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The Automotive Supply Chain: How Nearshoring can Fit into Cost-Saving Strategies

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Archives, Global Logistics, Global Trade Daily, Uncategorized

The Automotive Supply Chain: How Nearshoring can Fit into Cost-Saving Strategies

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The automotive industry struggled to meet demand during the pandemic as global supply chain congestion and parts shortages left lots empty. Dealers and manufacturers are now rebounding to meet pent-up demand and drive sales after a tough 2022. In fact, S&P Global Mobility expects new vehicle sales globally to reach nearly 83.6 million units in 2023, a 5.6% increase from last year. 

Economic challenges could impact this growth, but as automakers are bouncing back, now is a good time to take a holistic look at supply chain strategies to help reduce costs, emissions, and delays. 

Reflecting on the past few years, the auto industry is a great example of why supply chains must regularly be optimized in a holistic way. The supply chain strategies that worked well in 2020 may not be reliable in 2023. As market conditions and geopolitical factors evolve, companies must reassess their transportation and customs processes to be effective. Automakers are doing this now and finding success with certain strategies – like nearshoring.

Hedging against volatility

Nearshoring, reshoring, or friend-shoring is the process of relocating manufacturing operations closer to the final destination of the product. The strategy gained popularity when U.S.-China tariffs were established and made it increasingly difficult and expensive to import from specific regions. 

Now, global shipping and political volatility is prompting many automakers to leverage this strategy to diversify their supply chain and reduce risk. To name a few, Volkswagen announced it’s establishing an EV plant in Canada and Tesla and BMW are establishing or growing plants in Mexico.

The idea of nearshoring is daunting and complex. For companies looking to assess whether it’s right for their operations, they should start by looking into their sourcing analysis report. Digging into this can help them understand sourcing shifts, trade agreements that vary by region, or other location factors that could impact the total landed cost of goods. Using a supply chain technology partner can help with developing this type of report. 

Moving manufacturing operations doesn’t automatically lower shipping costs. Because of the complex global shipping environment and the state of supply chain infrastructure in any country, ground transportation can be equally as expensive as shipping containers across the ocean. Due to the complex ocean shipping environment this Spring, a truckload from Mexico to the U.S. could be more expensive than a container shipped from China. For many automakers, having fewer delays is worth a lot of money. 

Understanding the overall cost of nearshoring requires a holistic look at the entire supply chain so the decision can be made with all variables considered.  

Other things to consider

Of course, nearshoring alone isn’t the only way to save costs and manage risk in the supply chain. An updated customs audit can ensure that duties are only being paid on required products. Working with a trade expert when nearshoring can help assess if agreements such as USMCA have created any additional cost-saving opportunities to consider. Moving to Mexico, for example, allows qualifying products to be transported duty-free under USMCA.

Demurrage and detention costs rose dramatically for global shippers over the Covid-19 pandemic, so it’s important to factor those in when considering nearshoring. Among top automakers, it wasn’t uncommon to exceed logistics budgets by up to 200% due to high fuel costs, shipping rates and dwell times. Managing container prioritization and consolidation offerings for truckload and ocean can both minimize delays and storage costs. So, while it may be more expensive to ship via truck instead of ocean container to the U.S., factoring in demurrage and detention costs may show that shifting some of your freight to utilize truckload can lead to cost savings. Overall, being flexible with modes and a mix of contractual and spot pricing can help amid market uncertainty. 

Agility is still key

The events of the last few years have demonstrated the importance of an agile supply chain. The automakers that want to keep up with growing demand will need to use strategies that allow them to quickly adjust to market conditions. Nearshoring can help reduce costs and delivery risks, but no single manufacturing location or shipping mode can protect against disruption. Working with supply chain partners can help with understanding the varying risks, costs, and opportunities that come with shipping in the post-pandemic global environment.

 

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Archives, Global Logistics, Global Trade Daily, News, Warehousing

CILTSA Leads the Discussions on Warehouse Automation at its Free-to-Attend Conference

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The Chartered Institute of Logistics and Transport: South Africa (CILTSA) is gearing up to host an informative and insightful warehousing conference. Themed ‘Warehouse Automation: The benefits and risks’, this hybrid event takes place on 23 May at The Garden Venue in North Riding, Johannesburg and online.

The program includes talks on:

  • ‘Warehouse automation: the benefits and risks’ by Martin Bailey FCILT, Chairman of Industrial Logistic Systems
  • ‘How to optimize digital transformation in your warehouse’ by Munya Huvsu, CEO – ISB Optimus
  • ‘The current challenges preventing warehousing automation and how to overcome them’ by Gerhard van Zyl – Group Operations Director: AsimoTech
  • Safety and compliance in the modern warehouse, transport and logistics environment by Annah Ngxeketo – Founder and CEO: Mamoja Projects

Warehouse automation aims to automate repetitive and tedious manual tasks in warehousing operations, making manual work less labor-intensive, whilst reducing labor costs. It also increases productivity, accuracy and safety levels.

While the possibilities of warehouse automation are varied and exciting, investing means making difficult choices and taking high risks. “Implementing automation technologies in a logistics network is costly and time-consuming, with hundreds of possibilities, from the most basic to the most innovative. It is a long-term investment: experts are quick to cite the benefits of warehouse automation, but it is also vital to understand and assess the risks”.

CILTSA’s conference is being hosted in collaboration with the Transport Forum. The event sponsors are Acrow, Fumani Holdings, ISB Optimus, Mamoja Trading and Projects, Toyota Material Handling and Tendai Mhlanga Photography. Event supporters include CILTSA interest group Women in Logistics and Transport: South Africa (WiLATSA), the African Women in Supply Chain Association and Sincpoint.

To sign up for this free-to-attend event in person, register at https://www.transportsig.com/component/dtregister/23-may-2023-737/register?Itemid=99999  If you wish to attend online, click on https://us02web.zoom.us/meeting/register/tZMlc–gqz4sEtdBC20H9ItPB_NGnjhIo92o

About CILTSA

The Chartered Institute of Logistics and Transport supports the professionals who plan the systems, bring in the raw materials, manage the movement of people and goods, who ensure safety standards, maintain mobility, and keep the economy working.

We are the leading professional body for everyone who works in supply chain, logistics and transport. We are a global family, representing professionals at all levels across all sectors, with a mission to give individuals and organizations access to the tools, the knowledge and connections vital to success in the logistics and transport industry.

Founded in 1919 with a mission to improve industry practices and nurture talent, our Institute supports over 35,000 members in 35 countries. Through our educational suite, our strong community and our commitment to high standards, we help professionals at all levels to develop their careers and access better jobs.

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3pls, Archives, Global Logistics, Global Trade Daily, Software

Nine Out of 10 Companies Detected Significant Software Supply Chain Security Risks in the Last 12 Months, According to New ReversingLabs Report

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Facing a Growing Threat, More Than 70 Percent Confirm that Current Application Security Solutions Fail to Protect Companies From Software Supply Chain Security Risks

Global research commissioned by ReversingLabs, the market leader in software supply chain security, and conducted by Dimensional Research, revealed evidence that organizations recognize, and have been impacted by, software supply chain security threats. The ReversingLabs Software Supply Chain Risk Survey found that nearly 90 percent of technology professionals detected significant risks in their software supply chain in the last year. More than 70 percent said that current application security solutions aren’t providing necessary protections.

Dimensional Research surveyed more than 300 global executives, technology, and security professionals at all seniority levels directly responsible for software at enterprise companies. The ReversingLabs Software Supply Chain Risk Survey set out to identify the sources of software supply chain security issues across internally developed, open source, third party and commercial software, as well as the frequency of these issues. Through the research, ReversingLabs also sought to investigate the maturity of organizations’ software supply chain security program; the tools currently used; and the perceived value of those tools in addressing the security of the software supply chain.

Key findings of the ReversingLabs Software Supply Chain Risk Survey include:

Software Supply Chain Issues Fuel Ongoing Business Risk

Nearly all respondents (98 percent) recognized that software supply chain issues pose a significant business risk, citing concerns beyond code with vulnerabilities, secrets exposures, tampering and certificate misconfigurations. Interestingly, more than half of technology professionals (55 percent) cited secrets leaked through source code as a serious business risk followed by malicious code (52 percent) and suspicious code (46 percent). Recent public attention on secrets exposure from CircleCI and other breaches has heightened awareness of this emerging issue. Software tampering was cited by 38 percent of professionals in the study as a serious risk. The disclosure of the recent 3CX supply chain attack may drive more attention to that issue.

These sources of risk led to problems for the majority of respondents: almost nine out of 10 companies detected security or other software issues in their software supply chain in the last 12 months. While open source software has long been viewed as the main culprit for software supply chain security issues, the research reveals that internally developed software (47 percent) is nearly tied with open source (49 percent) for the leading source of software issues, followed by commercial software (30 percent).

Enterprises Lack Control of the Software Supply Chain…and They Know It

Despite the prevalence of software supply chain risks, most enterprises are ill-equipped to identify and mitigate those risks, according to the findings of the survey.

Survey participants overwhelmingly (88 percent) recognized that software supply chain security is an enterprise-wide risk, but only six out of 10 felt their software supply chain defenses were up to the task. Acknowledging the issue, 80 percent disclosed that their company is directly focused on improving security for the software supply chain.

The complexity of modern software development is partly to blame. For example, more than half of companies developing software that responded to the survey said they used contractors and third-party development companies as part of their software development process. The reliance on third parties increases cyber risk. In fact, according to the World Economic Forum’s Global Cybersecurity Outlook 2022, indirect cyberattacks—successful breaches coming into companies through third parties—increased to 61 percent from 44 percent in the last several years.

Application Security Solutions Leave Gaps in Software Supply Chain Protection

The lack of proper tools may be exacerbating software supply chain risk. Almost three quarters (74 percent) of professionals surveyed agreed that traditional application security solutions, including software composition analysis (SCA), static application security testing (SAST) and dynamic application security testing (DAST), are ineffective at protecting companies from modern software supply chain threats.

Application security testing and software composition analysis solutions are important components of software supply chain security. However, they only address specific risks such as software vulnerabilities, while leaving gaps. Companies recognize these solutions alone, or even in combination, are not enough, and nearly all agree (96 percent) that a dedicated software supply chain security (SSCS) solution is very important, enabling teams to securely control the release of software via the detection of software supply chain threats, malware, malicious behaviors, tampering and secrets exposures.

Wanted: Dedicated Software Supply Chain Security

Further defined to respondents, SSCS is described as going beyond SCA solutions that only provide open-source licensing compliance and vulnerability detection, and SAST and DAST solutions that analyze source code quality for vulnerabilities.

Software supply chain risks demand evolved application security capabilities that confront the full spectrum of challenges introduced by internally developed, open source- and third party components, commercial software, and binary misconfigurations. ReversingLabs comprehensive Software Supply Chain Security (SSCS) platform surpasses just addressing vulnerabilities and license compliance issues in open source components, providing inspection of internally developed binaries, commercial and third-party code and identifying malware, malicious behaviors, misconfigured certificates, evidence of tampering, version differencing, and secrets detection and prioritization.

 

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Archives, Global Logistics, Global Trade Daily, Ocean Ports, Uncategorized

Descartes Releases April Global Shipping Report: March Volumes at Top West Coast Ports Increase Significantly

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Descartes Systems Group, the global leader in uniting logistics-intensive businesses in commerce, released its April Global Shipping Report for logistics and supply chain professionals. U.S. container import volumes in March 2023 increased significantly from February 2023, largely driven by the Ports of Los Angeles and Long Beach, which was very counter intuitive, but kept the monthly trendline aligned with pre-pandemic 2019 volumes. Despite overall increases, port transit delays stabilized for all ports. Imports from China continued their downward trend and are almost 10% lower than their high in February 2022. The West Coast labor situation has still not been sorted out. The March update of the logistics metrics Descartes is tracking shows some consistency with pre-pandemic import volume seasonality but continues to point to challenging global supply chain performance in 2023.

March 2023 U.S. container import volumes increased 6.9% from February 2023 to 1,853,705 TEUs (see Figure 1). TEU volume was down 27.5% from March 2022, but up 4.2% from pre-pandemic March 2019. Two points to consider with the March numbers: 1) March has 31 days versus 28 for February and 2) With the Chinese Lunar New Year holiday occurring in January 2023, there still could be some impact on container import volumes in early March 2023.

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

Chart, line chart Description automatically generated

Source: Descartes Datamyne™

“Container import volumes at the Ports of Los Angeles and Long Beach have been in decline, but in March they experienced significant increases (see Figure 2). 2023 continues to track 2019 volumes,” said Chris Jones, EVP Industry and Services at Descartes. “There was also good news in that the port transit delay times remained constant despite the significant volume increases.”

Figure 2: February to March Comparison of Import Volumes at Top 10 U.S. Ports

Source: Descartes Datamyne™

The March report is Descartes’ twenty-first installment since beginning its analysis in August 2021. To read past reports, learn more about the key economic and logistics factors driving the global shipping crisis, and review strategies to help address it in the near-, short- and long-term, visit Descartes’ Global Shipping Resource Center.

About Descartes

Descartes is the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses. Customers use our modular, software-as-a-service solutions to route, schedule, track and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes by participating in the world’s largest, collaborative multimodal logistics community. Our headquarters are in Waterloo, Ontario, Canada and we have offices and partners around the world.

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3pls, Archives, Global Logistics, Global Trade Daily

World Bank Releases Logistics Performance Index 2023

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Resilience and reliability are crucial in the performance of logistics

The World Bank today released its 2023 Logistics Performance Index report, a measure of countries’ ability to move goods across borders with speed and reliability.

The seventh edition of Connecting to Compete, the Logistics Performance Index (LPI) report comes after three years of unprecedented supply chain disruptions during the COVID-19 pandemic, when delivery times soared. The LPI, which covers 139 countries, measures the ease of establishing reliable supply chain connections and the structural factors that make it possible, such as the quality of logistics services, trade- and transport-related infrastructure, and border controls.

On average across all potential trade routes, 44 days elapse from the time a container enters the port of the exporting country until it leaves the destination port, with a standard deviation of 10.5 days. That span represents 60 percent of the time it takes to trade goods internationally.

According to LPI 2023, end-to-end supply chain digitalization, especially in emerging economies, is allowing countries to shorten port delays by up to 70% compared to those in developed countries. Moreover, demand for green logistics is rising, with 75 percent of shippers looking for environmentally friendly options when exporting to high income countries.

Such policies include improving clearance processes and investing in infrastructure, adopting digital technologies, and incentivizing environmentally sustainable logistics by shifting to less carbon-intensive freight modes and more energy-efficient warehousing.

Download the report: http://lpi.worldbank.org/report

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Archives, Global Logistics, Global Trade Daily, Technology

Cold Robots Revolutionize Cold Chain Logistics!

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The labor attraction to the cold chain facilities is not growing, however, the market does. The global cold storage market size was valued at USD 138.97 billion in 2022 and is projected to grow at a compound annual growth rate (CAGR) of 17.2% from 2023 to 2030. Therefore, the cold chain turns to automation to meet internal productivity needs and customer expectations and that’s where mobile robots play an essential role.

Efficiency in every way

‘Efficiency’ here has several connotations. There is the efficient use of the available space. Many cold stores are quite small – often ‘cold rooms’ within larger buildings. But demand for cold space, from private companies’ own facilities to ‘public’ stores operated by a 3PL for multiple customers, is increasing. In the food chain in particular, companies from processors to distributors and retailers are looking for larger facilities – the Cold Chain Federation (CCF) has identified 678 units of over 50,000 square feet, and there are many that are much larger still. But cold stores are expensive to build and equip, and although the CCF recently estimated that some 16.7 million square feet of new space is under construction or being fitted out, that may not meet increased demand, especially as so much of the existing stock (34%) is over 25 years old and some of this is converted, not always very effectively, from other uses.
Cold stores must also be efficient in operation, which is key at a time of gas and electricity bills rising remorselessly. Although a well-built, equipped and run cold store uses a lot less energy than is commonly supposed, there is still an imperative to improve storage density and operations to minimize the heat coming in through open doors. And contrary to popular opinion, cold chain warehousing is not usually about minimally manned, long-term, bulk storage. Many cold chains move goods in and out of stores rapidly and involve all the break-bulk, order-picking, stock rotation and other operations familiar to ambient warehousing. That has to be performed just as efficiently and productively but in much more arduous conditions.

This means that labor, too, has to be deployed efficiently. In November, the Cold Chain Federation noted “10 percent to 20 percent shortage rates” among its members. The pool of workers prepared to perform arduous, even hazardous, tasks in cold conditions is decreasing. In addition, there is an increasing realization of the need to limit the length of time that workers spend in the cold before taking a break in warmer areas, and of the long-term impacts of heavy manual tasks in cold conditions.

 Overcoming technical issues

Given all this, the cold store would seem an obvious arena for the introduction of automation. But this is not without its problems. There are technical issues – operation at low, and especially sub-zero, temperatures, can embrittle and otherwise degrade materials including metals, plastics and rubber tires. Electric and electronic components can be affected by ice and condensation. Batteries, in particular, have degraded performance and shorter lives at low temperatures. Fixed mechanization, such as conveyors, takes up refrigerated space that isn’t being used to store the goods. There are safety and operational issues too – it isn’t easy to perform complex control operations or to ensure that people are adequately protected from machinery when workers are wearing heavy and cumbersome protective clothing and both their physical and mental agility may be compromised by the low temperatures alongside the hazards of condensation and ice.

Not all AMRs can work in cold storage. iFollow, however, has a range of robots for cold chain logistics that transport from 300 kg to 1500 kg payload down to -25°C and is specific to the cold store environment. This is due to its approach to safeguarding electronics and batteries. The temperature of key electronic components is regulated by an iFollow-developed servo system which eliminates condensation (and therefore, icing,) at temperatures as low as -25° – a particular issue when moving regularly between cold and temperate spaces. This also means that battery life is not degraded. Depending on the size of AMR, between 12 and 18 hours of autonomous operation are available from a 2-hour charge time. Fewer battery charges or changes obviously improve productivity, but also reduce the space needed for recharging.

 Using AMRs rather than ride-on vehicles eliminates the known hazards of the latter – present in any warehouse operation but exacerbated in cold and slippery conditions. Specialized cold-store standard trucks are also not cheap.

Operator control is also suited to cold store conditions. It is not reasonable to expect workers to input complex instructions while wearing heavy gloves or to require them to take their gloves off for extended periods. The Mycelium WCS software from iFollow, which is compatible with all available WMS/ERP systems, can be used through any computer or tablet with most instructions available through just one or two clicks.

AMRs do not require the segregated space of conveyor-based systems and they can turn in their own footprint, unlike most AGVs which require a defined bend to corner. This maximizes storage space, or to put it another way, minimizes the volume of fresh air being refrigerated. Also unlike AGVs, AMRs do not require semi-permanent predefined pathways, thus allowing more flexible use of warehouse space. They also do not require especially smooth and even floors – an issue with some older or converted cold stores – indeed, the implementation doesn’t usually require any expensive infrastructure at all.

An ability for an AMR to carry two roll cages at once, to a maximum load of 1,500kg offers an advantage, particularly in the cold store environment because it reduces the number of times doors have to be opened and closed. That not only reduces energy loss and minimizes the potential for condensation, but reduces the hazard from the, typically, fast-acting cold store doors.

Collaborative order picking 

The AMRs are designed with safe, collaborative use in mind. Lidar navigation prevents the vehicle from colliding with permanent fixtures, with goods left blocking aisles, or of course with the attendant workforce (who, clad in thermal headgear, may not always be aware of the traffic around them). The typical maximum speed is 1.7m/s – a brisk walking pace – with linear and angular speeds and accelerations closely controlled.

 In typical order-picking use, one operator might work with two AMRs within a defined pick zone, selecting items to roll cages or destinations. The operator can receive pick-list instructions by voice terminal, RF terminal or tablet, and of course, the AMRs are simultaneously receiving their complementary movement instructions. Picking this way can yield 50% better productivity than the conventional manual approach while optimizing the picker’s movements. AMRs can equally be used for the variety of shuttle movements required in the store, moving goods between locations. Through an intuitive fleet management interface, the scenario can be simply generated, and the robotic system works out the movements required.

AMRs, then, can improve the efficient use of cold store space both by increasing productivity and minimizing ‘wasted’ space. The latter, along with reduced door openings, helps with energy efficiency, as does the non-degrading battery performance. The efficiency of scarce and increasingly expensive labor is maximized, and perhaps most importantly, the safety and welfare of both goods and staff are addressed. There is a clear logic in letting AMRs carry the load in cold stores.

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Archives, Global Logistics, Global Trade Daily, Ocean Ports

April Global Shipping Update: Import Volumes Increase Significantly at West Coast Ports

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As the second quarter of 2023 unfolds, U.S. economic uncertainty continues to cast its shadow across the supply chain. While inflation appears to be decelerating, interest rates are still high and the political impasse over raising the federal debt ceiling is cause for concern, with the potential to send shock waves through global financial markets if the government defaults. In the midst of this volatile economic landscape, importers and logistics service providers (LSPs) continue to grapple with lingering supply chain challenges.

IMPORT VOLUMES REMAIN ON 2019 TRACK

Largely driven by activity at the Ports of Los Angeles and Long Beach, U.S. container import volumes increased significantly in March 2023, rising 6.9% from February 2023 to 1,853,705 TEUs (Figure 1) and keeping the monthly trendline aligned with pre-pandemic 2019 volumes. While volume was down compared to March 2022 (27.5% drop in TEU volume), imports were still up 4.2% from pre-pandemic March 2019.

When evaluating container import volumes, it’s worth noting that March 2023 numbers may be influenced by multiple factors, including the longer duration of the month (31 days vs. 28 days in February) and the potential lingering impact of January’s Chinese Lunar New Year holiday on early March import volumes.

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

Source: Descartes Datamyne™

WEST COAST PORTS MAKE GAINS

Compared to February 2023, container import volumes for the Top 10 U.S. ports in March 2023 increased 98,379 TEUs (Figure 2). The West Coast ports made strong gains at the expense of the smaller ports, with the Port of Los Angeles experiencing the greatest overall container volume increase (30%), followed by the Port of Long Beach (25%).

The surge in volume at West Coast ports seems counterintuitive given that import volumes from China continued their downward trend—declining 7.4% from February 2023 and down 41.6% from the August 2022 high—and no country had a spike in commodities or exports to the U.S. from February to March. In addition, importers have likely been shifting freight away from the West Coast ports due to the uncertainty of the ongoing—and still unresolved—contract negotiations with the International Longshore and Warehouse Union (ILWU).

Figure 2: February to March Comparison of Import Volumes at Top 10 U.S. Ports

Source: Descartes Datamyne™

Notably, for the top 10 countries of origin, U.S. box import volume increased 2.5% (30,257 TEUs) in March, with Italy (50%), Thailand (39%) and South Korea (23%) experiencing the greatest percentage increases.

PORT TRANSIT DELAYS STABILIZE

Despite the increase in container import volume, port transit delays stabilized for all ports. Overall port transit delays in March 2023 were consistent with February 2023, with transit times at the major East and Gulf Coast ports remaining slightly lower than at major West Coast ports (Figure 3).

Figure 3: 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.

ONGOING CHALLENGES HINDER TRADE FLOW

Despite the March data showing consistency with pre-pandemic import volume seasonality, lingering supply chain issues continue to hamper the efficient flow of goods. While the situation has improved since the start of the year, COVID continues to impact manufacturing supply chains, especially in China where companies are still dealing with the fallout of the country’s sudden zero-COVID exit this past December.

The ILWU contract negotiations continue to drag on, with the two sides seemingly no closer to bridging the gap on their disagreements. While there has been little impact on container processing to date, tensions are rising and there are calls to bring in the federal government to assist in the negotiations to resolve the issue.

On the regulatory front, California’s AB5 labor law remains a significant hurdle for logistics and transportation providers, with big implications for truckers at U.S. ports. With no resolution in sight, the potential for AB5 protests—akin to the demonstrations at the Port of Oakland last July that lead to a 28% drop in processed cargo containers—remains a concern.

With cuts to oil production and the war in Ukraine propelling energy prices higher, elevated gasoline costs—a significant contributor to high inflation rates—remain a challenge for importers and LSPs. Indeed, the price of gasoline increased slightly to $3.50 per gallon, according to the U.S. Energy Information Administration, although it was down $0.63 per gallon from the same time in 2022. 

And while the decline in the cost of diesel is good news—decreasing slightly to $4.11 per gallon and down $1.04 per gallon from March 2022—the cost of both fuels is likely to remain elevated for the foreseeable future given the disruption of global energy markets.

TIPS TO MITIGATE ONGOING SHIPPING DISRUPTIONS 

While the pressure on supply chains and logistics operations continues to ease, ongoing issues have the capacity to cause further disruptions as the second quarter of 2023 unfolds. To manage supply chain turbulence, importers and LSPs should review their supply chain strategies to identify opportunities to mitigate risk and moderate supply chain variability.  

In the short term, logistics companies should keep a close eye on ILWU contract negotiations, potential AB5-related port disruptions or decline in port container processing performance, and the spread of any new COVID variants, especially in China, that might impact manufacturing supply chains. 

Given the current economic unpredictability, importers and LSPs should focus on retaining existing supply chain resources, especially drivers. While wage increases are important, building trips to reduce stress and improve quality of life for drivers is equally important for increasing driver retention. 

To improve supply chain velocity and reliability, logistics companies should seek out less congested transportation lanes, including alternative entry lanes through northern and southern borders and inland ports. While total transit time is a valid consideration, supply chain predictability is especially valuable during times of economic uncertainty.

Thinking long-term, importers and LSPs should implement strategies to mitigate the risk of another logistics capacity crisis down the road. Companies may consider evaluating supplier and factory location density to minimize reliance on over-taxed trade lanes and geographical regions that have the potential for conflict. 

PARTING THOUGHTS

Overall, the March U.S. container import data points to less pressure on supply chains and logistics operations, with box import volumes tracking to 2019 levels and port transit delays remaining constant despite significant volume increases at West Coast ports. Yet, despite a degree of relief from the logistical challenges that choked operations during the height of the pandemic, several current issues may cause further disruptions and threaten global supply chain performance in 2023.

COVID continues to impact available supply chain and logistics resources and operations globally, increasing supply chain performance variability, while labor-related issues such as the unresolved ILWU contract negotiations and California’s AB5 law threaten West Coast port operations. 

Although the latest Consumer Price Index report (February 2023) shows a gradual decline in inflation, the rate is still high—driving a rolling recession and continued economic uncertainty in the U.S.; diesel prices continue to decline, but gas prices have risen slightly and remain elevated due to the Russia/Ukraine conflict. By monitoring these key economic and logistics factors closely, importers and LSPs can heighten supply chain resilience to mitigate risk and strengthen operational and financial performance moving forward.

 

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Archives, Global Logistics, Global Trade Daily, News, Technology

Traxens New IoT Device Leads Smart Container Requirements For Decarbonising Shipping

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Traxens, the world’s first smart-container service provider for the global supply chain industry, unveiled today the new third edition of the Traxens-Box 3, its permanent container tracker and flagship product for shipping lines, freight forwarders and BCOs.

With the shift to green methanol-powered vessels and the increasing safety requirements of the International Maritime Organization, the Traxens-Box 3 IoT device has been completely redesigned to meet the highest level of ATEX certification on the market for explosion safety onboard ships.

Various shipping products are now being subjected to new explosion safety requirements as the shipping industry moves towards clean energy such as methanol-based fuel.

Added to the ATEX redesign, the battery life now reaches 7 years – an increase of 50% compared to the previous model. As a permanent container installation, this feature is critical to maximizing the device’s return on investment during a major part of the life of a container.

While focusing on risk management and cargo safety, Traxens continues to reinforce its main features for greater reliability. Traxens’ door opening detection, whose algorithms are constantly being improved, has already demonstrated its value in numerous cases, such as when consumer electronic goods have been stolen and when authorities have intervened timely after being alerted.

Several thousands of Traxens-Box 3 devices have already been pre-ordered by Traxens’ main customers who will start to deploy them in the following months.

The world’s top shipping lines, which are also Traxens’ shareholders, are already using the two previous versions of the device to convert their assets into smart containers, constantly communicating their location and additional status information.

About Traxens

Traxens has been driving digital transformation in the global supply chain for more than 10 years. The company’s breakthrough loT technology, data science expertise, global logistics experience and standards leadership unlock the value of real-time data generated from cargo assets shipped by sea, rail and truck. Traxens is trusted by hundreds of global cargo owners, enabling them to reduce door-to-door transport costs, optimize their operations and minimize risk. By partnering with the world’s leading shipping lines, authorities and insurance companies, Traxens helps all members of the global logistics supply chain ecosystem to reach a sustainable and optimized supply chain. Traxens is privately held and headquartered in Marseille, France.

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Archives, Global Logistics, Global Trade Daily, Ocean Ports

Container xChange Asia Forecaster April 2023

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Asia’s maritime and supply chain industry is on a tumultuous ride, experiencing significant disruptions in trade patterns resulting in container prices dipping, according to the April Asia container market forecaster published by Container xChange, an online container logistics company that provides a marketplace, an operating infrastructure, and a layer of services like payments to container logistics companies globally.

Container oversupply risk looms over China with empty containers at ports

The year-on-year comparison of the Container Availability Index (CAx) in Shanghai presents some interesting insights into the problem of excess containers at the ports in China. Traditionally, the CAx values in Shanghai during Q1 have been lower than the 0.5 balance due to a higher number of outbound containers compared to inbound containers.

However, this year, the trend is just the opposite with CAx value over the 0.6 threshold. The current trend is attributed to the drop in exports during Q1, owing to reduced demand post the peak season quarter (October- December) and the Chinese New Year shutdowns. 

Consequently, the number of containers at ports is usually lower during the Q1 of last two years. However, the situation this year is different. With a demand deficit and a higher number of containers lying idle at the ports, there is a significant rise in inbound containers in China as observed in the Q1 of 2023. This shift in the trend is reflected in the CAx graph below.

Since the beginning of week 37 (September) in 2022, the Container Availability Index (CAx) has consistently remained higher than the previous two years. This indicates an increase in inbound containers at the port of Shanghai since September and a continued upward trend. The trend is also observed in Yantian and Tianjin ports in China.

Our research and interviews with Chinese customers reveal that the post-Lunar New Year recovery in the industry has only recently started and is below the normal expectations for this time of year. According to Descartes, US imports have declined by 16.2% from January, 25% year on year, and 0.3% compared to pre-COVID February 2019.

The Container Availability Index measures the ratio of inbound to outbound containers port-wise and a reading above 0.5 suggest more inbound than outbound containers at the ports. It suggests that ports in China currently have a higher CAx value than in 2019, 2020, 2021, and 2022, indicating a significant container surplus in China. A higher CAx index rating means that there are more inbound containers than outbound containers. Thus, if China’s outbound containers are low, it suggests that main import countries have not been importing goods from China as usual. This trend is apparent in the industry as well.

62% slump in average container prices* Y-O-Y in China in March

According to the analysis by Container xChange, we compare the container prices between March of this year and the same period last year, there has been an average fall of 62% in prices across China. The table below provides a detailed breakdown of the decline in prices at different ports in China. It is noteworthy that this quarter (January to March) has been relatively more stable compared to the overall price fluctuations throughout the year.

Average container price development – North-East Asia
Port Delta to last month Delta to 3m ago Delta to 6m ago Delta to 12m ago
Shanghai 6,00% -14,00% -36,10% -62,30%
Qingdao 3,10% -1,00% -24,70% -58,60%
Ningbo 9,50% 1,70% -26,20% -56,60%
Tianjin -0,50% -7,30% -28,00% -54,70%
Xiamen 6,40% -1,50% -26,40% -54,30%
Shenzhen -9,70% -1,80% -32,50% -60,20%
Guangzhou 11,20% -1,90% -19,00% -56,00%
Dalian -9,60% -25,50% -37,10% -61,10%

*Average prices for containers are the prices at which containers are available to buy at these port locations. 

It is evident that there has been a decline in average container prices in China since the past one year. However, the graph below indicates that the prices have remained relatively stable during the first quarter of 2023. This observation suggests that if there is no further decrease in prices, it is possible that the container prices have already hit the bottom and are not expected to fall any further.

Inta-Asia Trade could give a push to China’s trade figures

On one hand, concerns are being raised due to the shifts in supply-chain and weakened global demand, as companies are diversifying their trade and increasingly sourcing goods from Southeast Asia. On the other, China’s export numbers for March have exceeded expectations, with a significant increase of 14.8% in US dollar terms from the previous year, as reported by China government data.

The unexpected rise in exports can be attributed to improved demand from many Asian countries and Europe, as well as the resumption of production in China’s factories. This is a positive glide considering the container pileup on China ports in the beginning of 2023. 

The uptick in shipments to South-East Asian nations is evidenced by sliding pickup charges on the Intra-Asia trade lane. Average pickup charges dropped by 85% since January 2023.

“The shipping industry is on the verge of completing its lap in terms of container prices bottoming out, excessive inventory, empty containers and everything in between. Once it’s through with its rep, the demand will crop back up. The alluring box rates present for traders offer a ray of hope for the growth of container demand. As the spot rates on significant container trade lanes settle down to levels like those before the pandemic, the trend of decontainerization that prevailed from 2020 to 2022 is now reversing. The container freight rates reached record heights during the peak of the coronavirus pandemic, which resulted in cargo overflowing from containers into minor bulk vessels.”, said Christian Roeloffs, cofounder and CEO, of Container xChange.

However, we cannot compare it to the demand that existed until 2021, as there is still a surplus of inventory that has not been exhausted yet. China has already initiated the process of diversification, although it is still too early to see any visible trade patterns. However, we have noticed a rise in intra-Asia trade. As a result, capacity needs to be adjusted to regions with more stable rate levels and demand to ensure more resilient supply chains in the future. This relocation strategy will decrease reliance on one production and supply chain hub and move towards a smaller and more diverse trading pattern.

The Asia-Europe container shipping lane, which is critical, has experienced a rapid decrease in demand since the summer of 2022, resulting in a sharp decline in container shipping spot freight rates. Carriers have responded by cutting services or cascading capacity to regional trades. However, this has left many empty containers stranded across Europe instead of being returned to Asia and other origin markets for loading with more exports. This accumulation of boxes will gradually decrease when export demand rises again, with the majority being returned to Asia.

China’s port investments give it an edge in global trade

“China’s expertise in developing world-class port infrastructure that can be an asset to strengthen global trade ties and create opportunities for collaboration, despite potential challenges for western countries to compete in this domain. While US and European companies are signalling their intent to shift manufacturing to India and other countries in Southeast Asia, the lack of port infrastructure in these regions remains a major obstacle.”, said Christian Roeloffs, cofounder and CEO, of Container xChange as he commented upon the current state of the container shipping in Asia.   

The lack of harbors able to accommodate large ships in other Asian countries means that investment is essential to handle the mega-container ships that drive world trade. Therefore, it will take a great deal of investment from other Asian emerging markets to catch up with China, and it generally takes port operators up to five years to build a new terminal.

The data from research group Drewry reveals that the rest of Asia needs significant investment to match the capacity of Chinese harbors, which have become essential for transporting goods from east to West. China’s investment of at least $40 billion between 2016 and 2021 in coastal port infrastructure has allowed the country to handle the equivalent of 275 million 20ft containers at its ports last year, up to 80% more than the amount processed annually by all countries in Southeast Asia combined, according to figures from data group Dynamar and the UN. In contrast, the rest of Asia has only 31 port terminals capable of handling the largest ships. Large vessels make up about two-thirds of the shipping capacity for services between East Asia and Europe, according to data provider MDS Transmodal.

For more on container logistics industry developments, download the full report ‘Where are all the containers’ from here 

 

 

 

 

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Synergy NA expands WMS Solution into UAE

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WMS Technology Innovator, Synergy Logistics, is Expanding its Global Operations having Secured its First Customer in the United Arab Emirates (UAE).

Dubai based specialists, Automyze Fulfillment Center, established in 2017, has onboarded technologically advanced, cloud-based SnapFulfil into its newly expanded 25,000 sq. ft warehouse. The initial SaaS contract includes 45 licensed users.

Automyze specializes in start-ups and SME brands positioned for significant growth and currently ships an average 18,000 units a month. However, with their ambitious target to double this over the next six months, they required a WMS with the flexibility and scalability to adapt and grow with them and its customers’ strategic expansions.

The proven flexibility of SnapFulfil’s solution means Automyze will now have accurate and consistent control of inventory and outbound processes, as well as returns, which will help them deliver a first-class service experience for their clients and their customers. The live data functionality will also help maximize performance and cost savings, plus have a tangible impact on strategic growth.

A key attraction of SnapFulfil for Automyze was its Application Programme Interface (API) friendly and robust pathway that meets the challenges of B2C and D2C omni-channel fulfilment. However, identifying the solution is just half of the challenge. Delivering it while continuing to satisfy existing customer requirements – without incurring custom coding costs and delays for new clients – is a different matter.