“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
**** New content Weekly gets slotted in here ****
Week 7
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.
Week 6
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?
Week 5
More Capacity
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.
Week 4
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.
Week 3
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.
Week 2
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.
Week 1
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?
Buying Power
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.
