a year ago. For example, package delivery costs have risen 14.4% in the last year, as of February 2023.

According to the U.S. Energy Information Association, gasoline costs, a significant contributor to high inflation rates, decreased slightly in February to $3.34/gallon and somewhat stabilized. Diesel costs were also down slightly to $4.29/gallon, nearing February 2022 prices. Although stabilized, fuel costs are likely to remain elevated due to the disruption of global energy markets caused by the war in Ukraine and subsequent sanctions against Russia.

MANAGING SUPPLY CHAIN RISK

With the myriad of challenges impacting supply chain performance, importers and LSPs should stay proactive in their approach to designing and executing their logistics and supply chain strategy. In the short term, evaluating and understanding the impact of inflation and the Russia/Ukraine conflict on logistics costs and capacity constraints is critical for clearing a path ahead, while making sure key trading partners are not on sanctions lists mitigates potential penalties and further delays.

In the near term, importers and LSPs should focus on improving supply chain velocity, reliability, and predictability by looking for less congested transportation lanes, including smaller ports, and evaluating alternative transportation lanes into the U.S. To allay the risk of another logistics capacity crisis in the long term, companies may consider evaluating supplier and factory location density to minimize reliance on over-taxed trade lanes and regions of the globe that have the potential for conflict. 

FINAL THOUGHTS

The February U.S. container import data demonstrates some consistency with pre-pandemic import volume seasonality and offers a measure of relief from the logistical challenges that have plagued operations over the past few years. Several factors, however, point to continuing challenges for global supply chain performance. 

Despite declining import volumes, port transit times increased at West, East, and Gulf Coast ports, while unresolved labor-related issues may be keeping importers from moving volume back to the West Coast. Compounding factors, including the COVID-related impact on China’s manufacturing capacity, inflation, and the war in Ukraine continue to put pressure on supply chains and logistics operations. By closely monitoring these factors and taking steps to build long-term supply chain resilience, importers and LSPs can mitigate risk, improve supply chain reliability and velocity, and shore up the bottom line moving forward.

 

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Global Logistics, Global Trade Daily, News, Ocean Ports

Turkey Earthquake Impact on Ports and Shipping

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The earthquake in Turkey and Syria is impacting major Black Sea and Mediterranean ports, potentially having global impacts.

project44’s latest data reports highlight the most impacted regions and ports as well as Turkey’s export dwell time. Port of Iskenderun has halted exports while Port of Mersin’s export dwell time rose to 10.63 days. These changes could potentially agitate the ongoing oil shortage across the globe.

Ships Within 25 Nautical Miles of Turkey, Syria and Cyprus

A 7.8 magnitude earthquake with a 7.5 magnitude aftershock hit Turkey and Syria on Monday, February 6th. Here are the location of cargo and Tanker ships in the Area. project44 will continue to monitor movement. if tankers are not moving, this can escalate the already prominent oil shortage that started due to Russia invasion of Ukraine.

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Turkey Export Dwell

A 7.8 magnitude earthquake with a 7.5 magnitude aftershock hit Turkey and Syria on Monday, February 6th. One of the areas affected is the port of Iskenderun. exports were discontinued as of February 6th. The area is highly volatile when it comes to export dwell times and project44 will continue monitoring to determine whether recent upticks in dwell time in Merin and Aliaga will result in broader supply chain impacts

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electronic shipping route import 7LFreight Expands Instant Cargo Pricing and Booking for North American Forwarders Across Both Air and Trucking  import container descartes automation
Global Logistics, Global Trade Daily, News, Ocean Ports

Global Shipping Update: Does 2023 Herald the Start of the Return to “Normal”?

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As the new year unfolds, importers and logistics service providers (LSPs) are experiencing signs of relief from the logistical challenges of the past couple years, with U.S. container imports falling back in line with 2019 levels and port wait times continuing to decrease. On the flip side, key economic indicators, such as employment and inflation, paint a conflicting picture of their future impact on import volumes. Combined with COVID uncertainty, geopolitical upheaval, and ongoing U.S. West Coast labor issues, macroeconomic indicators point to further disruptions and challenging global supply chain performance in 2023.

IMPORT VOLUMES APPROACHING PRE-PANDEMIC LEVELS

When the global pandemic took hold in 2020, the “Stuff Economy” flourished, with consumer demand for apparel, kitchen appliances, sports equipment, and other retail goods soaring to unforeseen heights. U.S. imports accelerated in kind, precipitating a complex and unprecedented global supply chain crisis. Yet in the latter months of 2022, as record inflation took a bite out of disposable income and consumers put Covid in their rear-view mirror, shifting spending away from the purchase of goods towards services (e.g., travel, restaurants, entertainment), U.S. container imports began to decline.

Recent data shows December 2022 U.S. container imports receding to pre-pandemic 2019 levels. Indeed, December volumes declined 1.3% from November to 1,929,032 TEUs (see Figure 1). Although the holiday season in the second half of the month can adversely impact December import volumes, TEU volume was down 19.3% compared to December 2021—and sat just 1.3% higher than December 2019, before the pandemic forced lockdowns and sent the global supply chain into a tailspin.

Figure 1: U.S. Container Import Volume Year-over-Year Comparison

Source: Descartes Datamyne™

WEST COAST PORTS GAIN MARKET SHARE

While overall import volume decreased, half of the top 10 U.S. ports saw volume increases. The Port of Los Angles returned to its position as the top container import processing port, importing 349,493 TEUs and reporting the greatest increase, while the Ports of Houston and New York/New Jersey experienced the greatest drop in total import volume, declining 37,611 and 28,206 TEUs, respectively (see Figure 2).

Figure 2: November to December Comparison of Import Volumes at Top 10 U.S. Ports

Source: Descartes Datamyne™ 

In December 2022, top West Coast ports reversed their market share decline. Comparing the top five West Coast ports to the top five East and Gulf Coast ports in December vs. November, the total import container volume of West Coast ports grew to 38.1% in December. This gain represents a 1.2% increase from the previous month. In contrast, volume at East and Gulf Coast ports declined in December to 45.5%, down 1.7% from November. 

Despite this market share reversal, the top West Coast ports continued to experience container throughput shifts to other ports, including East and Gulf Coasts, from August through December 2022. However, with the exception of the Port of Houston, the top East and Gulf Ports are now operating below the peak volume levels that drove port congestion in 2021. 

PORT VELOCITY INCREASING

In good news for importers and LSPs, port delays continued to decline in December, especially for East Coast ports which saw a sizeable decrease and reported no double-digit wait times. Major West Coast ports are all now well below 10 days wait times and have somewhat stabilized. Much of this progress can be attributed to the continued reduction in volume that the majority of ports have experienced in the latter months of 2022. 

While wait times have made significant progress, schedule reliability still remains low when compared to pre-pandemic numbers. According to a recent Sea-Intelligence report, schedule reliability is almost 20% lower than in 2019.

CONTINUING IMPACT OF THE PANDEMIC: CHINA FOCUS

More than two years in, the spread of COVID subvariants continues to add uncertainty to the trajectory of the pandemic, impacting supply chains and global trade in unpredictable ways. While China relaxed its “zero-Covid” policy in early December in an effort to spur growth, the country’s exports continue to drop, with December’s 9.9% contraction the worst since February 2020, as China now grapples with the fallout, economic and otherwise, of the highly contagious Omicron variant.

With Lunar New Year—arguably the most important holiday of the year in China—beginning January 22, hundreds of millions of Chinese workers will be traveling in the midst of an Omicron wave. This has the potential to lead to localized lockdowns that could impede workers’ travel home to their manufacturing jobs, shortages of quarantine space in factory cities, and further disruptions in manufacturing and supply chain operations.

Of note, the downward trend of U.S. container imports from China continued in December, falling to 686,514 TEUs—down 0.5% from November and 31.9% from the 2022 high in August. Overall, China represented 35.4% of the total U.S. container imports, a decline of 6.1% from the high of 41.5% in February 2022. By comparison, U.S. imports showed strong growth from Japan and Thailand, increasing by 10.6% and 9.1%, respectively.

KEEP AN EYE ON LABOR AND INFLATION IN 2023

While members of the International Longshore and Warehouse Union (ILWU) have been working without a contract since July 1, 2022, the more pressing concern is California’s AB5 legislation which could lead to more port terminal shutdowns. This continuing labor uncertainty may be a significant reason why import volumes are not shifting back to major California ports, despite their improving situation. 

Importers and LSPs should watch the progress of the ILWU contract negotiations and monitor the impact of AB5 on owner-operators serving California ports for potential disruption or any degradation of port container processing performance.

Heading into 2023 with the threat of a global recession looming, key indicators offer a mixed view of the U.S. economy and, ultimately, demand for imports. Inflation remained high in December and, although both diesel and gas prices softened, they are likely to remain elevated for the foreseeable future due to the disruption of global energy markets driven by the war in the Ukraine and subsequent sanctions against Russia.

While inflation may be the only way to slow down the strong U.S. economy and, ultimately, help to alleviate existing global logistics capacity-related challenges, consumer spending remained relatively steady (up 0.1% in November) and the strong December job numbers—employment increased by 223,000 jobs and unemployment declined to record levels at 3.5%—are still contrary to the expected negative impact of high inflation figures and fuel prices. Of concern, strong employment numbers can put pressure on labor-intensive supply chain and logistics operations, impeding the ability to ensure adequate resources to meet customer demand. 

PARTING THOUGHTS

Overall, December U.S. container import data points to less pressure on supply chains and logistics operations. While pre-pandemic volume levels do offer a degree of relief from the logistical challenges that have plagued operations for the past few years, a number of issues may cause further disruptions this year. Outbreak risks from new Covid variants, geopolitical conflicts including Russia’s war in the Ukraine, ongoing labor negotiations at busy West Coast ports, and the threat of global recession are all on the radar of importers and LSPs. By keeping a close eye on these factors, in conjunction with key economic indicators—inflation rate, monthly BLS Jobs Report, FRED Inventory to Sales Ratio and FRED Personal Consumption Expenditure: Durable Goods—importers and LSPs can mitigate risk and heighten supply chain reliability to bolster their bottom line in the face of 2023’s uncertainties. 

 

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Archives, Global Logistics, Ocean Carriers

LOOKING BACK WITH 2021 VISION: NAVIGATING THE EVOLVING OCEAN LOGISTICS INDUSTRY

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Nearly every business has experienced the effects of today’s global supply chain disruptions over the course of the COVID-19 pandemic, including product delays, shortages and rising costs. Pandemic-related challenges that were expected to be temporary are now predicted to last well into 2022—and potentially beyond.

The ocean freight industry has arguably shared the spotlight the most due to record-breaking prices, port congestion, container shortages and more. The average price worldwide to ship a 40-foot container has more than tripled from the beginning of 2021 and is 10 times pre-pandemic rates. Only a few months ago outside two of the biggest ports in the U.S. near Los Angeles and Long Beach, California (which manage 40% of all cargo containers entering the country), more than 70 vessels waited to dock. Before the pandemic, it was rare to see more than one.

Given today’s complexities, it’s important we examine the key 2021 learnings from the ocean logistics industry to incorporate lessons learned as we prepare to navigate the year ahead.

Lesson 1: Embrace Flexible Shipping Routes

As capacity shrank, container ships experienced record times to dock and labor shortages backlogged the unloading of cargo, 2021 highlighted that flexibility is key to a successful shipping strategy. For 3PLs and freight forwarders, this meant adapting plans in real time to manage limited resources in the most strategic way possible according to each customer’s specific product and goals.

For some large retailers and automotive manufacturers, for instance, we witnessed growing shifts from ocean to air cargo as an alternative. While air freight ensures a faster and more reliant shipment of goods, it is also a much more expensive option. According to Freightos, a $195 ocean shipment can comparatively cost $1,000 via air. Because of these major price discrepancies, we have largely seen the trend of shifting from ocean to air routes among big-box retailers and manufacturers of premium goods that can absorb the higher rates.

However, shifting from ocean to air is not feasible for most brands. Instead, flexibility in 2021 also meant pivoting to different ocean routes. Throughout the pandemic, many countries have closed or limited capacity at key shipping ports for reasons like worker shortages or limiting the spread of the virus. This presented 3PLs and freight forwarders with the opportunity to explore less traditionally traveled sea routes to try to mitigate delays. For example, closures in Australia due to COVID-19 significantly decreased capacity from the United States. As a result, some forwarders successfully rerouted to Singapore and finally to Sydney as a solution.

In 2021, we also increasingly saw shippers embrace a hybrid sea-air model. While transitioning wholly from ocean to air isn’t viable for most, shippers did strategically tap into air to move critical inventory to keep operations running smoothly on an as-needed basis. Ultimately, 2021 taught us that flexible, real-time adjustments to supply chain routes based on the current environment and each customer’s strategic goals is crucial to best navigate backlogs.

Lesson 2: Explore Agile & Visible Solutions

While the ocean freight industry has always experienced unplanned challenges beyond its control, such as severe weather, the impacts of COVID-19 have only exacerbated these preexisting issues. Now, it is more important than ever that shippers explore creative solutions to mitigate the effects of today’s both expected and unexpected challenges.

For example, in 2021, we saw the growing trend of major retailers and 3PLs chartering their own shipping vessels to combat capacity issues. Coca-Cola began chartering vessels typically reserved for raw goods like coal and iron to instead use for finished goods. Retailers such as Walmart explored chartering smaller container ships to dock at smaller ports to help side-step congestion. Also chartering vessels more and more were 3PLs seeking to guarantee capacity for clients in an ultra-tight sea freight market. While in the past this has traditionally been viewed as risky due to cost and capacity, chartering vessels became a creative solution for many this year to supplement carrier agreements.

For other shippers, particularly those unable to charter their own vessels, freight consolidation services became especially vital in 2021. Many brands leveraged Less than Container Load (LCL) services for reasons like the need to ship smaller and less-sensitive products on a more ad-hoc basis to keep up with fluctuating e-commerce demands. Partnerships with 3PLs became even more important thanks to fixed sailing schedules with space across all major routes, steady cargo volume to consolidate orders, and competitive rates and conditions.

This year also reinforced that incorporating sophisticated visibility technology into operations is imperative for maneuvering supply chain challenges. A 24/7 freight management application allows for real-time tracking and tracing and full control over shipments. Incorporating the latest visibility technology provides critical data across every stage of the supply chain—from tracking fluctuating customer demands to updates on freight in transit—to empower real-time, data-driven decisions. Visibility has proven to be particularly important during the pandemic to mitigate unforeseen disruptions by rapidly adjusting resources and strategies.

Lesson 3: Adjust Your Supply Chain with New Resources

The pandemic underscored just how critical it is to partner with supply chain experts amid times of severe disruption. In fact, a recent study predicts strategic relationships between shippers and 3PLs will increase from 28% to 45% over the next five years due to the effects of COVID-19.

There are several reasons behind this shift from transactional to relationship-driven partnerships between 3PLs and customers. First and foremost, a partnership with a skilled 3PL allows shippers to outsource supply chain management so instead, they can focus on their core competencies. Shippers found that working with a 3PL during the pandemic, when business decisions changed daily based on the fast-changing environment, was particularly significant in order to focus on running efficient operations. Deemed an essential service during the pandemic, 3PLs were also able to keep supply chains moving and businesses running.

Additionally, 3PLs are able to offer real-time adjustments to shipping strategies based on the current environment. Utilizing an international network across all modes of transportation, global 3PLs are equipped to provide comprehensive, 360-degree recommendations across the supply chain to source the best possible solution. For many businesses during the pandemic, demand was unpredictable and ever-changing. An advantage of partnering with a 3PL is its ability to quickly and easily scale operations up or down based on demand so customers can run their businesses most efficiently. With a massive network of transportation carriers, including vessels, planes, trucks and rails, 3PLs can tap into their strategic partners to best source capacity even during strained environments.

As we look ahead to 2022, it is important we learn from the ocean logistics challenges of the past year as these issues are not expected to end anytime soon. Because of this, it will be increasingly vital that businesses emphasize flexible and agile shipping strategies and relationship-driven, third-party partnerships to best navigate what is to come.

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Joshua Garee is vice president of U.S. Ocean Product at GEODIS in Americas. Previously the vice president of Operations at PAC International Logistics, Garee has a proven record of growing organizational talent and implementing innovative solutions through key leadership, best practice, strategic planning, continuous improvement, financial planning and cost management.

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3pls, Archives, Global Logistics, Global Shippers 101, Global Trade Daily

Logistics Providers Have a Higher Calling than Freight’s ‘Middleman’

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Since the domestic onset of the COVID-19 pandemic last March, logistics providers and freight brokers have had to deal with two extremes in the market — and in short succession.

In the initial economic fallout in the first few months of the pandemic, freight volumes sank, and so did per-mile rates. There simply weren’t enough loads to go around for all of us who make a living moving freight, and the slowdown happened so fast, we were all left searching for answers.

At least I know here at Circle Logistics, we weren’t immune to that sudden freight vacuum.

But then as the recovery gained steam, freight volumes hit a warp speed, seemingly making up for lost time last spring and due to consumers spending money on hard goods rather than services or entertainment.

Behind that pendulum swing, logistics providers this year have faced a tall task in keeping up with the demands of their shippers. There’s been a dearth of transportation capacity, and 3PLs have often had to book loads at a loss to make sure we take care of our shippers.

Between freight volumes slamming the brakes in spring of 2020 and then mashing the throttle this year, I’m sure we as an industry will glean many lessons from the trials we’ve weathered.

But there’s a fundamental lesson staring us in the face right now: We have to pivot our industry away from transactional deals and work to create real, trusted relationships with each other.

This involves all of us — shippers, brokers, and carriers. We’re at a precipice in the logistics industry, and it’s incumbent upon all of us to heed the requirements of this new world. That starts with ditching the old ways and forging a path in which mutually beneficial relationships rule, and in which we utilize those relationships to help manage the current crisis and any future events that occur.

For freight brokers and 3PLs, first and foremost, this starts with shedding the label of a freight  industry “middleman.” That might have been true of yesteryear’s freight broker. You know the type — the guy at a desk working a big landline phone with four or five different lines connected into it. But it absolutely cannot be true of a modern logistics provider.

We need to be viewed as a valued, trusted source of market information and trucking capacity by our shipper customers. And we must be viewed as a business partner of our carriers — a sales team working to find loads that fit their lanes and rates, a dispatcher trying to get them backhauls, and someone who they’d turn to for a load over taking a chance on a random broker from a loadboard, even if it pays a little better.

By building these relationships on both sides, you can ward off the situation where shippers try to pit 3PLs and brokers against each other in negotiations. Or the situation where you try to squeeze a carrier for a few pennies a mile on a one-and-done load and then find you need their service a few weeks or months later for a different load.

Will every freight transaction be this way? Of course not. Logistics providers still have to turn to loadboards to find carriers, and carriers will still have to utilize some one-time deals to reposition or simply keep the wheels turning.

Also, shippers’ procurement managers will still mostly be working to find transportation services at the best cost for their company. They still have a boss to answer to, too.

But what I hope has become a stark realization during these turbulent times is that we’re all in this business together, for better or worse. Shippers need their freight hauled. Carriers need loads to move to keep their operations afloat and their bills paid. And freight brokers and 3PLs, more than ever, are the conduit to bridge those two parties’ needs.

In an 18-month span which has seen both ends of the spectrum — carriers unable find loads at sustainable rates and shippers unable to find capacity — the new calling for freight brokers has been laid bare: We must work to build the relationships that keep goods moving and keep the supply chain chugging. Anything less is a step in the wrong direction.

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Air Cargo, Archives, Global Logistics, Global Shippers 101, Global Trade Daily, Ocean Carriers

2021 Has Felt Like One Big Peak Season: A Global Shipping Market Update

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For global freight shippers, managing disruption comes with the job. But the challenges of the last year have truly been out of the ordinary. Supply chain disruptions that consist of port and terminal congestion, shipping delays due to high cargo volumes, lack of labor due to Covid-19 and limited space have caused a myriad of challenges for shippers.

For many, it has felt like one big, never-ending peak season, and they’re all asking when will things get better and what can they do in the interim, especially as we head into pre-holiday shipping.

Unfortunately, disruptions and delays likely won’t be ending soon. But there are best practices that all shippers can follow to navigate the pre-holiday rush. Let’s start with an update on the current air and ocean market situation as we head into fall.

Ocean Shipping

Ocean demand continues to exceed global capacity, with no sign of slowing down. This is compounded by port congestion, largely unreliable and inflexible schedules, and pandemic-driven labor challenges at major ports. But these issues aren’t a product of the pandemic alone.

In 2015, there were roughly 17 global ocean carriers. After mergers and consolidations, only 9 remain in 2021. Those 9 have been further consolidated into three alliances that control over 80% of the global containerized market. As a result, there are limited options for getting space on vessels and lower flexibility across vessel schedules due to the number of ships in rotation and the lack of available containers.

Globally, schedule reliability in ocean shipping is at the lowest we’ve ever seen. Right now, the reliability that a vessel carrying goods will arrive on time is roughly 40%. At this time last year, it was over 80%. While ocean carriers are trying to stay on track to destinations by skipping ports or enabling blank sailings, improving the schedule systematically in time, their methods are negatively impacting customers trying to transport products out of high-traffic areas such as Asia in a timely manner.

Air Shipping

Lower levels of passenger air travel over the past year have created congestion at air cargo terminals worldwide.

Pandemic-induced travel restrictions reduced commercial air capacity dramatically. Instead of having weekly passenger flights that move cargo volume to a wider network of airports in smaller quantities, most freight is now consolidated at larger terminals in bigger quantities via freighters or charter flights.

Terminals are then receiving increasingly large waves of freight, pushing demand to an all-time high over this past summer while also having to navigate labor shortages. Today, some of the larger terminals such as Chicago are seeing up to two-week delays in the recovery of cargo.

In addition, changes in export screening standards in the U.S. are also creating backlogs and congestion at terminals that are exacerbated by a lack of warehouse capacities. Carriers have been tasked with picking up more screening activities than usual because some shippers may not be partnering with the right forwarder who can take care of the screening for them.

This increased screening is also at odds with expedited terminal timelines, which currently give carriers as little as 12 hours to move freight that traditionally would have had a 48-hour takeoff window. If problems are encountered during screening or transportation to the terminal that slow the timeline, congestion will follow.

What Now?

No one solution is going to bring an end to the challenges of today’s market. But there are a few proven best practices shippers can use to better navigate the current challenges:

Maintain a flexible approach and be open to different options

To stay on top of this market, global shippers must commit to maintaining a flexible approach toward moving their freight. Remaining open to new and different options, such as less-than-container-load (LCL) ocean shipping, different routings or air charters when needed, as well as on-the-spot troubleshooting, can significantly improve shipping outcomes.

For example, for one C.H. Robinson customer moving PPE (personal protective equipment), Thomas Scientific, air charters were a fast-shipping option that offered a great deal of flexibility for last-minute demand shifts during the pandemic. The team worked with airlines to charter passenger planes with the seats removed for cargo flights, which offered a creative alternative to crowded cargo flights and other shipping options.

Seek support from providers who can use information to your advantage

When needed, shippers should consider partnering with a logistics provider that can give data-driven market insights to drive smarter solutions for their business. Sometimes shippers aren’t aware of all their options and need quick help figuring out how to circumvent disruptions to keep current and future orders on track. We’ve seen these solutions play out with our global experts and technology platform, Navisphere, by providing shippers with the aggregated data and analysis they need to determine which ports or terminals to avoid and the right tactics to overcome unique challenges.

Closely collaborate and communicate with supply chain partners

In a market as challenging as this one, close collaboration and frequent communication with supply chain experts are critical. For example, we’ve seen shippers overcome a variety of new challenges this year because they allowed daily cross-functional meetings with our team and theirs. To develop robust solutions, both teams need to truly understand all aspects of shipping challenges and what a company is trying to achieve.

Final Thoughts

Shipping disruptions likely won’t be ending soon. It has taken the industry about a year to get to this point, so it’s safe to say that it may take just as long for things to revert to normal levels or to adjust to the higher demand. Shippers have had to become increasingly nimble and informed to create success throughout this past year, and they must commit to staying flexible and seeking alternative solutions to continue overcoming obstacles.

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Mike Short was named president of global freight forwarding in May 2015. Short started in the global forwarding industry in 1997 and joined C.H. Robinson through the acquisition of Phoenix International in 2012. Prior to being named President, Mike served as Vice President, Global Forwarding – North America. Prior to joining C.H. Robinson, Short held a number of roles at Phoenix International, including Regional Manager, Sales Manager, and General Manager of the St. Louis office. He graduated from the University of Missouri in 1993 with a Bachelor of Arts in Business.

logistics
Archives, Global Logistics, Global Trade Daily, International Trade

3 Reasons Why it’s Going to Take Longer to Unravel the Current Global Logistics Mess

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If you’re involved in global shipping or even a consumer who recently purchased furniture or other bulky items, you’re well aware of the sorry state of global logistics. The pandemic and its knock-on effects have created global shipping chaos and driven astronomical shipping costs. While we are all enduring the consequences, the big question now is when will global logistics return to normal? Will it happen after peak season this year? I am less optimistic about a quick turnaround. Here are three data points that highlight why I believe the current situation will drag on longer than anticipated.

Inventories are way down and retailers want to hold more of it in the future.

The pandemic created a unique situation. Manufacturing and distribution capacity declined, but consumer demand didn’t. Retailers have seen their inventories cut as consumers continue buying, but they cannot replenish their stocks. According to the US Census Bureau, the inventory to sales ratio is down more than 25% since the beginning of the pandemic (see Figure 1).

The chart also shows a general decline over 2 decades in the inventory to sales ratio, which is a testament to retailers and their logistics partner continually improving their supply chain performance. That trend is about to change as many retailers are deciding to hold more inventory as a hedge against greater supply chain uncertainty. So, what does that mean? Retailers will be buying more than what they need in the short-term to build their stocks to larger acceptable levels. This will continue to put more pressure on supply chains and logistics operations—not reduce it—even after the peak season ends this year.

Figure 1: Retail Inventory to Sales Ratio

Inflation is up, but still viewed as manageable and history says it can go higher before stunting demand.

The Federal Open Market Committee (the Fed) just released its revised forecast for inflation. The forecast did rise by 1% to 3.4% for the year; however, that is more than manageable and unlikely to suppress consumer demand as longer-term inflation is being forecasted at 2%. In addition, if inflation were to go higher, that wouldn’t necessarily mean that US import volumes would decline and take pressure off the current situation. The last time inflation breached 5%, as it did in May, was in August 2008 when it reached 5.8%. As you can see from the US maritime import chart (see Figure 2), import volumes continued to increase.

Figure 2: US Maritime Import Volume

Source: Descartes Datamyne

The economy continues to reopen and the Fed expects robust job creation through the fall. This is a good news/bad news story. As states continue to relax or eliminate COVID-19 related restrictions, parts of the economy such as restaurants, tourism and other service industries will return to more normal capacity, increasing demand for goods many of them import. The Fed is also predicting robust job growth into the fall. The continued opening up of business will drive job growth and consumer spending as those hit hardest by the pandemic have more cash to spend. Again, more pressure on global supply chains.

The protracted situation means that short-term plans that increase costs but get goods to market may make more sense than waiting for the global shipping situation to get better on its own. However, retailers and other importers should evaluate their supply chains now for the alternate sources and paths their goods take to get to market. This evaluation should take into account the impact that highly concentrated and congested trade lanes have on the risk to fulfilling customer demand. For example, the concentration of manufacturing in countries such as China and the use of ports like LA/Long Beach. We can see today the delays that are happening and it won’t take much to see additional delays at some level with disruptions in the future. Now is the time for importers to engineer the risk out of the supply chain.

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

DIGITIZATION HELPS SHIPPERS ADDRESS CHALLENGES, CAPTURE OPPORTUNITIES

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For today’s shippers, these are unprecedented times. Importers and exporters were clearly challenged by a supply chain that met with disruptions unlike any others previously experienced. Now, in the “post-pandemic” period, where things are slowly starting to return to what many are calling the “new normal,” shippers still face challenges but also opportunities. The key to regaining control over supply chain operations and remaining competitive is in knowing how best to mitigate the challenges and capture the opportunities. You can be sure that digitization will play an integral role in addressing both goals.

Shippers Facing New Challenges, Opportunities

It is true that the global supply chain is far more resilient and agile today than it was as recent as a decade ago. The pandemic, however, has disrupted what was steady progress in advancing the supply chain. Most significantly, it prevented the movement of raw materials, components and goods due to national lockdowns and the cessation of various modes of transportation.

The lack of transparency and information only exacerbated the challenges shippers faced in attempting to conduct business and protect their supply lines. Those businesses that did have some degree of visibility into their supply network fared much better than those left in the dark not knowing what materials they would receive and when, how their production lines might fare, and if they could deliver any orders and if so, during what time periods. Even major natural disasters such as earthquakes, hurricanes and tsunamis caused less uncertainty.

These are undoubtedly distinct times for global trade and commerce. While boundaries between B2B and B2C began eroding some time ago, the pandemic has introduced what will be long lasting, if not permanent, changes to how trade is conducted worldwide. The Amazonified business that wants its shipments now and in smaller quantities has added to the challenges and complexities, further straining even the more efficient supply chains. The need to coordinate more efficiently across the supply chain, keep operations agile and flexible, and maintain a workforce capable of adapting to the changing environment are among the primary challenges facing today’s shippers.

According to a Forbes Insights survey, 65 percent of logistics, supply chain and transportation executives acknowledged the need to revamp their existing models and add flexibility to their business operations so that they can ensure delivery across multiple channels, reduce operational costs and meet the heightened and changing demands of today’s consumers. This revamping of the supply chain will not only help shippers address the new challenges they face but also help them position their companies for new opportunities.

It’s not all doom and gloom. As the expression goes, “Necessity is the motherhood of invention.” The calamitous effect of the pandemic on the supply chain also gave shippers pause to consider how they could improve their operations. Specifically, it introduced new opportunities to identify and access the right clientele for their companies, reduce costs through better exception management, and optimize their operations. It also presented an opportunity to plan better for the future, and other potential disruptions and disasters, by leveraging digitization and prescriptive analytics. By understanding these advanced technologies, shippers can position themselves more opportunistically and to better sustain future disruptions and uncertainties, whether caused by a global pandemic, geopolitical uprising or natural disaster.

Digitization Delivering Enhanced Decision Making

Digitization’s most valuable deliverable is in facilitating accurate decision making and, in turn, improving operational efficiencies. While improved efficiency means better coordination across the supply chain, more precise decision-making translates into a more agile and flexible corporate culture. Through this more nimble culture, customers receive a value that previously didn’t exist, which positively impacts the company’s bottom line. These two outcomes go hand in hand with an engaged workforce that understands the criticality of the digital transformation and, in parallel, benefits from it by accessing a better toolbox containing valuable data that helps them perform better.

Moore’s law, which has been empirically proven to be accurate for more than 50 years, states that computing power roughly doubles every two years, while the cost of doing so comes down. Assuming the trend continues over the near future, we should expect that new opportunities afforded to shippers will continue to be amplified since they all depend closely on how well we record, process and make sense of data –which together defines digitalization. These three things are also the key drivers for shippers looking to position themselves for today’s market opportunities.

Where Digitalization Succeeds, Manual Processes Fail

In Gartner’s “Weathering the Supply Chain Storm Survey, 2020,” participants were asked to select which of these terms–highly resilient, moderately resilient or not resilient–best described their supply chain networks. As for how Gartner described each term, it was as follows:

Highly resilient – good visibility to the supply network; recognize the need to increase flexibility/resilience as a necessary investment for the network; are able to conduct scenario planning for trade-offs in the network; can shift sourcing, manufacturing or distribution within the network fairly rapidly

Moderately resilient – good visibility to the supply network, hard to justify making an investment to modify supply chain footprint; focus more on managing disruptions once they occur than investing in resilience

Not resilient – dependent on existing sourcing, manufacturing, and/or distribution footprint, and need to find other ways to compensate for changing conditions; have yet to invest in analytics to support network decision-making

Here’s what Gartner learned: Only 21 percent of those surveyed said their supply networks were “highly resilient,” 62 percent said “moderately resilient,” and 14 percent said, “not resilient.” While just in time (JIT) systems of the past helped improve operational efficiency, they did not address the “what if” scenarios such as those introduced by the pandemic. That’s where resiliency comes in. Resilient shippers are better able to pivot and adapt to supply chain disruptions, whereas those without the prescriptive analytics and transparency that digitization provides cannot. Unlike manual processes and JIT systems, digitization supports better planning, adapting, and reacting to new “what if” scenarios.

There are also other differences in manual processes versus digital processes. Manual processes are human dependent and therefore not scalable. To get a unit of output, one must insert a certain input. Even if manual processes are made more efficient, they are still limited by human capabilities. In contrast, digital processes by default are scalable.

Consider this example: A talented member of a shipper’s company is hand stamping holiday calendars being sent to each client. The number of hourly shipments is limited by the human capacity to stamp, box, and ship each calendar. Conversely, a digital calendar can be sent to a significantly larger group of customers at a fraction of the time. As illustrated, there are finite benefits provided from manual processes that are resource-heavy, prone to human error, and non-scalable.

Making Shippers and the Supply Chain More Resilient

Through digitization, shippers can benefit from advanced platforms that are fully-connected, fully-integrated, and facilitate their ability to better cope with supply chain challenges and capture new business opportunities. The most future-proof of today’s new digital supply chain platforms give shippers the opportunity to quickly access automated rate quotes, fast bookings, and real-time tracking of their shipments. These platforms enable them to quickly view delays or disruptions through an online supply chain map and issue customer notifications promptly

This not only streamlines manual processes like back and forth phone calls and/or emails but also supports a higher level of customer communications and service quality. This real-time access to information increases shippers’ overall resiliency while decreasing their costs of doing business. Advanced reporting capabilities, paperless document sharing, and storage further support shipper’s more cost-effective operations. Ultimately, this resiliency will pave the way for the shipper’s long-term viability.

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Matt Goker is the CEO of Quloi, a Garden City, New York-based technology firm focused on providing quantified logistics solutions that leverage Artificial Intelligence (AI), machine learning and deep logistics expertise to transform and optimize the supply chain.

4Pl
Archives, Global Logistics, Global Trade Daily, Trucking, Warehousing

The Role of the 4PL Lead Logistics Providers in Supply Chain Logistics Management

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As the business sector continues its development and improvement, new challenges arise for businesses that are part of this domain. Logistics management is a complex process that ensures that every product the consumer needs is on the market. However, supply chain logistics management includes all the processes that contribute to the transformation of raw materials into final products. And these processes include manufacturing, transportation, storing, inventory, purchasing, and planning, says a study by EssayWritingLand.

Experts from professional writing services on business management topics underlie the fact that many layers of logistics are involved in the supply chain logistics management.

The Layers of Logistics

There are five layers of logistics involved:

-First Party Logistics (1PL) – this is something characteristic of businesses that have their own logistics department that takes care of the entire supply chain logistics management

-Second-Party Logistics (2PL) – it describes those companies that decide to subcontract a specific part of the supply chain logistics, such as transportation or production; this is usually a short-term collaboration

-Third-Party Logistics (3PL) – this describes third parties that are outsourced by businesses to provide logistics or/and transportation services; these service providers are often the link between the manufacturer and the business

–Fourth-Party Logistics (4PL) – 4PLs are outsourced to offer more than logistics and transportation services; they are involved in the logistics and tasks management, taking care of the entire supply chain.

-Fifth-Party Logistics (5PL) – it is often linked to e-commerce, which is constantly growing. 5PLs make the shift from supply chains to supply networks and take care of their management, being involved in the strategic planning of logistics as well.

So, there are important and definite differences between the layers of logistics. 4PL, often called lead logistics providers, are important parts of businesses that want to grow and thrive. They offer more than 3PLs do, from supply chain consulting and analytics on the transportation spend or carrier performance to business planning and project management. Their expertise is not only on the transportation part of the supply chain but also on the development, growth, and strategy of the business, says a custom paper writing service.

4PL lead logistics providers are important and essential, especially when there is a complex supply chain logistics management involved. There are many entities and small businesses involved in the supply chain, from producers, manufacturers to ocean carriers, warehouse operators, and data analysts. Fourth party logistics take care of all of these, focusing also on freight sourcing strategies or freight bill auditing.

So, which is the role of 4PL lead logistics providers in supply chain logistics management?

Expert leaders of the assignment help service at an essay writing service reviews have highlighted in their last paper how businesses can benefit from the collaboration with 4PLs.

Data Analysis

One of the key elements of the supply chain logistics management is the data behind all the processes. There are a lot of resources, collaborators, and money involved in the supply chain. And knowing how businesses can make their internal and external processes and collaboration more efficient can help them meet the market demands more proactively.

Lead logistics providers do not only take care of all the processes involved in the supply chain but also offer insights on how everything is evolving. They come with data that can later be used in project management and business strategy. At the same time, this data analysis is important for change management and the operations department of the business.

Business Growth

In the supply chain logistics management is important not only the data but the process too. For businesses that are new on the market and still do not have the resources necessary for a geographical spread, lead logistics providers are the best choice. Opening another branch of a business in a new location involves a lot of money and resources. Businesses need to hire employees, rent, or buy a warehouse to store the materials and also the means of transportation for those goods.

Lead logistics providers have an entire chain of warehouses and collaborators that are spread geographically. They are important elements of the international supply chain and outsourcing their services helps businesses and companies grow and thrive.

On top of this, they also use the latest technology to improve their processes and help companies reduce their costs. And because 4PL lead logistics providers keep up the pace with the business and technology development, they are prepared to face challenges and rapidly adapt to changes or disruptions.

Conclusion

The model of fourth-party logistics or lead logistics providers becomes more and more attractive to companies that are looking to grow their services. 4PL lead logistics providers are more than 3PL; they support companies in building their business strategy and managing their projects.

4PLs come with data analysis and the latest technology that can reduce operating costs and can make them have an entire base of warehouses, producers, manufacturers, carriers, and logistics experts, which helps them to adapt to changes and handle challenges.

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This guest post is contributed by Kurt Walker who is a blogger and college paper writer. In the course of his studies, he developed an interest in innovative technology and likes to keep business owners informed about the latest technology to use to transform their operations. He writes for companies such as Edu Birdie, XpertWriters, ResumeWriterReviews, and uk.bestessays.com on various academic and business topics.