230 years of Data Show Rates Will Soon Hit to 0.50 Percent

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230 years of Data Show Rates Will Soon Hit to 0.50 Percent

March 10th, 2020 Bryan Taylor and Michelle Kangas, Global Financial Data Leave a comment

While everyone has been concerned about the sell-off in the stock market in the past two weeks, this decline should be contrasted with the rapid rise in the price of government bonds. For the first time in history, the yield on the 10-year government bond fell below 1%.

As Figure 1 illustrates, the 75-year interest rate pyramid is continuing its path toward new lows. The pyramid began on November 30, 1945, when the 10-year bond yielded 1.55%. The yield gradually rose for the next 36 years, peaking at 15.84% on September 30, 1981. The yield has trended downward for the past 39 years and now has sunk below 1%. The past 75 years have provided a near mirror image in bond yields. So what does it mean?

Before the current downturn, the lowest yield on the 10-year bond was 1.37% which occurred on July 5, 2016. We analyzed the 75-year interest rate pyramid in the blog “Government Bond Yields and Returns in the 2020s” which was published on January 8. We predicted the continued decline in government bond yields in the United States during the coming decade. With negative interest rates on most 10-year bonds in Europe and Japan, there is no reason why yields in the United States shouldn’t continue to decline.

The 10-year bond yielded over 3% in November 2018 and by December 31, 2019, the yield on the 10-year bond had fallen to 1.92%. Today, the yield is half that. This decline has provided an 8% return to fixed-income investors during the past two months as the price of government bonds has risen. A 10-basis point decline in the yield rewards investors with a short-term gain of about 1%.

In the blog “300 Years of the Equity-risk Premium” published on February 5, we predicted that the total return to government bonds over the next 10 years will be around 2% per annum or less. This return can only occur through the continued decline in bond yields and increase in the price of government bonds. As we explained, government bonds have outperformed stocks since 2000; however, our analysis indicates that the return to bonds will be lower than the return to stocks over the coming decade.

The 5-year bond yield fell to almost 0.5% back in 2012. So why can’t the 10-year bond yield decline to 0.5%in 2020? Figure 2 provides 230 years of bond yield data, which shows each decline building a deeper valley indicating that interest rates will soon reach a lower low. We believe it is only a matter of time before the yield on the U.S. 10-year bond hits 0.5%.

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Dr. Bryan Taylor is President and Chief Economist for Global Financial Data. He received his Ph.D. from Claremont Graduate University in Economics writing about the economics of the arts. He has taught both economics and finance at numerous universities in southern California and in Switzerland. He began putting together the Global Financial Database in 1990, collecting and transcribing financial and economic data from historical archives around the world. Dr. Taylor has published numerous articles and blogs based upon the Global Financial Database, the US Stocks and the GFD Indices. Dr. Taylor’s research has uncovered previously unknown aspects of financial history. He has written two books on financial history.

Archives, Global Trade Daily, News

MODEX 2020 Day One: Millennials and Their Impact on Distribution

March 10th, 2020 GT Staff Leave a comment

Day one of this year’s MODEX event kicked-off with its anticipated array of technology solutions in action and hundreds of global companies sharing the latest and greatest impacting the supply chain. From warehousing and robotics to transportation and packaging, just about every moving part of the supply chain represented a part of the show.

Keynote speakers such as Michael Roe, Senior Account Executive at DMW&H, took on challenges specific to the distribution and ecommerce sector: millennials.

The generational differences brought to the ecommerce market have shaken the way distributors approach customer adaptation. Furthermore, distributors are now challenged to balance multiple consumer demands while remaining relevant. Roe explains:

“Millennials changed retail because of the way they shop. Millennials value culture, experience, and they value the value of the experience. Although it may seem new, it may not be so new.”

“Distribution practices have changed because we have to adapt to the customer base. If you understand what your customer wants, you have to change your distribution and understand how it’s going to work.”

He goes onto explain that during the early days of ecommerce, companies like Amazon (known to-date as the fastest company to reach $100 billion in sales) changed that model and took the stores out of the equation. This effort was a strategy used by ecommerce companies to reinvent the consumer’s shopping and comparison experience by adding ease and convenience. Amazon created a presence everywhere through its distribution centers – they were simply found everywhere. To this day, Amazon continues to expand its footprint with the help of automation.

For the modern consumer, the days of mall visits are a thing of the past for some, while for others in the same consumer pool prefer the option of both ecommerce and the traditional store model. Baby boomers typically still prefer the in-store experience with 84 percent confirming this preference. They want their product when they leave and aren’t keen on the idea of waiting for something already paid for.

Meanwhile, Gen X prefers the option of comparison-shopping while reaping the benefits of maximized value. Millennials demand a hybrid model offering a complex blend of what Boomers and Gen X’ers seek. And they want it for a competitive price. Navigating this shift has left some scratching their head as they identify the most adaptable approach.

At the end of the day, it boils down to understanding the customer and identifying the best approach to navigating the balance of consumer demands. The millenials concept isn’t all that new at all. in fact, generational changes have always been present, it’s all a matter of anticipating these changes and preparing the solution accordingly. Roe concluded that “Every generation has changed their shopping preferences. With each generation comes faster response times to customer preferences.”

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The Impact of the Coronavirus on U.S. Trade Proceedings

March 9th, 2020 Mark Ludwikowski Leave a comment

The coronavirus (COVID-19) has had an undisputed impact on health and travel around the globe during the past two months. It has also stifled trade with China, where it originated. The pressure from tariffs and the ongoing trade war is beginning to shift to pressure from supply chain disruptions caused by the coronavirus. Importers and manufacturers that source from China have been particularly affected, as have maritime, construction, and global supply chain entities. But as trade with China has taken a hit, how have U.S. agencies handled the administration and enforcement of ongoing proceedings involving China?

Of all U.S. federal agencies with oversight over trade with China, the Department of Commerce (“DOC”) is perhaps the most directly involved. The DOC administers antidumping (“AD”) and countervailing (“CVD”) cases, as well as Section 232 tariffs that target Chinese imports. The Office of the United States Trade Secretary (“USTR”) administers the Section 301 tariffs specifically targeting China.

The virus has had a lesser impact on the administration of Section 232 and Section 301 tariffs because this is handled almost entirely in Washington. However, in AD/CVD cases DOC officials must regularly travel to China to conduct onsite verifications of Chinese producers examined in these proceedings. The DOC is currently overseeing nearly 200 ongoing AD/CVD cases against China. Of these, new investigations require verifications, and in the remaining annual reviews the DOC must verify Chinese producers at least once every three years. Each verification takes at minimum a week and involves two or three officials. That adds up to significant travel to China during an average year.

So how has the DOC been mitigating the impact of the virus on its ability to administer trade remedy proceedings? For one, many AD/CVD verifications have been put on hold indefinitely due to health concerns and because major airlines have suspended flights to China. This can be good or bad depending on which side of the case one is (i.e., U.S. companies that brought the cases vs. the importers that have to pay the duties). If the case is likely to result in high margins, importers and their Chinese suppliers would likely want verification so that they can personally prove to DOC officials that they are not dumping and do not receive illegal subsidies. On the other hand, if the AD/CVD margins are projected to be low, then U.S. producers may want the Chinese producers verified, and conversely the latter would prefer not to be audited.

The DOC has also been generous about granting extensions for submissions to Chinese respondents in AD/CVD cases. The agency recognizes that responses to its questionnaires require access to information which has been difficult for Chinese employees to access. Many of them are in quarantined areas and unable to get to work, let alone respond to DOC’s requests. Chinese legal counsel and accountants that regularly support respondents in DOC’s proceedings also are less able to reach their clients.

The DOC may even consider a less conventional approach – tolling of AD/CVD cases. Tolling would allow for ongoing proceedings to be paused or delayed. There is little precedent for such action in response to a foreign emergency or crisis. The DOC last tolled deadlines in its proceedings during the U.S. government shutdown in January 2019. But that was necessitated by domestic federal government concerns. With the coronavirus, a close comparison could be made to the 2004 Asian tsunami crisis, but that event did not necessitate tolling of DOC’s AD/CVD cases involving shrimp from Thailand and India whose seafood industries were decimated.

The DOC has the discretion to toll its deadlines. However, an action that changes AD/CVD duties would require Congressional approval. Hence pleas for a reduction in such duties would face an uphill effort and encounter resistance from domestic producers (as it did when Thailand asked to have dumping duties on its shrimp reduced after the tsunami).

Although the coronavirus itself appears to have become a non-tariff barrier, the Trump Administration has given no indication of backing off its trade deal reached with China in January. Under the agreement, China promised to increase purchases of U.S. crops and meat products by $20 billion in 2020 in exchange for a reduction or delay on current tariffs. Indeed, in late February, USTR Robert Lighthizer and Agricultural Secretary Sonny Perdue insisted that the Administration will hold China accountable for its commitments, even as the outbreak disrupts global supply lines.

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*Mark Ludwikowski is the leader of the International Trade practice of Clark Hill, PLC and is resident in the firm’s Washington D.C. office. He can be reached at 202-640-6680 and mludwikowski@ClarkHill.com

Archives, Global Trade Daily, International Trade

DRIVING CONGRESS TO ACT ON NATIONAL SECURITY TARIFFS

March 9th, 2020 Ed Gerwin Leave a comment

Volkswagen GTI is turbocharged with room for…tariffs?

The Volkswagen Golf GTI is a perennial winner of Car and Driver’s 10Best award. The German-built sport hatchback combines “speed, handling, build quality, an attractive interior, and room for the family,” all for under $30,000. Car and Driver raves about the GTI’s turbocharged engine and notes it’s a formidable challenger to competing “hot hatches.”

Apparently, the U.S. Department of Commerce believes that the GTI poses another challenge — maybe a turbocharged threat to America’s national security.

In a still-confidential 2019 report, the Department reportedly found that imported autos like the GTI “threaten to impair the national security” and recommended that the president impose tariffs as high as 25 percent.

All revved up

The president would enact these tariffs under Section 232 of the Trade Expansion Act of 1962. As TradeVistas’ Andrea Durkin has detailed, Section 232 is a little-used Cold War-era law under which Congress delegated broad authority to the president to restrict imports for national security reasons. The law is also the basis for current controversial duties on steel and aluminum.

The proposed tariffs have generated opposition from vehicle manufacturers, suppliers, economic analysts and members of Congress. The Alliance of Automotive Manufacturers notes that a 25 percent tariff on autos and parts would raise the price of an average imported car by an estimated $6,000 (and add $2,000 to a U.S.-built car) while potentially leading to the loss of over 600,000 American jobs. The Association of Global Automakers (now merged with the Auto Alliance to form the Alliance for Automotive Innovation) questions how passenger cars and light trucks are relevant to national security, suggesting that “America does not go to war in a Ford Fiesta.” Statements from Administration officials suggest that the “national security” justification for auto tariffs may be a pretext to gain negotiating leverage in other contexts.

Congress may put the brakes on Presidential tariffs

With the possible exception of avid inventor Ben Franklin, America’s founders would be astounded by the GTI. They might be equally astonished, however, by the Trump Administration’s assertion of broad authority to impose tariffs. After fighting a revolution against “taxation without representation,” the founders believed it was vital to entrust the power to impose tariffs and other taxes to the people’s representatives. Specifically, Article I, Section 8 of the Constitution vests Congress with the “power to lay and collect taxes [and] duties.”

Since 1934, after its disastrous experience with the Smoot-Hawley tariffs, Congress has increasingly delegated specific trade and tariff powers to the president, subject to a variety of limitations. Presidents have generally used these powers judiciously and to reduce tariffs to expand trade. For example, when President Kennedy signed the 1962 Trade Expansion Act (which enacted Section 232), he emphasized the importance of opening trade and reducing trade barriers and warned against “stagnating behind tariff walls.”

President Trump has taken a maximalist approach to his delegated powers to impose tariffs, particularly for “national security” reasons. In response, Congressional critics from both parties point out that under the Constitution, Congress should be the ultimate driver of tariffs, not the president.

Other concerns with the Administration’s application of national security tariffs include a lack of transparency in determining tariffs and administering tariff exclusions, its use of an overly broad definition of national security, and the cascading impacts on U.S. producers from higher metal prices. Legal experts are also concerned that the Administration did not follow the law when it imposed new tariffs on derivative steel products (including nails and bumpers) and when it extended its review of auto tariffs when time limits under Section 232 have likely expired.

Time for a trade law tune-up?

Congress could rein in presidential national security tariffs by simply repealing Section 232. However, even critics of current tariffs recognize that there are circumstances where the president might need authority to adjust trade in response to national security threats. Accordingly, Congress has focused instead on bipartisan proposals to place additional limits on the president’s ability to employ Section 232.

The Trade Security Act of 2019, introduced by Senator Rob Portman (R-OH) and Representative Ron Kind (D-WI), would bifurcate the Section 232 process. The Department of Defense (DoD) would first investigate whether there is a national security basis for restricting imports of an article. If DoD finds that an article poses a security threat and the president decides to act, the Commerce Department would then recommend tariffs or other measures to address the threat. The Portman-Kind bill would also enable Congress to disapprove any Section 232 trade restriction imposed by the president through a resolution of disapproval that would itself be subject to a veto by the president. This legislation would not impact current Section 232 tariffs on steel and aluminum.

The Bicameral Congressional Trade Authority Act of 2019, introduced by Senator Pat Toomey (R-PA) and Representative Mike Gallagher (R-WI) would also require DoD to take the lead in investigating whether an article poses a national security threat, while also adopting a tighter definition of national security. Notably, under this legislation, no proposed Section 232 action by the president could take effect unless Congress first passes a resolution of approval. The Toomey-Gallagher bill would also (i) repeal current steel and aluminum duties unless Congress passes an expedited resolution of approval, (ii) direct the independent U.S. International Trade Commission to report to Congress on the economic impacts of Section 232 actions, and (iii) require that the USITC administer the tariff exclusion process for future Section 232 actions.

Getting out of neutral

For the past year, Senate Finance Committee Chairman Chuck Grassley (R-IA) has been attempting to meld the Portman and Toomey bills into a compromise measure that would attract veto-proof majorities in Congress. Despite considerable bipartisan support, Grassley notes that this effort has faced two challenges. First, there’s opposition from Republicans who see the legislation as a rebuke of President Trump. Second — as any student of U.S. trade history could have predicted —interests that benefit from new national security tariffs are now lobbying intensely to retain these tariffs. Despite this opposition, Grassley has vowed to continue efforts to enact Section 232 reform in 2020.

More potholes ahead?

Meanwhile, Volkswagen’s GTI and other imported autos will continue to face the threat of national security tariffs. And that threat won’t necessarily subside if a Democratic president takes office next year. Some Democrats have already proposed using the Trump Administration’s expansive reading of Section 232 to advance their own policy goals — particularly to address the climate crisis. Carbon-emitting autos like the GTI would be a prime target for new tariffs.

The GTI was designed for Germany’s smooth, high-speed autobahns. When it comes to U.S. national security tariffs, however, the GTI’s road ahead may continue to be full of potholes.

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Ed Gerwin is a lawyer, trade consultant, and President of Trade Guru LLC.

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

Archives, Global Trade Daily, News

Germany’s Gypsum Plaster Production Grew for the Fifth Consecutive Year in 2018

March 9th, 2020 IndexBox Leave a comment

IndexBox has just published a new report: ‘Germany – Gypsum Plasters – Market Analysis, Forecast, Size, Trends And Insights’. Here is a summary of the report’s key findings.

The revenue of the plaster market in Germany amounted to $208M in 2018, increasing by 3.8% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price).

The market value increased at an average annual rate of +1.2% over the period from 2007 to 2018; however, the trend pattern remained consistent, with somewhat noticeable fluctuations being recorded over the period under review. The most prominent rate of growth was recorded in 2008 with an increase of 21% y-o-y. Plaster consumption peaked at $239M in 2016; however, from 2017 to 2018, consumption stood at a somewhat lower figure.

Market Forecast to 2030

Driven by increasing demand for plaster in Germany, the market is expected to continue an upward consumption trend over the next decade. Market performance is forecast to decelerate, expanding with an anticipated CAGR of +1.8% for the period from 2018 to 2030, which is projected to bring the market volume to 2.5M tonnes by the end of 2030.

Production in Germany

Plaster production in Germany amounted to 3.3M tonnes in 2018, levelling off at the previous year. The total output volume increased at an average annual rate of +1.5% over the period from 2007 to 2018; the trend pattern remained consistent, with somewhat noticeable fluctuations being observed in certain years. The most prominent rate of growth was recorded in 2008 with an increase of 11% against the previous year. Over the period under review, plaster production attained its maximum volume in 2018 and is likely to see steady growth in the near future.

In value terms, plaster production stood at $326M in 2018 estimated in export prices. In general, plaster production continues to indicate a relatively flat trend pattern.

Exports from Germany

In 2018, the amount of plaster exported from Germany totaled 1.4M tonnes, falling by -4.1% against the previous year. Over the period under review, plaster exports attained their maximum at 1.4M tonnes in 2012; however, from 2013 to 2018, exports remained at a lower figure.

In value terms, plaster exports totaled $100M (IndexBox estimates) in 2018.

Exports by Country

The UK (308K tonnes), Belgium (259K tonnes) and the Netherlands (155K tonnes) were the main destinations of plaster exports from Germany, with a combined 13% share of total exports.

From 2007 to 2018, the most notable rate of growth in terms of exports, amongst the main countries of destination, was attained by the UK, while exports for the other leaders experienced more modest paces of growth.

In value terms, the largest markets for plaster exported from Germany were Switzerland ($16M), Belgium ($14M) and the UK ($13M), with a combined 7.1% share of total exports.

The UK recorded the highest rates of growth with regard to the value of exports, in terms of the main countries of destination over the period under review, while exports for the other leaders experienced more modest paces of growth.

Export Prices by Country

In 2018, the average plaster export price amounted to $74 per tonne, jumping by 6.7% against the previous year. Overall, the plaster export price, however, continues to indicate a mild descent. The pace of growth appeared the most rapid in 2013 an increase of 29% y-o-y. Over the period under review, the average export prices for plaster reached their peak figure at $107 per tonne in 2009; however, from 2010 to 2018, export prices stood at a somewhat lower figure.

Prices varied noticeably by the country of destination; the country with the highest price was Switzerland ($130 per tonne), while the average price for exports to the UK ($43 per tonne) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was recorded for supplies to Belgium, while the prices for the other major destinations experienced mixed trend patterns.

Imports into Germany

In 2018, the amount of plaster imported into Germany totaled 112K tonnes, growing by 14% against the previous year. The total import volume increased at an average annual rate of +1.6% over the period from 2007 to 2018; however, the trend pattern indicated some noticeable fluctuations being recorded in certain years. The most prominent rate of growth was recorded in 2017 when imports increased by 34% y-o-y. Imports peaked in 2018 and are expected to retain its growth in the immediate term.

In value terms, plaster imports amounted to $10M (IndexBox estimates) in 2018.

Imports by Country

Austria (45K tonnes), Belgium (36K tonnes) and France (14K tonnes) were the main suppliers of plaster imports to Germany, with a combined 2.4% share of total imports. The U.S., the Netherlands, the UK and Poland lagged somewhat behind, together accounting for a further 0.3%.

From 2007 to 2018, the most notable rate of growth in terms of imports, amongst the main suppliers, was attained by the U.S., while imports for the other leaders experienced more modest paces of growth.

In value terms, France ($3.8M) constituted the largest supplier of plaster to Germany, comprising 0.7% of total plaster imports. The second position in the ranking was occupied by Austria ($1.6M), with a 0.3% share of total imports. It was followed by Belgium, with a 0.3% share.

From 2007 to 2018, the average annual growth rate of value from France amounted to +4.5%. The remaining supplying countries recorded the following average annual rates of imports growth: Austria (-0.6% per year) and Belgium (+1.6% per year).

Import Prices by Country

The average plaster import price stood at $91 per tonne in 2018, declining by -13.2% against the previous year. In general, the plaster import price continues to indicate a mild shrinkage. The growth pace was the most rapid in 2008 when the average import price increased by 31% year-to-year. In that year, the average import prices for plaster attained their peak level of $136 per tonne. From 2009 to 2018, the growth in terms of the average import prices for plaster remained at a somewhat lower figure.

There were significant differences in the average prices amongst the major supplying countries. In 2018, the country with the highest price was France ($267 per tonne), while the price for Austria ($36 per tonne) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by the Netherlands, while the prices for the other major suppliers experienced more modest paces of growth.

Source: IndexBox AI Platform

Archives, Commentary, Global Trade Daily

9 Spend Duplicates Only AI Can Catch

March 8th, 2020 Josephine McCann Leave a comment

What prevention methods does your company have in place to prevent duplicate spend? Most modern invoice automation systems can look out for two invoices with the same invoice number, or the same amount, and stop a payment that appears to be a duplicate. But this doesn’t find typos in invoice numbers, duplicates across expense and AP systems, or a number of other scenarios you may not even be considered.

AI can help. When it comes to duplicate spend, AI takes an expansive view, looking across all back-office systems, identifying duplicate spend across multiple payments, and more.

By taking advantage of the structured data in your spend systems as well as the unstructured data in your invoices and receipts, you can identify duplicates with ease.

Below are nine types of duplicates that only AI can catch.

1. Manual keying errors

Invoice processes often rely on manual data entry, which is error-prone. An employee might mistype the letter “O” as the number “0”, or “SEPT” as “SEP.” These types of duplicates are preventable and common, but wouldn’t be caught by a traditional invoice system. AI can find manual entry errors in invoice numbers or dates that typically fly under the radar in invoice automation systems and flag them for review.

2. Different supplier divisions

Your company might do business with multiple supplier divisions. These names may be listed separately in your supplier master list, so if you receive the same invoice from these entities, your AP automation system may not detect it. AI can flag duplicate invoices for the same deliverables sent from a supplier’s headquarters and international divisions.

3. Different company divisions

Similar to the example above, your own company’s internal divisions can create confusion. Each division within your company may have its own AP organization and approvals process, and wouldn’t know if an invoice was already received and paid by a separate department. AI can flag duplicate invoices for the same deliverables that are sent to different divisions.

4. Overlapping or cumulative

A supplier may send several invoices and then a quarter-end cumulative invoice, for example, three separate invoices at different amounts (one for $8,500, one for $4,000, and one for $13,200) and then a quarter-end invoice for $25,700. Traditional invoice systems may not catch this, but AI will flag these invoices for review.

5. Line-level

AP automation systems may not extract line details from an invoice. AI will check for duplicates at the line level and discover that, for example, the same services were included in two separate invoices.

6. Different AP systems

Maybe you have several back-office systems because of company mergers. When duplicate invoices hit different systems, your company may never know it. AI integrates with multiple invoice automation systems and flags duplicates regardless of which system they’re in.

7. Duplicate crossover spend

Your company likely doesn’t have visibility across its invoice automation and expense systems, causing you to pay twice for the same service if it’s submitted via T&E reimbursement and again via accounts payable. AI flags this so payments aren’t sent twice.

8. Duplicate expense claim submitted by two different employees

Maybe this is a mistake, or maybe the employees know that expense reports aren’t cross-referenced (especially if they have two different managers, or are in two different departments). Whatever the reason, AI can cross-reference expense reports from any department and flag when the same receipt is found on two different reports.

9. Duplicate expense claim in the same report

After a long business trip, all the receipts may begin to look the same, and an employee might accidentally submit the same expense twice in the same expense report. AI looks at individual line items and flags any duplicates.

How AI can help

Duplicates can take many different forms and can be difficult to find in a manual review process. To gain visibility into their business spend, many companies have embraced AI to achieve 100% visibility into expenses and invoices. Companies that automate their audit process are able to find errors, fraud, and non-compliant spend before payment.

To learn more about how 100% visibility into business spend means to you and gain additional insights on auditing business spend with AI, download our latest research report, The State of Business Spend. The findings focus on the impact of auditing with AI, the risk hiding in expenses and invoices, risky spend, and more.

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Josephine McCann is a Senior Marketing Associate at AppZen, the world’s leading solution for automated expense report audits that leverages artificial intelligence to audit 100% of expense reports, invoices and contacts in seconds.

3pls, Archives, Global Trade Daily

Myths vs. Realities of Global Sourcing

March 7th, 2020 Axia Sourcing Leave a comment

Axia Sourcing released the following six telling myths and realities related to global sourcing, breaking down common misconceptions about language-barriers, outsourcing partnerships, quality control and more. Global businesses can apply this knowledge to successfully navigate the world of sourcing while expanding business operations with confidence, regardless of the industry.

Global Sourcing: Myth Versus Reality from Axia Sourcing

Archives, Global Logistics, Global Trade Daily

10 Tips for Cutting Costs and Improve Customer Service in Supply Chain Logistics

March 6th, 2020 Kurt Walker Leave a comment

As organizations continue to create and source raw materials from overseas, controlling expenses remains the number one priority for players involved in international trade.

One critical factor that executives should monitor closely is logistics management. This sector covers important activities relating to procurement, transport, and storage of goods. In most industries, supply chain logistics account for 5% to 50% of a product’s total cost.

Some of the issues that affect logistics costs include fuel prices, complex international trade laws, and security. High transportation fees are mainly caused by high fuel prices delays in ports. Complex international trade laws increase warehousing costs by lengthening delivery times.

As technology evaluation.com reports, air-freight shipment takes about eight to twelve days. During these days, the cargo is on ф route around 5% of the time. 95% of the time is spent lying in warehouses waiting for compliance checks and documents. So, how can you cut down costs and improve customer service in supply logistics? Keep reading!

1. Use your space efficiently

Using your space efficiently will save you a lot of money in the long run. As you already know, storing your supplies in a warehouse comes at a cost. Figure out whether you are making the most out of your space or not.

You might discover other ways of finding spaces that are best suited for your business. As we’ve seen, supplies, spend most of their time in warehouses waiting for compliance checks. The more efficient you are at warehousing; the more profits you’ll generate at the end of the day.

2. Automate your processes

Organizations that use technology solutions to automate compliance processes have the power to speed up the process four times as much compared to organizations that rely on manual work. Automating tasks such as document preparation will eliminate expensive mistakes and errors.

Automating your processes also leads to fewer delays at crossing points thus resulting in timely deliveries, increased customer satisfaction and avoidance of expensive fines.

3. Inform decision-makers

According to dissertation service, providing decision-makers or your customers with the costs of freight associated with each service level, the reliability of every lane and the total cost of transporting inventory will make it easier for them to make informed decisions and work with you in the future. In most cases, your customers will select the cheapest option that complies with the laws to meet their needs.

4. Figure out the real costs of sourcing overseas

Before sourcing overseas, you need to calculate freight, brokerage, duty, and transportation costs to support these long supply chains. You should factor in other costs such as engineers flying overseas. Once you figure out the total landed cost and its impact on your business, you might discover that domestic buy is quite attractive. For instance, sourcing from Ohio to your plant in the US might be cheaper in the long run compared to sourcing from China.

5. JIT inventory management

There are many benefits to implementing Just-in-Time inventory management. With this system, you can order and receive inventory only when you need to. In the long run, this will reduce your inventory transportation costs, protect against write-downs attributed to dips and eliminate unnecessary overhead costs caused by excess inventory.

6. Sales and operations planning

For a supply chain to function at its highest efficiency, sales, and operations planning is required. Optimal performance greatly depends on creating proper plans. However, it can be complicated and expensive in the long run.

By working with a third-party logistics provider, your team will eliminate waste and redundancies thus enabling you to analyze data, forecast and enhance visibility so that everyone is involved. During the sales and operations planning process, you should address issues such as unrestrained stock-outs, obsolete inventory, inaccurate forecasts and adjusting demand and production schedules.

7. Package your products well

Packaging your products well will result in less or no damages during the shipping process. Ensuring that the people responsible for packaging your products do it properly will minimize quality costs and build your reputation. As the saying goes, it’s the smallest things that matter the most.

8. Assess your performance

You have to measure the performance of your strategies to forge the way forward. Doing business without assessing your performance regularly is a recipe for disaster. By not assessing your performance, you’ll have a hard time determining how much money you are spending and saving. Come up with your key performance indicators and gauge how well your business is doing.

9. Eliminate variability during transit times

The more variable the transit times, the higher the likelihood that the receiving party is using premium freight, ordering more quantity than is necessary to compensate for the uncertainty of creating buffers of inventory. When you understand these dynamics, you’ll realize that paying for higher freight costs will enhance variability and save your company loads of cash in the long run.

10. Choose your mode of transport.

Which mode of transport is the cheapest? Trains? Airplanes? Automobiles? In most cases, rail is cheaper when transporting bulky goods than air or trucking. Also, water is cheaper than air. Regardless of the delivery model, it’s important to get all the quotes from different modes of transport available.

Conclusion

Managing a supply chain logistics company is not the easiest thing to accomplish. You have to make the right move every time out to avoid expensive mistakes and losses. The ten tips discussed above will help you reduce your costs and grow your business. You owe it to yourself to assess your situation and determine what needs to be changed or implemented.

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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 and uk.bestessays.com on various academic and business topics.

Archives, Global Trade Daily, News

The EU Folding Boxboard Market Reached $9.6B

March 6th, 2020 IndexBox Leave a comment

IndexBox has just published a new report: ‘EU – Folding Boxboard – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The revenue of the folding boxboard market in the European Union amounted to $9.6B in 2018, growing by 7.9% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price). Overall, folding boxboard consumption continues to indicate a relatively flat trend pattern. The pace of growth appeared the most rapid in 2011 when the market value increased by 8% year-to-year. In that year, the folding boxboard market attained its peak level of $10.7B. From 2012 to 2018, the growth of the folding boxboard market remained at a lower figure.

Consumption by Country

The countries with the highest volumes of folding boxboard consumption in 2018 were Germany (1.1M tonnes), Poland (1M tonnes) and France (1M tonnes), with a combined 40% share of total consumption.

From 2007 to 2018, the most notable rate of growth in terms of folding boxboard consumption, amongst the main consuming countries, was attained by Poland, while folding boxboard consumption for the other leaders experienced more modest paces of growth.

In value terms, the largest folding boxboard markets in the European Union were Germany ($1.4B), Poland ($1.3B) and France ($1.3B), with a combined 41% share of the total market.

In 2018, the highest levels of folding boxboard per capita consumption was registered in Austria (63 kg per person), followed by Poland (27 kg per person), the Netherlands (21 kg per person) and Italy (17 kg per person), while the world average per capita consumption of folding boxboard was estimated at 15 kg per person.