“When it comes to the logistics industry, DB Schenker has been around for some time. Every month I’ll be providing my insight into what’s going on and what you need to know. I’ve been part of this industry for over 20 years, and my passion is all about the teams I work for and with.
Bookmark this page and come back often.
Manage the systems. Lead the people.”
Bill Heaney, CCO of DB Schenker, USA
U.S. Administration announces more than $703 million to improve port infrastructure and strengthen national supply chains
The U.S. Department of Transportation announced more than $703 million this past week to fund 41 projects in 22 states and one territory that will improve port facilities through the Maritime Administration’s Port Infrastructure Development Program.
The funding will benefit coastal seaports, Great Lakes ports, and inland river ports, helping improve supply chain reliability through increased port capacity and resilience, more efficient operations, reduced port emissions, and new workforce opportunities.
More than 60 percent of the awards will benefit ports in historically disadvantaged communities, and several projects will help reduce emissions at the ports through electrification. Additionally, more than $150 million in awards focus on the electrification of port equipment to reduce emissions and improve air quality.
The awards include nearly $100 million for port projects that advance offshore wind deployment. This supports the goal of deploying 30 gigawatts of offshore wind by 2030, which is enough to power 10 million homes with clean energy, support 77,000 jobs, and spur private investment up and down the supply chain.
For more information about select grants, read more here.
What are U.S.-based senior decision-makers making in the logistics industry?
The technology company SAP released research this past week based on a survey conducted in late August and early September 2022 of 400 U.S.-based senior decision-makers in logistics and supply chain strategy across small, medium, and large businesses.
The result shows that more than half (52%) of those surveyed think their supply chain still needs much improvement and nearly half (49%) expect current supply chain issues to last through the end of 2022. One in three says the problems will last until the summer of 2023.
What is fueling this sentiment? Global political unrest is the main factor causing current supply chain Issues. Business leaders say their existing supply chain issues primarily stem from global political unrest (58%), lack of raw materials (44%), and rising fuel and energy costs (40%). Only 31% cited inflation as a significant contributor.
Looking ahead, the top three supply chain disruptions that business leaders expect in 2023 are:
- Reduced availability of raw materials in the United States (50%)
- A slowdown in the construction of new homes (44%)
- Disruption to public transport due to lack of drivers (44%)
Business leaders anticipate the online shopping trend to continue, with 73% expecting an increase in e-commerce volume this season compared to last year. To sell their own products, business leaders plan to deliver on these differentiating points:
- Speed of delivery (64%)
- The excellence of customer service (57%)
- Availability of products (52%)
- Sustainability credentials (47%)
- Price reductions (42%)
- Made in the U.S. (38%)
Companies are fortifying supply chains for the future. Every organization said their supply chain needs improving to some extent, and they’re making significant changes to prepare for future disruptions and to fortify their supply chains. Business leaders plan to:
- Adopt new technology to overcome challenges (74%)
- Implement new contingency measures (67%)
- Prioritize U.S.-based supply chain solutions (60%)
- Find new environmentally friendly supply chain solutions (58%)
In summary, as I’ve commented before, the supply chain conversation is vital in the C-suite today because it drives business profitability. However, with multiple shifting logistics factors still causing problems and many ways to fortify supply chains, senior decision-makers in logistics and the supply chain need value-based partners. Partners that can provide innovation, experience, and global reach across multiple modes of transport to keep your cargo moving.
Spare parts from the cloud: driving digital innovations for supply chains
I talk about innovation quite a bit – and this has got me excited. Not to show off too much, but DB Schenker has become the first global logistics provider offering 3D printing and a virtual warehouse. This allows us to facilitate the supply of spare parts faster, cheaper, and more sustainably.
In the face of increasing challenges in global logistics, digital innovations such as spare parts deliveries via 3D printing create real added value for customers in many areas.
In pilot projects, DB Schenker has already successfully tested the virtual warehouse, designed for customers from the mechanical engineering, automotive, and rail transport markets. Parts such as handles, cladding, and housings were produced on demand close to the customer. Without pre-production and storage, on-demand production reduces capital commitment costs. The new Schenker service with a virtual warehouse is now being offered to a wide range of customers worldwide.
Takeaway: innovation takes many shapes in the supply chain. The once impossible becomes possible if we can dream it.
More information here.
First on-road tests of the full-electric Volta Zero
And in other news – I unapologetically bring you some more DB Schenker news from outside of the United States. In Europe, with Volta Trucks, a full-electric commercial vehicle manufacturer, we have completed the first on-road test phase of the full-electric Volta Zero truck. For the first time, a design verification prototype Volta Zero operated on roads and in real distribution environments in Paris.
As part of our partnership, we have pre-ordered 1,500 full-electric Volta Zero vehicles – the largest order for medium-duty electrified trucks in Europe. The full-electric 16-tonne Volta Zero will be used in DB Schenker’s European terminals to transport goods from distribution hubs to city centers and urban areas. This is where the vehicle’s innovative design, safety-oriented cab to protect vulnerable road users, and zero-tailpipe emission drivetrain will offer the greatest benefits.
Our desire for clean logistics will be achieved by reducing the environmental impact of our products and operations. We are driving climate action, transitioning towards renewable energy, and managing resources effectively. We aim to ensure sustainable growth measures for our target to achieve climate neutrality by 2040, providing scope 3 emission reduction solutions as our asset for commercial differentiation and neutralizing emissions by driving partnerships throughout the supply chain.
In summary, we can achieve great things when we take bold actions. Achieving climate neutrality has been seen by some as highly unlikely, but this demonstrates a very positive step in that direction.
More information here.
Hurricane Ian and Logistics This Week
Hurricane Ian devastates parts of Florida, but the economic ripple effects will likely be felt well beyond the storm zone. South Carolina, Georgia, North Carolina, and Virginia are also affected.
We already see severe disruption to supply chains from flooding, power outages, and wind damage that could stall factory and farm production, as well as freight movement through major ports, airports, and highway and rail nodes.
More than 4,500 factories, warehouses, and distribution centers, which produce or distribute about 74,000 parts for everything from electronics to chemicals, are estimated to be in the storm zone.
Companies in other states could face shortages of truck capacity in the coming days if many motor carriers shift resources to provide logistics support for recovery efforts through the Federal Emergency Management Agency, humanitarian aid groups, or state governments.
It may well take nine weeks for business to recover to pre-Ian run rates, based on historical experience with similar weather events.
Meanwhile, Typhoon Noru is similarly upsetting supply chains in Southeast Asia as it barrels across the South China Sea toward Vietnam.
Take away: redundancy and geographical disbursement, where possible, are about the only workaround for localized weather disruptions.
Ukraine and Logistics
Ukraine on Sunday claimed complete control of the eastern logistics hub of Lyman. Located in the east of the country, close to the Molochnyi Estuary of the Molochna River, situated on the north-western coast of the Sea of Azov. Lyman is a critical railway junction.
This is significant for the war in Ukraine – and Kyiv’s most considerable battlefield gain in weeks, providing a potential staging post for further attacks to the east while adding additional pressure on the Kremlin. That said, we don’t foresee much change in commercial cargo shipping.
We continue to watch many factors across the globe to keep your logistics running effectively and efficiently.
Yes – We’ve Expanded – Increased Land Transport Capacity
Last week we announced the completion of the previously announced acquisition of USA Truck (NASDAQ: USAK), a leading capacity solutions provider. USA Truck’s stockholders approved the transaction at a special meeting of stockholders held on September 12, 2022.
Founded in 1983, USA Truck has provided comprehensive capacity solutions to a diverse North American customer base, including more than 20% of the Fortune 100. USA Truck brings us a 1,900-unit fleet of trucks, 2,100 employees, partnerships with more than 36,000 active contract carriers, and a strategic network of terminals across the Eastern half of the United States. This presence will immediately provide capacity solutions to meet the evolving demands of both regional and national DB Schenker customers.
Why am I excited? Quite simply, we have expanded our capacity solutions at a time when our customers need them.
Today, DB Schenker in the United States has over 9,000 employees – in over 40 locations and 55 logistics centers, and over 21 million sq. ft. of distribution operations.
If land transport is part of your supply chain, contact your representative to find out how we can help you.
What Happened to The Trains?
President Joe Biden’s administration secured a tentative deal on Thursday to avert a railway strike that could have wreaked havoc on the U.S. economy. Still, union members angered by harsh work conditions have yet to ratify the agreement.
A deal between major U.S. railroads and unions representing tens of thousands of workers was reached after about 20 hours of talks brokered by Labor Secretary Marty Walsh. Workers agreed not to strike while votes are tallied over the next several weeks, avoiding a stoppage that could have started on Friday.
A rail shutdown could have frozen almost 30% of U.S. cargo shipments by weight, stoked inflation, cost the American economy as much as $2 billion per day, and unleashed a cascade of transport woes affecting U.S. energy, agriculture, manufacturing, healthcare, and retail sectors.
The impact of a shutdown would have stretched beyond U.S. borders because trains link the United States to Canada and Mexico and provide vital connections to massive ships that ferry goods from around the globe.
The U.S. economy can keep running without freight trains — but not for long. That is why the risk of the first national railroad strike in 30 years worried economists and businesses. However, a brief work stoppage — some previous rail strikes have lasted only hours — likely won’t cause much economic disruption.
But a prolonged walkout of a week or more will cripple the nation’s still struggling supply chain, cause widespread shutdowns and shortages, and likely further drive-up prices even as inflation remains near a 40-year high.
How would your supply chain have been affected if there had been a rail strike? What lines of redundancy do you have in place? Does your logistics partner have the insight and breadth of service to keep you moving?
California AB5 – Demystified
The judge overseeing a significant trucking industry challenge against enforcement of California’s new AB5 independent contractor law has lifted an injunction in the case after the U.S. Supreme Court failed to take up the matter.
Judge Roger Benitez of the U.S. District Court for the Southern District of California held an Aug. 20 hearing on the California Trucking Association’s (CTA) challenge to enforcement of AB5 against the trucking industry.
To say that California’s Assembly Bill 5 has created confusion in the trucking industry would be understating the issue. So, let’s break it down a little.
First, the latest decision is not an end; it is just the next chapter. More will happen.
As anticipated, Judge Benitez lifted the injunction, which the Ninth Circuit Court of Appeals had reversed. CTA indicates that it intends to file a new motion for a preliminary injunction under the Federal Aviation Administration Authorization Act (F4A) preemption standard set forth by the Ninth Circuit and on Dormant Commerce Clause grounds.
The Dormant Commerce Clause, or Negative Commerce Clause, in American constitutional law, is a legal doctrine that courts in this country have inferred from the Commerce Clause in Article I of the Constitution. The primary focus of the doctrine is barring state protectionism.
The judge’s earlier ruling denying the Dormant Commerce Clause challenge, for which CTA sought reconsideration, was vacated. Briefing on the new motion for an injunction will take place this fall.
In addition, the court will consider the Owner-Operator Independent Drivers Association’s (OOIDA) motion to intervene in the case.
The CTA and OOIDA are in negotiations over their legal rights to try and protect the independent contractor model. Some options being discussed:
- Business as usual and wait and see what law enforcement does;
- Carriers cancel leases and report drivers as employees;
- Two-check model—One check for the use of the truck and another check for the driver. Driver must declare truck income separately;
- A carrier may become a broker and use owner-operators with their own operating authority; and
- A “Business to Business” model (B2B), which lawyers deem unlikely as there is another test that must be met to claim it legally.
AB 5 establishes an independent contractor test known as the “ABC” test. To be considered an independent contractor, a worker must satisfy all three parts of the test.
The Supreme Court’s refusal to review a legal challenge has trucking company-related workers and carriers scrambling for a suitable Plan B.
California is home to an estimated 70,000 independent truckers. But the new AB5 rule is threatening to make it prohibitively expensive to remain independent, trucking officials said. Already, there have been protests at the Port of Oakland.
It’s a reminder that politics is integral to the supply chain. You’re not alone in trying to understand this, and your team here at DB Schenker will stay on top of the latest development so we can continue to offer superior over-the-road services in all states.
Building Resilient Maritime Logistics in Challenging Times
The United Nations Conference on Trade and Development (UNCTAD) launches new tools to help build maritime supply chain resilience by supporting countries to cope with and adapt to disruptions that extend beyond pandemics.
Frequent disruptions in supply chains have exposed the vulnerability of transport and logistics operations amid unequal capabilities and resources between countries.
Recurrent extreme weather events, the COVID-19 pandemic, the war in Ukraine, and other crises illustrate the magnitude of the challenge and its implications for global supply chains and sustainable development.
These challenges underscore the need to enhance resilience, particularly in the most vulnerable economies.
“As disruptions are becoming part of the new normal, resilience and risk management emerge as new mantras for transport, logistics, trade, and supply chains,” said Shamika N. Sirimanne, director of UNCTAD’s technology and logistics division.
To help countries cope with the new normal, UNCTAD has launched a new website to promote resilient maritime logistics in the face of disruptions. The website includes a guidebook for ports entitled “Building Capacity to Manage Risks and Enhance Resilience” and a wealth of other resources.
“The web package provides our beneficiaries with support in risk identification, assessment, management tools and approaches, case studies, good practices, and a step-by-step resilience-building process for ports and other relevant maritime supply chain actors,” she added.
Your supply chain is just that; a chain that consists of many interlaced parties. Therefore, the better maritime ports are prepared, the most efficient your supply chains are. We see this as a significant development for our customers.
More Disruptions to the China Supply Chain
COVID-19 lockdowns in China threw a wrench into global supply chains earlier this year, causing shipping and production delays worldwide, and hindering economic growth.
Now, the country is facing another major threat—and this one could be even worse for the economy.
China has been coping with its worst heat wave in 60 years this month, with temperatures in several provinces routinely reaching 40°C (104°F). But one key province is experiencing the worst financial repercussions from the suffocating heat.
In Sichuan, a regional manufacturing powerhouse that is home to more than 80 million people, the record heat wave has exacerbated an ongoing drought, cutting water levels at hydropower reservoirs in half this month, according to the Sichuan Provincial Department of Economics and Information Technology.
Sichuan relies on hydropower for roughly 80% of its energy needs, and with consumers using more energy than usual to stay cool during the heat wave, energy supplies are running short.
As a result, officials announced on Aug. 15 that factories in 19 cities and prefectures would be forced to close their doors for five days to reserve electricity for “use by the people.”
Main take away: stay updated, be prepared and plan ahead.
The Cost of Trucking
According to The American Transportation Research Institute’s (ATRI) 2022 update, the total marginal cost of trucking grew by 12.7% in 2021 to $1.855 per mile, the highest on record.
Leading contributors to this increase were fuel (35.4% higher than in 2020), repair and maintenance (18.2% higher than in 2020), and driver wages (10.8% higher than in 2020). On a cost-per-hour basis, costs increased to $74.65.
The trucking industry experienced many new, atypical market conditions in 2021 and their effects can clearly be seen in the Ops Costs data, according to ATRI officials.
Overall, fleets with 100 or fewer trucks spent 4.9 cents more per mile than fleets with more than 100 trucks – closing the 2020 gap with larger fleets by 70%. While larger fleets spent less than smaller fleets on insurance premiums per mile, the advantage was offset by higher out-of-pocket incident costs per mile for large fleets.
In response to the truck driver shortage, total driver compensation at $0.809 per mile was 10% higher than in 2020.
What does this mean? As may have heard, DB Schenker announced in June intent to acquire USA Truck. This would add a 1,900-unit fleet of trucks to our land transport offering and increase our offering in both the USA and across borders to Canada and Mexico. Stay tuned!
Peak Shipping Season Ahead of the Holidays – What To Expect
An ocean spot rate is a one-time price a shipper can lock in for a specific shipment without a long-term contract. Ocean spot rate pricing trends flow through to the broader economy, as retailers have passed on container prices to the consumer during the pandemic, and it is among inflationary pressures as the Federal Reserve tries to tamp down demand.
A decline that shippers were seeing in ocean spot rates and in premium surcharges across many trade routes as demand for containers softened has reversed, with congestion at ports and at sea increasing container spot prices for the U.S./Europe trade route and creating a floor in spot rates for the Asia to East Coast shipments.
A recent decrease in demand which had led spot prices to decline was the result of manufacturing orders being cut due to changes in consumer spending behavior. But now the situation is changing again as the trade routes experiencing congestion are seeing container rates moving higher.
Traditional peak season for ocean shipping begins in August – as the supply chain gears up for the holiday.
Main take away: be prepared for volatility in the coming quarters. Plan early, and build flexibility into your holiday cargo.
How will Businesses Adapt to the Future Supply Chain?
A new whitepaper from global advisory and auditing firm BDO reveals that of 500 C-suite executives surveyed across the Americas, Australia, Asia Pacific, Europe, the Middle East, and Africa, almost half said their supply chains have been severely impacted over the last 18 months. Looking ahead, meanwhile, 47% of business leaders around the world believe a lack of supply chain transparency in the current conditions is their top concern for the current period. This rises to 62% in Europe – where the impacts of the Ukraine-Russia war have seen shortages of fuel and food products.
According to the survey, a lack of transparency poses two key supply chain risks to businesses. Most immediately, there’s a significant financial risk when a company doesn’t understand the regional challenges faced by their suppliers – something many companies are finding out to their cost now. However, a non-transparent supply chain also comes with a longer-term risk, on a reputational front.
Opaque supply chain practices mean a company may struggle to prove it meets heightened ethical standards demanded by consumers regarding things like environmental impact and modern slavery. Reflecting this, many more companies anticipate a worsening supply chain situation in five years from now. This is worst in the Middle East, where 75% of business leaders believe a lack of transparency will bite then; while in comparison, Europe has seen many firms already attempt to blend ESG policy with their supply chain – so the number worrying on this long-term basis is a lower 28%.
What you need to know: You must be aware of your supply chain’s commitment to ESG policy. Read about our strategy here.
Are Mexican Tariffs on the Horizon?
The US is seeking dispute settlement consultations under the US-Mexico-Canada Agreement, the first step in what could lead to tariffs on a range of Mexican products. It also represents a challenge by the Biden administration to Mr. López Obrador’s effort to regain government control over the country’s oil and electricity markets.
Mr. López Obrador was dismissive of the U.S. action, chalking it up to intense lobbying by what he called corrupt right-wing rivals in Mexico. In launching the dispute, US Trade Representative Katherine Tai said an array of Mexican policies undermine American companies and U.S.-produced energy in favor of Mexico’s state-owned power company Comision Federal de Electricidad, or CFE, and oil company Petróleos Mexicanos, or Pemex.
Key takeaway: watch this space. With longer supply chains than previously, new tariffs on Mexican products could lead to unprofitable business. We’ll keep you updated as we hear more, so come back often to hear the latest new.
More Supply-Chain Disruptions Due to AB5
The Oakland International Container Terminal (OICT) management closed operations last week at the Port of Oakland due to the independent trucker protests over California’s gig worker law, known as AB5.
The Port’s other three marine terminals are effectively shut down for trucks as well, the Port of Oakland told CNBC, while there are some vessel labor operations underway. This is the third-day truckers have protested California’s gig worker labor law, which was sparked by the rise of gig economy platforms like Uber, Lyft and DoorDash.
A two-year legal stay was recently lifted when the Supreme Court decided not to hear a case which would have protected truckers from the impact of the law. AB5 requires companies that hire independent contractors to reclassify them as employees, but there are some exceptions in the law across industries.
Most truck drivers in California are owner-operator and many in this job category are concerned about their future. An estimated 70,000 truckers who own and drive their own trucks would fall under this law and they do not want to become an employee or part of a union to work.
Biden Close to Rollback of Chinese Tariffs to Fight Inflation
President Joe Biden may announce a rollback of some US tariffs on Chinese consumer goods — as well as a new probe into industrial subsidies that could lead to more duties in strategic areas like technology. Biden has not yet made a final decision, and the timing could slip.
It would mark his first major policy step on trade ties between the world’s two biggest economic powers.
The president in recent weeks held a number of meetings with senior economic advisers where options for a decision on the Trump-era tariffs were discussed. Hints that the Biden administration is considering an easing in some of the tariffs on $300 billion in Chinese imports have multiplied as inflation has accelerated, putting pressure on US officials to find ways to tamp down prices paid by consumers for everyday merchandise.
Key takeaway: if you’re trading between the US and China, ensure you have a winning team that has the latest tariff details.
Will Freight Transport Costs Rise Due to AB5?
Trucking fleet owners are warning that freight transportation costs will soon begin to rise after the US Supreme Court handed a win to labor unions by declining to hear a challenge from the California Trucking Association to AB5, a law requiring fleets in the state to classify their drivers as employees instead of independent contractors.
The high court’s decision means that a lower court will now dissolve a 2020 stay that had frozen the law during its appeal, freeing the State of California to enforce AB5 against motor carriers within the state.
Passed by the state legislature in 2019, Assembly Bill No. 5 (AB5) was originally centered on ride-sharing models like Uber and Lyft and on the broader “gig” economy but would also affect owner-operators of full-sized freight trucks. Supporters such as the International Brotherhood of Teamsters say the law will stop companies from dodging payment of certain benefits to employees, such as labor laws and minimum wage guarantees.
Are you working with a logistics partner than can offer you the best multimodal solutions if trucking prices rise?
The lack of capacity is something that is talked about a lot right now – both within the industry and in the general media. As we know as logistics professionals, we can’t change that quickly. It takes a lot of time and resources to add new assets (trucks, trains, planes, or boats) to the supply chain – and then there are plenty of other missing parts to get right.
What we can do, is give our customers greater access to the available capacity that exists – to fast track their needs, to provide preferential carrier options.
For that reason I’m very excited about the news last week that DB Schenker is purchasing USA Truck. USA Truck’s approximately 1,900-unit fleet of trucks, 2,100 employees, and partnerships with more than 36,000 active contract carriers, means that DB Schenker customers immediately get greater access to these resources.
The second reason that I am excited, is that this comes at a time where onshoring and nearshoring is becoming ever so important in North America. USA Truck’s existing cross-border experience in North America adds strategic advantage to our customers who are managing their supply chains in Canada and Mexico.
There is more capacity.
ESG and the Supply Chain
As we’ve witnessed, onshoring and nearshoring are one part of the solution for North American companies that have suffered from COVID-19 related delays on longer shipping lanes. As if there needed to be more reasons to upset the supply chain, it looks like another one is just around the corner. Not caused by the capacity crunch, but by consumer demand.
American companies are adopting a new standard called ESG, which stands for environmental, social, and governance. Already well under way in Europe, ESG business practices means that companies agree to only get their product from so-called socially and environmentally responsible companies.
If a manufacturer in China or India is not deemed to be socially or environmentally responsible, the American company must find another source for its product or risk a bad ESG score with real economic consequences, like losing investors and capital.
There are little governmental consequences for not following ESG practices, but that’s because they are not needed. It is self-regulated within commerce as investors put pressure on the banking system to ensure companies that are holding loans or apply for them, have a high ESG ranking.
In other words, the traditional bottom line… profits – of which the supply chain is a critical factor… is no longer the only bottom line. Now there is also ESG, and that’s made the supply chain more complicated.
Need advice on how your supply chain could be changing soon due to wider business trends? We’ve got you covered.
The Price of Diesel – now and what it means for the future…
National diesel average hits a new record high. Prices are at a record $5.75, according to data from AAA. On an annual basis, this week’s national average is up $2.429
West Texas Intermediate Crude oil is currently trading at $120.00 per barrel on the New York Mercantile Exchange, up from $115.37 a week ago.
Logistics Management recently reported that diesel prices will probably remain high longer than gasoline prices because diesel inventories have fallen to multiyear lows.
For truckers, that means they’re spending as much as $1,700 refueling their trucks each day.
As a supply chain professional that means two things – careful planning is required, and working with a leading, global logistics company is a necessity. Your logistics supplier needs to have the technology to source, and the knowledge and experience to negotiate, the best rates on your behalf. They also need the volume of business to allow you to choose between FTL and LTL solutions so your goods can arrive on time.
Port of Long Beach – The Latest News
On Friday, President Biden visited the Port of Long Beach. That in itself talks to the administration’s action – making it clear that fighting inflation is their top economic priority. Shortly after, The Port of Long Beach Executive Director Mario Cordero shared some key information.
Today we have about 29 vessels backed up off the coast, waiting to get into the port complex. In January, we had over 100.
There is a focus at the port on productivity, cargo velocity, as opposed to cargo volatility – that is leading to a drive on 24/7 operations.
Cordero also highlighted the important work of digital transformation, data sharing, and the uplifting of technology at national ports and through the supply chain.
You can read the full interview on Yahoo! Finance.
Where are The Delays Today?
CNBC released a heat map in the past week created along with some of the world’s top maritime and logistics data providers. It shows the scores of challenges facing the global supply chain in real time.
According to the data, the Port of Oakland tops the list of congestion with vessels taking six days to unload and load. Import containers are lingering almost 11 eleven days in the port before they are transported. The Port of Los Angeles is the second highest in wait times, clocking in almost 12 days containers to leave the port and five and a half days for vessels to be processed. Rail delays of 6.2 days are also plaguing the port’s productivity.
This shows that partnering with a global, omni-channel logistics supplier allows shippers to reduce wait times and increase reliability in the supply chain.
Shanghai Lockdowns to End
The latest indications are that China’s largest city, Shanghai, will end its COVID-19 lockdowns on Wednesday (June 1, 2022). This is good news for any supply chain that is reliant on China.
Shanghai city authorities now say they’ve controlled COVID’s spread to their satisfaction and are happy for the city to re-open with few restrictions in districts that have gone 14 days without a detected infection.
At a Sunday press conference, officials said 1,700 “key production-oriented enterprises in the region have resumed work and production,” as have 450 key financial institutions and 580 key foreign trade enterprises.
City authorities also saw fit to mention that 88 per cent of e-commerce warehouses have resumed operations.
What the Future Holds for Freight Rates
Maritime research consultancy Drewry announced at a recent UK Ports Conference in London that container freight rates might fall by as much as 40% over the next decade.
Freight rates hit record highs in summer of 2021, hitting levels more than 400% higher than pre-pandemic rates.
While the supply chain begins to take on some level of pre-COVID normalcy, we can predict the fall-off to continue gradually and – right now – anticipate a return to normality by 2024.
If You’re a Logistics Professional: Pass This to Your Finance Team
Dear Colleague in the Finance Team… I’m getting some insight about the latest logistics changes, and this is written specifically for financial experts – thought you might be interested…
All too often we are writing about logistics for logistics professionals, but occasionally, we need help from within the shipper’s organization to overcome logistics challenges.
Over the last two years, a series of shocks — including factory closures, skyrocketing shipping costs, shortages of material and labor, and the war in Ukraine — has created extreme variability for businesses in practically every industry.
This means that your logistics team are probably making some changes. If you import or export internationally, that will be even more complex.
What does it all mean for finance? These changes provide an opportunity and a challenge for finance teams and their members, whether they’re working at public accounting firms or within companies.
For example, complex new trade arrangements will raise new tax and money transfer questions. Many times, companies will think their problem is a logistics problem or a shipping problem, but the problem is more complex:
– Are credit terms updated – and how do we deal with that?
– Is there currency volatility that needs to be managed?
– How do you move the money for that transaction? And how long will that take?
– What does that mean for customs?
– How do they account for the goods on their books?
Finance needs to be involved early and often in changes to the supply chain. Amid increasing complexity finance also needs to understand the legal, tax, and global trade angles of the supply chain.
It’s not just about the books. It’s about how do your books match what’s really happening out there in the business, to properly reflect those activities. Each company’s supply chain will raise unique issues, such as questions of force majeure in a particular contract. The goal for finance is to create partnerships with experts in other fields — including indirect tax and customs and duties — to examine all sides of a scenario before making decisions.
While we support your logistics professionals, we are also here to support you and your financial questions.
Risk Comes In Many Forms – Wise Up To Cybersecurity
In recent years we’ve seen a trend towards attacks targeting the software supply chain rather than being directly against the goods being transported. Attacks can include poisoning the software components, stealing secrets to compromise an account, or modifying code repositories to allow for exploits.
Why have these attacks become such a concern? And how can you guard against them?
Products such as DB SCHENKERsmartbox can physically provide increased security and information transparency for your cargo. But what about data?
As we increasingly digitize the supply chain and become more reliant on the data that we have at our fingertips… and reliant on that data to make decisions, so does the risk increase from bad actors.
Cyber-attacks were the fifth top rated risk in 2020 and became the new norm across public and private sectors. This risky industry continues to grow in 2022 as IoT cyber-attacks alone are expected to double by 2025.
Cybercrime, which includes everything from theft or embezzlement to data hacking and destruction, is up 600% as a result of the COVID-19 pandemic. Nearly every industry has had to embrace new solutions and it forced companies to adapt, quickly.
We wrote about Three Things Every Shipper Should Know About Cybersecurity not too long ago. Since COVID-19 we’ve increased our vigilance and security measures. But, just like your interactions with your bank on a personal level, there is a part for everyone to play.
At the most basic level:
- Ensure you are setting up and using complex passwords when logging into your business and logistics systems.
- Don’t share login details, and
- Be aware of suspicious email that may be a phishing attack designed to trick you into revealing sensitive information
Together we can work on protecting your cargo physically and the data that drives it.
Senate Debates Bill to Help Build Domestic Technology Supply Chains Amid Shrinking Economy
The U.S. Senate debated the America COMPETES Act on Thursday, a bill to help build domestic technology supply chains. A quick summary…
Two trends were key drivers of the U.S. economy’s decline last quarter:
- Imports soared nearly 20 percent as Americans spent heavily on foreign-made goods, while exports fell almost 6 percent as growth slowed overseas — a widening of the trade deficit that subtracted 3.2 percentage points from GDP.
- Businesses had built inventories aggressively ahead of last year’s holiday shopping season, when they feared pandemic-related supply shortages, so they restocked more slowly at the start of 2022, denting GDP by 0.8 percentage points.
Although imports surged in the first quarter, COVID lockdowns in China are likely to perpetuate supply shortages this year. Ford and General Motors said this week that they still can’t get all the computer chips they need, costing them sales and forcing temporary plant closures.
As logistics professionals, it’s ever more important to look at our processes. Are we running forecasts often enough, so that we can put in place plans for our supply chains, whether they are international or domestic?
As Ferris Bueller said, “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”
The supply chain is moving fast – make sure you keep up.
Why Having a Leading 3PL as Your Logistics Partner is Ever More Important
3PLs have evolved from being a mere service provider to an enabler that makes sure that customers get their goods delivered. And logistics professionals realize that a good relationship with their 3PL is key to a good experience for their customers. A recent Gartner survey found that 63% of logistics leaders believe that logistics outsourcing has had a positive impact on their organization’s competitive positioning.
Here are three factors to consider when finding or reviewing your 3PL relationship.
Knowledge and Experience
Not all 3PL’s are made the same. Some have been around longer than others. Some have weathered more than one economic recession and worked in multiple regions where war and pandemics have changed the supply chain. Find a 3PL that has seen it before so you can benefit from their experience.
Tech and Innovation
A key driver of ongoing supply chain resilience in the logistics space is investment in technology. While it’s great to have a 3PL that has experience, how are they investing in, and implementing the latest technology? When it comes to your supply chain, can your 3PL give you the planning, flexibility, transparency, and communication platforms that makes your life easier and exceeds your customer’s expectations?
You’ve found 3PL that has the knowledge, experience, and technological innovation. Do they also have the market size (domestically and internationally) to negotiate the best rates for you, across all modes of transport? Breadth across land, ocean and air is vital, as the supply chain changes, and what might seem like a very logical solution today, may need to be changed in the future.
And, to add one more consideration, does your 3PL have the best people, that you can have the best relationship with? Connect directly with me if we can help you, and come back often to find out the latest thought leadership.