“If you are in the logistics industry, then you’re in the right place. Every week I’ll be bringing you the latest insight from our profession. This is not just the latest news, but how it will influence your logistics, so you can stay one step ahead and make the most of it.
Let’s work smarter, not harder.”
David Buss, CEO North America
Week 63
Red Sea Crisis Continues
Major developments in the Red Sea have occurred since we heard from Art Chrapko last month. Currently, global businesses are grappling with a looming vessel shortage, just before China’s New Year celebration. This has led to a scramble for solutions, including shifting some ocean cargo to airlines, as uncertainty and rising tensions add to the concerns.
These disruptions have impacted the regular movement of goods, given that around 30% of container volumes usually traverse the Red Sea and Suez Canal, a vital route connecting Europe and Asia. Some vessel operators had already shifted their services to the Suez route to avoid the drought conditions affecting the Panama Canal, and now they are facing a double bind.
Marc Schlossberg, executive vice president at Unique Logistics International, noted that the e-commerce wave had just subsided, causing rates to drop. Unfortunately, the Red Sea shipping crisis is expected to reverse this trend, and carriers are starting to impose war risk surcharges, which only pile on extra costs for shippers.
Shipping experts also highlight that the recent diversion around the Cape of Good Hope is causing delayed vessel arrivals, port congestion, and difficulties in repositioning containers globally. This situation is particularly challenging as it coincides with the lead-up to the Chinese New Year, which results in a surge in shipping requirements and increased shipping rates. According to a Flexport analysis, about 540 vessels are assigned to Suez services, with 136 currently being diverted around Africa and 42 that have paused their journey.
While there’s typically less urgency for mode-conversion decisions after the Christmas shopping rush, logistics managers anticipate a growing demand for airfreight as importers place new orders with Asian suppliers. We’re already starting to see some retailers shifting to air routes due to the lack of viable alternatives that don’t add significant delays.
Bad news can be a tough pill to swallow, and though the Multinational Joint Task Force (MNJTF) may not offer an instant remedy, it’s important to note that they are approaching their decisions with careful consideration and deliberation. So, as we navigate these waters, preparedness will be the key to resilience.
Planning for some extra time, being ready for possible rate increases, and booking shipments well in advance can help cushion the impact of this ongoing challenge and keep things moving as smoothly as possible. I am optimistic that the situation will become more manageable as time goes on, so be sure to recharge your batteries this holiday so we are ready to put our best foot forward in 2024.
Warehouse Strategies for 2024
On a lighter note, as we gear up for the upcoming year, it’s the perfect time to revamp your logistics strategies and ensure your warehouse operations are running smoothly. I’ve read through inboundlogistics’ latest article on improving warehouse operations, and I want to share what I believe to be the three most important game-changing tips to help you excel in the coming year. Let’s dive right in!
- Optimizing Your Warehouse Space
First and foremost, let’s talk about making your warehouse operate like a finely tuned engine. It’s essential to ensure that you’re using your physical space efficiently and making well-informed decisions.
Think about arranging your warehouse layout to minimize the distance your staff and inventory need to cover. High-density racks and intelligent shelving systems can help you make the most of your vertical space. Also, consider implementing a Warehouse Management System (WMS) to streamline inventory organization.
Automated systems can be your best friend when it comes to planning and optimizing workflows. They can take care of complex logistics, allowing your team to focus on handling unexpected challenges that may arise.
- Efficient Order Processing
There are some ingenious strategies to simplify order picking. Batch picking allows your workers to pick multiple orders simultaneously, zone picking assigns specific areas to reduce travel time, and wave picking prioritizes orders. Using handheld devices or voice technology can further speed up the process and reduce errors.
While automation is fantastic, remember that it’s not always the ultimate solution. It can be costly to maintain, and human touch might be more efficient in certain scenarios. Regular training is vital to keep your team sharp, safe, and up to date with new rules and regulations, helping you avoid fines and legal issues.
- Smart Resource Management
Finally, let’s talk about managing your resources effectively.
To keep things running smoothly, it’s important to plan your work based on labor capacity, inventory availability, and demand. This can help you reduce delays and make the most of your space.
If your warehouse is spread across multiple buildings, optimize how things move between them using technology and planning. These smart tools work with your Warehouse Management System (WMS) to adjust tasks in real time, helping you rearrange schedules, figure out labor needs, and ensure that your shipments arrive on time.
By focusing on these areas—optimizing your warehouse space, efficient order processing, and smart resource management—you can ensure your warehouse runs smoothly, keeping your customers happy and your operations efficient.
Week 62
Holiday Season Wins and Woes
We’re kicking off the 2023 holiday season in a big way! Join us as we dig into the numbers behind our favorite online holiday sales, uncover the journey of getting your purchases to your doorstep, and unravel the mystery of what goes down with those unwanted returns.
November went all out, smashing records with Black Friday sales hitting a staggering $9.8 billion online. But hold on, Cyber Monday also outdid itself, reaching $12.4 billion, marking a solid 9.6% jump from the previous year. Talk about a major win for the retail industry!
However, it’s not all rosy. Holiday spending data, while indicative of retail trends, doesn’t represent the entire U.S. economy. A modest growth of 1% to 3% is expected in 2024, intensifying the competition among retailers. Having the right technology to improve the fulfillment processes becomes crucial in this scenario.
Now, let’s talk returns – a real headache for retailers. Each return burdens another round of shipping, sorting, and the struggle to sell it off, often at a discount or even a loss. It’s no surprise that 59% of retailers are rolling out “return-less” or “keep it” policies. Why bother with returns that end up costing more than the item itself?
Other big news in the trends department – consumers are leaning towards online shopping for large and bulky items (think furniture and fitness equipment). What used to be a logistical headache is now a golden opportunity for retailers. Supply chain visibility is crucial, so ensure you offer your retailers RFID tracking, GPS systems, and real-time analytics to monitor the movement of oversized products throughout the supply chain.
If you still need a trusted carrier, I highly encourage you to check out what DB Schenker can do. We nail the last-mile logistics with smart route planning, real-time tracking, local partnerships, and eco-friendly vehicles. We’re all about efficient, tech-driven, and environmentally conscious final deliveries.
Dealing with those bulky items can be a bit tricky for our carriers, but hey, let’s get creative with our problem-solving, shall we? Speaking of creativity – This company just rolled out an adorable emission-free to handle some of their Christmas deliveries. Talk about getting into the holiday vibe and a clever idea if you’re aiming for some positive attention.
Sending all the best to our hardworking logistics crews racing against the clock to bring the holiday spirit to everyone’s homes!
Navigating Cargo Theft – Lessons Learned from Q3
Speaking of deliveries, this next story should keep you on the edge of your seat. CargoNet just released some pretty alarming stats. They logged 692 cases of theft and pilferage in the U.S. and Canada during the third quarter, and get this—it’s a whopping 59% increase from the same time last year.
The real kicker is that a big chunk of this surge is thanks to what they call “shipment misdirection” attacks. Basically, bad actors are using stolen identities from truckers and freight brokers to snatch up freight and send it off course. These strategic thefts shot up by a staggering 430% compared to last year. Meanwhile, the good old-fashioned trailer thefts only inched up by 4%.
CargoNet is sounding the alarm, saying we can expect this cargo theft spree, especially the strategic kind, to keep going strong until the end of the year. Apparently, these cargo theft rings are really stepping up their game during the holidays, and they’re eyeing truckloads of stuff like copper, brass, aluminum, sports gear, and beauty products.
What’s interesting (and concerning) is that these thieves are getting crafty. They’re figuring out ways to dodge the usual checks and balances that brokers have in place. They’re going after small truckers and owner-operators, trying to hijack their accounts or convince them to pull shipments from brokers. CargoNet says both tactics are aimed at slipping past the identity theft checks that brokers usually do before handing over a shipment.
Here’s the kicker: the actual number of cargo thefts is probably way higher than what gets reported. According to CargoNet, some companies see a stolen shipment as just a cost of doing business and don’t bother reporting it. Moreover, the challenge lies in the jurisdictional complexities, making it difficult to report these crimes to law enforcement.
Nonetheless, consider implementing these security measures as we wrap up 2023.
- Advanced tracking systems, secured communication channels, and strong identity verification
- Rigorous employee training, collaboration with law enforcement, and regular audits and inspections
- Secure parking and storage, community awareness, and comprehensive insurance coverage
These strategies leverage technological advancements and human capabilities to fortify cargo ship security against misdirection and enhance overall safety in the supply chain.
So, with all that said, it’s a bit of a wild situation out there, and it’s not just ocean cargo they’re after. It’s also worth checking out Joe Jaskas’s post on protecting your cargo during holiday seasons to make sure your team is covered across the board.
Week 61
Logistics Highlights: Rockets, Race Cars, and a Sustainable Future in the Spotlight
This week, the logistics industry caught the spotlight, courtesy of the folks with rockets and race cars. They’re craving innovation, so let’s dive in.
So first up on the docket, SpaceX recently rocked the space scene by launching a cargo Dragon mission from Florida to the International Space Station on November 9. But here’s the scoop – they’re not just stopping there. They’re spicing things up by getting another launch pad ready at Space Launch Complex 40, giving them a handy backup for all those crew and cargo missions.
This Dragon is no lightweight; it’s hauling 2,950 kilograms of cargo. Inside, there’s some seriously cool stuff, like a laser communications demo called ILLUMA-T, making high-bandwidth communications happen through the Laser Communications Relay Demonstration payload on the STPSat-6 satellite in geostationary orbit. And that’s not all – there’s also the Atmospheric Waves Experiment (AWE), digging into gravity waves in Earth’s upper atmosphere and their links to space weather. Talk about the state-of-the-art.
Speaking of cutting-edge operations, let’s dive into a company that prioritizes top-notch performance and speed. Remember those race cars I mentioned earlier? Check this out – Ferrari switched up their logistics game, ditching the usual air routes and surprised everyone by using rail transport for the Canadian Grand Prix, the US Grand Prix in Texas, and the Las Vegas Grand Prix in Nevada.
They packed up six 45-ton equipment kits snugly in 53ft (16m) containers, embarking on a journey of over 4000 miles from Montreal to Nevada. It’s not just a logistical flex; it’s an eco-friendly one, too. Their logistics team claims they’re cutting carbon emissions by 32% compared to the regular all-road trucking and a jaw-dropping 90% less than if they went for a comparable flight. Not to mention – by 2030, Formula 1 aims to have net zero carbon emissions!
This isn’t just a win for Ferrari and Formula 1; it’s a game-changer showcasing how logistics can seriously cut down on carbon emissions for the whole industry. I look forward to reading about new ways companies raise the bar for our industry. If you’re #hungryforinnovation like these companies are, make sure to check out my counterparts to see how the logistics industry is growing in your sector.
Trends and Market Share Updates
According to the U.S. Bureau of Labor Statistics, the job scene in the U.S. is gearing up for some major action in the next decade. Brace yourself for 4.7 million new jobs coming our way, with health care and technical services taking the lead. But hey, it’s not all positive – retail and manufacturing might take a bit of a hit in the job department. And let’s talk about rent – still sky-high!
Now, for the good news – the job market’s looking at a 3% increase in wage and salary positions, and the gig economy is set to grow by 0.6% by 2032. The digital world is doing its thing, creating jobs in information, transportation, and warehousing. E-commerce is soaring, but sorry, retail jobs, it’s not your time to shine.
This Week in Logistics tells us that real estate is playing hard to get in most U.S. markets. Prologis warns companies might be in for some “significant rental rate increases” when renewing leases soon. The national vacancy rate hangs tight at 4.8%, way below the historical average during good times. And get this – even with more buildings popping up in 2023, the shortage of space means rent is still on the rise. In fact, U.S. rent growth skyrocketed by 85% from 2019 to Q3 2023.
Now, the job rollercoaster continues – automation’s causing a little dip in manufacturing jobs, but here comes the cavalry: green energy projects, electric vehicles, and semiconductors are riding in with positivity. North America held the highest revenue share in 2022 and should expect to maintain dominance by 2023 if these sustainability endeavors succeed. Yet, the Asia-Pacific region is projected to experience the highest Compound Annual Growth Rate (CAGR) of 24.0% from 2023 to 2032, emerging as the dominant force in the market throughout the forecast period.
Breaking it down further, in 2022, the transportation management segment ruled the digital logistics market, making up almost half of the total revenue. Why? Well, they hopped on the tech train with Internet of Things (IoT) sensors, blockchain for clear supply chain tracking, and artificial intelligence for smoother routes, making things more efficient and saving costs. But wait for it – the warehouse management segment is predicted to steal the show with a whopping Compound Annual Growth Rate (CAGR) of 23.3% from 2022 to 2032. It’s all thanks to artificial intelligence and machine learning that is predicting demand, nailing inventory accuracy, and fine-tuning routes for picking and shipping. Talk about a game-changer!
That’s all for this week. There is a lot of buzz in the air right now, so let us continue to understand the value of listening and collaboration as our industry grows. Stay hungry and check back with me again soon.
Week 60
Controversy Brews Over Texas DPS Inspections on Mexican Border, Impacting Trade and Traffic
The Texas Department of Public Safety (DPS) has rolled out a new safety inspection routine for all the big rigs coming in from Mexico through the Colombia Solidarity International Bridge in Laredo. They’ve cranked it up to 100% inspections, and we are seeing more harm than good.
Things down south are a bit chaotic with the surge in migrant crossings, but the new inspection protocol is causing major traffic delays that are starting to impact business. To make things worse, they’re not limiting these checks to Laredo – the rub started back in September when the TDPS kicked off inspections at the Ysleta-Zaragoza Intl. Bridge in El Paso and the Marcelino Serna port of entry in Tornillo, where wait times have reached a painful range of 6 to 16 hours!
To make matters juicier, these safety inspections in Laredo kicked off just three days after Mexican President Andres Manuel Lopez Obrador gave Texas Governor Greg Abbott a piece of his mind. He wasn’t too thrilled with the border safety inspections and claimed they were jamming up international trade, with over 19,000 trucks loaded with $1.9 billion worth of goods stuck waiting in Mexico.
Now, this latest crackdown is a huge deal because Laredo’s port of entry is like the superstar of international trade in the U.S., with a whopping $214 billion worth of goods passing through in the first eight months of this year, according to WorldCity.
“The Texas Trucking Association is sitting there with trucks idling, waiting for their cargo to come across the border, and it’s not happening. Distribution centers are waiting on their products, and factories in Texas are waiting on their finished goods and components. It’s affecting every sector of the Texas economy.” said Alan Russell, chairman and CEO of the Tecma Group.
U.S. Rep. Henry Cuellar, a Texan himself, isn’t holding back either, calling these inspections a waste of taxpayer dollars that are only hurting Laredo’s economy. It’s a tough pill to swallow for businesses in Laredo, Texas, and the entire nation.
Amidst all this, it’s important to remember that the Texas DPS inspections are just one piece of the puzzle. Mexican customs, U.S. Customs and Border Protection, and the U.S. Department of Transportation are also doing their own inspections. Nonetheless, these guys got it right when they said that pretty much everything related to Mexico’s trade on the U.S. side depends on Texas. Distribution centers, factories, you name it – they’re all feeling the squeeze.
As for Abbott and the Texas DPS, they’re keeping pretty tight-lipped about how effective these inspections are for curbing smuggling and how long they’ll keep them going. But here’s the good news – if you’re in a hurry to get your cargo into the U.S., I recommend swinging by the World Trade Bridge – they’re ready and open to receive shipments with cargo and loads, and you can check the wait times here. If you need a trusted partner, I can help you there too – check out how DB Schenker does transport in Mexico. In the meantime, stay tuned for more twists and turns in this border saga.
The Critical Race to Secure Funding for Soo Locks and Protecting America’s Industrial Backbone
Up in the Great Lakes and Canada waterways, the Soo Locks facilitate the annual passage of approximately 10,000 ships carrying essential goods to the Midwest and beyond. The biggest lock of them all, the Poe Lock, was built in the 1960s and is a crucial part of the US industrial supply chain. But here’s the thing – it keeps needing repairs; we’re talking 20 times in the past decade, with nine of those in just the last four years.
This is a big deal because if those locks aren’t working properly for a long time, it could mess up the whole domestic manufacturing scene and make things more expensive for consumers. You see, these locks are pretty much the only way to move certain important raw materials. Using trucks or trains would cost a ton of money. In fact, 13 out of 14 North American steel mills rely on these locks to bring iron ore from places like Minnesota and Michigan.
So, they’re finally doing something about it, and construction crews are working hard to fix things up, but here’s the big question: Can they get the money needed in time to avoid an economic mess? Considering the enormous national debt, the real challenge is getting the extra cash from a Congress that’s split on how much they should spend.
Currently, The Biden administration is channeling nearly $700 million from the $1 trillion infrastructure law into constructing a new lock, effectively doubling the project’s budget to $1.6 billion. But here’s the catch – they need twice that much to get it all done, and they want it done by 2030.
History makes it clear that getting funding for this is a long, complicated process. Congress said they’d work on the Soo Locks way back in 1986, but big money didn’t show up until 2015 when the Dept. of Homeland Security finally conducted a study that showed that the locks handle almost 90% of the iron ore in the country.
Trade associations and congressional delegations from Great Lakes states are championing the cause to keep the money flowing for the locks. John Walsh, the CEO of the Michigan Manufacturers Association, recognizes the urgency, remarking, “Ten years is a long time; we are going to have to keep this fire lit.”
I agree with John Walsh and hope things get ironed out quickly. If these locks are shut down for a while, it could throw a wrench in the steel business, cost millions of jobs, and shave an estimated $1.1 trillion off U.S. GDP. This project is not just about history; it’s about ensuring our industries and economy keep humming in the future. Hats off to the engineers and advocates who are #hungryforinnovation, and if you need alternate modes of transport, DB Schenker has you covered.
Week 59
US-Mexico Trade Dispute: Energy, Steel, and Environmental Concerns
Today, we’re diving into international trade and the recent discussions between the United States and Mexico – let’s get right into it!
U.S. trade official named Deputy Trade Representative Jayme White recently sat down with his Mexican counterpart, Alejandro Encinas, in Mexico. What was on the agenda? Well, it turns out there are some “serious concerns” on the U.S. side regarding Mexico’s energy measures. These concerns have lingered since consultations were held under the United States-Mexico-Canada Agreement (USMCA), a regional trade pact.
Now, you might be wondering what’s so concerning about Mexico’s energy measures. According to the U.S. Trade Representative’s (USTR) office, the United States believes these measures unfairly favor Mexican companies while discriminating against American ones. Not cool, right?
This issue has been brewing for a while. Back in July 2022, the U.S. and Canada decided they’d had enough and demanded dispute settlement talks with Mexico over its energy policy. And guess what? The U.S. is gearing up to escalate the dispute even further. It’s safe to say that they’re not backing down on this one. At the beginning of September, President Joe Biden’s administration asked U.S. energy companies to prepare affidavits documenting how Mexico’s protectionist policies disrupted their investments.
But that’s not all! White also expressed some worries about the sudden increase in U.S. imports of specific steel and aluminum products from Mexico. What’s bothering the U.S. in this case, is the “lack of transparency” when it comes to the origin of these products. It’s crucial for trade to be fair and transparent, after all.
During a press conference at their annual meeting in Washington, Henry Gordinier, who is the CEO of Tri-Arrows Aluminum and also the vice chairman of the Aluminum Association, mentioned that both the Aluminum Association and the Mexican Aluminum Association are urging the Mexican government to fulfill its commitments under the US-Mexico-Canada Agreement. They want the government to take significant steps to closely monitor metal imports in accordance with the requirements outlined in the 2020 trade agreement.
It’s a complex web of issues, from energy policies to steel imports and environmental concerns. I’ll be keeping an eye on how this unfolds, so stay tuned for more updates. As always, feel free to explore how DB Schenker does business in the USA and Mexico so we can move your freight at an affordable rate through the fluctuating economic climate.
California Gas Prices Soar, but Autonomous Trucks Get the Green Light
You know what they say, “Life is a highway,” and right now, in California, gas prices are soaring, but there’s some good news on the horizon for EV truckers who can steer clear of those price spikes.
So, here’s the deal: U.S. oil refineries are going through a rough patch with their equipment, and it’s causing quite a bit of trouble. These technical hiccups have shot up by over 50 percent in the first nine months of this year. On top of that, they’ve had to do more planned maintenance because they’ve been running their refineries at full throttle for a while. All of this adds up to less fuel on the market and you guessed it, higher fuel prices.
This whole saga began in the Midwest, where gas prices skyrocketed to a jaw-dropping $4 a gallon in Minnesota on September 11th. That’s the highest they’ve been in over a year! And guess what? The trouble didn’t stop there – it also spread to the West Coast. Right now, folks in Los Angeles and San Diego are forking over about $6 a gallon for gas. That’s the highest it’s been all year, according to the folks at AAA and GasBuddy.com, who keep a close watch on these things.
Now, when gas prices start climbing, what’s the natural response? People start thinking about buying that electric vehicle that’s been on their wish list since the last time gas prices put their budget in a pinch. Speaking of EVs… Remember the AB 316 Autonomous Trucking Regulation we talked about? Well, as expected, Governor Newsom shut it down. It’s a massive victory for the autonomous trucking industry.
According to Newsom, “Assembly Bill 316 is unnecessary for the regulation and oversight of heavy-duty autonomous vehicle technology in California, as existing law provides sufficient authority to create the appropriate regulatory framework.”
California Assemblymember Cecilia Aguiar-Curry, one of the bill’s authors, believes that “Requiring higher standards for AV safety isn’t just the right thing to do; it’s what more and more people across our state are demanding.” I’ve got to admit, she’s got a point. But hey, Innovation thrives on trial and error, and so far, we’re doing really well on the safety front. The world of AV trucking has always held itself to high standards since the beginning. That’s why there’s only one documented human injury involving an autonomous truck, and according to the Autonomous Vehicle Industry Association, it was caused by a human driver cutting off a self-driving truck on the highway.
So, let’s cross our fingers for the U.S. as they grapple with these soaring gas prices, and to those driverless trucks – congratulations on ditching the human babysitter! I look forward to sharing more news once the first fleets hit the road!
Week 58
Panama Canal Update
So, you might recall our previous chat about the Panama Canal and its supply chain struggles due to drought. Well, things are getting even more interesting. The prolonged drought is a growing concern, and if it continues for over a year, it could force the Panama Canal to revise its weather forecasts and impose further restrictions. The tricky part is that Panama’s dry season usually kicks in late November.
Now, they’re not talking about completely shutting down the canal, but as of Friday, there are 122 ships patiently waiting to make their way through. That’s actually an improvement from the 163 ships we saw back in August. However, the waiting time is still no picnic – it takes about 6 days for a vessel to transit in either direction. Usually, they can handle around 34 to 36 ships, but currently, it’s down to 32 ships, and the depth limit is still reduced to 44 feet instead of the usual 50.
The canal’s administrators are on the hunt for long-term solutions, but they might have to keep the daily passage restrictions to maintain that 44-foot depth. According to Ricaurte Vásquez of the Panama Canal Authority (ACP), This would affect a whopping 70% of shippers, and some container ships are adjusting their cargo weight due to the previous draft restrictions. They’re doing this by offloading around 600 to 800 containers at a single terminal in the Panama Port and then moving them to the opposite side using rail transport.
El Niño is even affecting Lake Gatun. It serves as a critical component of the canal’s operation by providing a water reservoir to help control water levels and facilitate ship transit.
In continued efforts to tackle this tricky scenario, the ACP reserved two slots in the Panamax locks specifically for smaller ships that can carry up to 5,000 containers, those 20-foot equivalent boxes. And here’s the interesting part: they’re not putting these slots up for auction. Nope, they’re giving them to the ships that have been waiting in line the longest. This change started on Tuesday and will keep going until September 30th.
Despite these hiccups, they’ve managed to keep disruptions relatively minimal, especially for container ships. However, the canal itself might take a financial hit, potentially losing around $200 million in revenue by 2024.
Given these circumstances, it’s crucial for shippers to stay in close communication with their partners and explore alternative routes, especially considering the upcoming holidays in China. It’s a bit of a logistics puzzle, but hey, adaptability is the name of the game! Hats off to the ACP for their diligent efforts in managing the situation and keeping the supply chain moving.
The AB 316 Showdown for Autonomous Trucking Regulation in California
So, you know how we humans have those hours-of-service regulations that limit our driving to just 11 hours in a 24-hour period? Well, it turns out robot drivers, or rather autonomous vehicles, get a free pass on that one— unless they’re in California.
The California Senate dropped a bombshell on Monday by passing a bill that basically says, “Hey, self-driving trucks, you can’t hit the road without a human babysitter!” Yep, you heard that right. This bill, known as AB 316, puts the brakes on driverless autonomous vehicles in the heavy-duty category. The catch is that a trained human safety operator has to be in the driver’s seat whenever one of these self-driving behemoths takes to the public roads.
Now, before you start worrying too much, remember that AB 316 still needs a nod from Gov. Gavin Newsom to become law. Newsom is known to be quite friendly with the tech crowd, so there’s a good chance he might give this bill the thumbs-down. Actually, one of his key advisors took a stand earlier by expressing strong opposition to the notion of slowing down the progress of autonomous trucking. This advisor made a case that these limitations might disrupt the current regulations, throw a wrench in supply chains, and potentially affect California’s economic well-being.
On the flip side, the champions of this bill say it’s all about keeping a tight grip on when those safety drivers can be taken out of the picture. Their main gig is road safety and job security for our trusty human truck drivers. They want to ensure that before the robots take the wheel solo, we have all our road safety ducks in a row.
It’s quite the delicate balancing act between pushing the boundaries of innovation and ensuring safety. While it can be frustrating when innovation faces roadblocks, it’s comforting to see that safety remains a top priority. After all, our goal is for this era of autonomous trucking to be marked by success and responsibility, not by risks and recklessness.
So, there you have it, folks – a bit of a showdown in California over who takes the wheel of those massive rigs. And let’s not forget, we’ve still got some work ahead on ramping up those supercharging power stations. I can hardly believe it’s been four years since our first autonomous and fully electric truck hit the road! With all this exciting progress, I’m feeling pretty optimistic that we’re about to witness some major strides in the electric vehicle department in just the next year.
That’s a wrap for this week. Stay tuned to see how this unfolds in the tech-savvy Golden State.
Week 57
Panama Canal Disruptions
There is a pretty serious situation going on with the Panama Canal right now. You know that waterway where ships pass through, and it’s a big deal for global trade. Well, it turns out that around 14,000 ships, which make up about 6% of the world’s maritime trade, use the Panama Canal each year. But things are getting a bit complicated this year due to an unusually long drought hitting Panama. The water levels in the region haven’t been this low since 1950, and it’s causing some major problems.
The problem starts with the weather. El Niño is bringing warm and dry air to the area, making the drought stick around much longer than anyone expected, at least until early 2024. The lack of rainfall is causing a serious shortage of fresh water for the canal, and that’s a big issue. Panama will need to do a juggling act to ensure there’s enough water for people to drink and to keep the canal running smoothly for ships.
Now, because of all this, there’s a domino effect happening in the supply chain. The water levels are so low that ships are having trouble passing through the canal. To deal with this, the Panama Canal Authority has decided to reduce the number of available bookings for ships passing through the locks. They’re also changing how they allocate slots for different types of ships. This is causing some congestion and delays for the cargo ships, and as of August 17, there’s a backlog of 130 ships waiting to get through.
In response to all of this, some of the shipping companies are adding a special fee called the Panama Canal Charge. They’re charging anywhere from $300 to $500 per container because of the delays and difficulties caused by the water shortage.
“We have implemented procedures such as cross-fillings, cross-spilling, and short chamber lockage’s in the Panama locks and increased the use of water-saving basins in the Neopanamax locks. Additionally, we have minimized direction changes between northbound and southbound transits in Gatun locks, maximized tandem lockage’s and have suspended hydroelectric power generation, among other controls.” explained the Panama Canal Administrator, Ricaurte Vásquez Morales.
The bottom line is that the Panama Canal Authority is working hard to make things better. They’re teaming up with experts, including the United States Corps of Engineers, to come up with solutions that will keep the canal operating for the next 50 years without causing too much strain on the water supply. It’s definitely a challenging situation, but they’re doing their best to handle it.
Rails to Success: Elevating Your Shipping Game
If you’re knee-deep in the world of shipping, aiming to up the ante on efficiency, reliability, and cost savings, then getting your rail operations finely tuned is an absolute must. Skimping on the right strategies could lead to some hefty bills – we’re talking major bucks – all thanks to delayed deliveries, production standstills, and a chaotic mess all around.
I came across three really cool opportunities that SupplyChainDive recently talked about. They are spot on with these strategies, so let me help break them down because they often slip under the radar when it comes to beefing up rail operations.
First off, we’ve got the concept of Inbound Empty Visibility. With supply chains adopting leaner strategies and businesses working to manage their workforce more intelligently, keeping tabs on when those empty railcars are pulling in has become a game-changer for rail shippers. This insight isn’t just about knowing when things are arriving; it’s about orchestrating production schedules, optimizing workforce allocation, and keeping a vigilant eye on both railcar and inventory management.
Then there’s the matter of Estimated Time(s) of Arrival (ETAs). Let’s face it, regardless of where your cargo is destined, if you’re clueless about when it’s going to land, you’re in a tight spot. ETAs have always been a bit of a puzzle. Various factors – think different types of trains, unpredictable weather – can throw them off track. If your tracking system is merely averaging out historical travel times, it’s probably missing the mark more often than not. And let’s be clear: inaccurate ETAs can spark a whole cascade of problems – missed deliveries, supply chain glitches, and a heap of other woes. But wait, enter the scene: artificial intelligence (AI). AI can chomp through colossal data sets to forecast future events – like when your shipment will roll in, even if things go sideways.
Lastly, let’s dig into Cycle/Dwell Analytics. When you’re in the rail shipping game, it’s crucial to keep a finger on the performance pulse. Are your trips taking the scenic route in terms of time? How long are your railcars kicking back at different stops? Are certain locations throwing a wrench into the gears? This is where the magic of cycle time reports comes into play. They serve as your compass for gauging whether your shipments are staying on course, if your railcars are loitering more than usual at certain junctures, and much more. It’s akin to having X-ray vision for spotting hiccups and ensuring the entire operation runs like a well-oiled machine.
So, there you have it – a trifecta of insider insights for supercharging your rail operations. Remember, staying on top of those railcar arrivals, predicting ETA with precision, and staying vigilant about how your operation is cruising can mark the difference between a good shipping game and a great one. If you’re hungry for more tips, we’re here to help. Get things rolling smoothly and on time with our land shipping solutions. Say goodbye to booking hassles – manage everything in one place, from pickup to drop-off, thanks to our worldwide land transport network.
Week 56
Navigating Turbulence: The Mexican Cargo Flight Shift from MEX to AIFA
Recent challenges between the Mexican government and the airline industry have emerged since President Andrés Manuel López Obrador (AMLO) took the helm in late 2018. One major item on his agenda that has caused concern was hitting the brakes on a new partially built Mexico City airport.
AMLO intends to turn the old Santa Lucia Air Force base into the Felipe Ángeles International Airport (AIFA), which would team up with the existing Mexico City airport (MEX) and the one in Toluca (TLC).
This is quite the ambitious plan as AIFA is quite a distance from the city, and getting around using public transportation is no walk in the park. Mexico City’s main airport is still stuck in a traffic jam and bursting at the seams.
A recent development shook things up earlier this year when AMLO boldly announced that all cargo flights must relocate from MEX to AIFA – a September 1st deadline now approaching rapidly. With that date just around the corner, it’s crucial to keep this in mind if you’re involved in shipping through Mexico.
This situation has thrown the cargo sector into disarray. It’s not as simple as redirecting flights to a new airport. The required infrastructure, although quickly set up, is not fully operational. Even though cargo can still be transported in passenger aircraft bellies at MEX, airlines that manage both dedicated freighters and passenger planes with belly cargo will find themselves juggling cargo operations at both airports. What adds to the challenge is coordinating the movement of freight between these two airports.
Airlines are reluctantly making the shift regardless of how they really feel about it. The US, on the other hand, isn’t exactly thrilled. Attempts at discussions between the US and Mexican governments have been made. Even Transportation Secretary Buttigieg paid a visit to Mexico at one point. Why the fuss? It’s all about setting a precedent.
You see, the US and Mexico have these “open skies” agreements, allowing pretty much unhindered access for each other’s airlines. There are exceptions due to slot controls or airport congestion, but these agreements aren’t meant to be casually contradicted by one party.
This isn’t a situation likely to resolve itself anytime soon. Generally, countries around the world aren’t too thrilled when the US tries to play boss. But if agreements aren’t respected, what’s the point of having them in the first place? We’ll see who blinks first.
Warehouse Construction Poised for a Comeback in 2024
In the ever-changing business world, something exciting is happening in the world of warehousing. Recent insights from Interact Analysis suggest that warehouses are making a comeback, hinting at big changes in how e-commerce works and how supply chains are managed.
Warehouse construction took a bit of a break in 2022 and 2023. Slower e-commerce growth and higher interest rates played a part in this. Businesses were a bit cautious with their investments in real estate during this time.
But guess what? E-commerce is picking up speed again and getting back to how it was before the pandemic. Here’s the twist – even though e-commerce sales might look like they’re shrinking compared to total retail sales, they’re actually doing well. This mysterious change suggests that the need for more storage space might be on the rise.
Supply chains are changing too. The old “just-in-time” approach is shifting to a smarter “just-in-case” strategy. The disruptions caused by COVID-19 made businesses think about managing risks differently. They’re planning for the unexpected, which means they need more storage space. This shift is expected to lead to more warehouses being built in 2024 and 2025. And this, in turn, will have an impact on the world of warehouse automation.
When it comes to automation, industry experts foresee an increase in investments during the latter part of 2023 and throughout 2024. By 2025, we could see a strong comeback in automation revenues. The move towards “just-in-case” supply chains, especially in the United States, is a big reason for this. This shift is likely to create a demand for specialized storage systems.
With the changes in e-commerce, shifts in supply chain strategies, and the power of automation coming together, the warehouse industry is gearing up for exciting times. If you are #hungryforinnovation, I highly recommend checking out some of the fascinating developments in Digital Warehousing at DB Schenker. It’s a transformational journey that’s shaping how business is done for years to come.
Week 55
Challenges & Progress: Analysis of 2023 Supply Chain Disruptions
Resilinc highlighted the top ten disturbances during the first half of 2023, which included factory fires, mergers & acquisitions, business sales, leadership transitions, factory disruptions, legal actions, labor disruptions, cyber-attacks, port disruptions, and recalls. Oh, is that all? Let’s highlight a few.
Labor disruptions (strikes, layoffs, protests) took the lead, showing a significant 136% increase compared to the same period in 2022. Check out some of my earlier updates on the labor disputes in the port of Long Beach to get more insight.
Factory fires were also a notable concern, being the top supply chain disruption with 1,642 instances. Industries like healthcare, high-tech, automotive, aerospace, and food & beverage felt the brunt of these disruptions. On the upside, there was a 20% decline in factory fires compared to the previous year, so it sounds like industry safety protocols are being taken more seriously.
There were also some alarming increases in financial disruptions. Bankruptcies shot up by 196%, and profit warnings increased by a staggering 300% compared to the same period in 2022. Corporate restructuring interruptions also rose by 125% year-on-year.
Manufacturing disturbances (shutdowns, production halts, warnings/citations, accidents also saw a 30% increase compared to the previous year. Meanwhile, product recalls rose by 66% during the first half of 2023.
The interesting part about all these disruptions is that this marks a 3% increase compared to the previous year, which actually suggests that the supply chain is gradually stabilizing! I believe we may even see a drop in delays fairly soon now that the US Dept. of Labor has officially launched their national emphasis program; so, continue on to my next post for more details.
US Department of Labor Unveils Latest Initiative
Latest announcement from the U.S. Department of Labor! They just launched a national emphasis program aimed at making workplaces in warehouses, distribution centers, and high-risk retail places safer for employees.
It’s no secret that the warehousing and distribution industry has been booming in the past decade, with over 1.9 million people working in this field. However, the Bureau of Labor Statistics found that injury and illness rates in these places are higher compared to other private industries, and some even have rates twice as high.
The main goal of this program is to create long-lasting changes in workplace safety. Assistant Secretary for Occupational Safety and Health, Doug Parker, explained that OSHA wants employers to take serious steps in addressing the root causes of worker injuries and prioritize worker health and safety.
Over the next three years, OSHA will carry out thorough safety inspections that focus on different aspects like powered industrial vehicle operations, material handling and storage, walking and working surfaces, means of egress, and fire protection. They’ll also be inspecting retail establishments with high injury rates, with a particular focus on storage and loading areas. And if they discover any other potential violations, they might expand the inspection.
“Our enforcement efforts are designed to do one thing: lead to permanent change in workplace safety,” said Assistant Secretary for Occupational Safety and Health Doug Parker. “This emphasis program allows OSHA to direct resources to establishments where evidence shows employers must be more intentional in addressing the root causes of worker injuries and align their business practices with the goal to ensure worker health and safety.”On top of that, OSHA will be looking into heat and ergonomic hazards during these inspections. They’re really covering all the bases to ensure workplaces are as safe as possible.
Safety is a big deal in logistics! It’s all about reducing accidents, saving lives, and making things run smoother. When we prioritize safety, we’re setting ourselves up for long-term success and building trust with our customers and partners. Oh, and don’t forget – state plans need to adopt this program or come up with a similarly effective one to comply with the federal model. Safety first, right? If you need some inspiration, check out my Week 44 post on using IoT to revolutionize your business.
Week 54
Diesel Prices Drop
Great news on Diesel prices! According to the latest info from the government, the average price of diesel fuel is now at $3.767 per gallon across the whole country, which is actually the lowest it’s been since January 2022. Even more impressive? For the past nine weeks in a row, retail diesel prices have managed to stay below $4 per gallon. Talk about some relief at the pumps!
You might be wondering why diesel should be on your radar. Well, here’s the deal: Diesel has emerged as the top choice for cost-effective and reliable transportation of heavy loads, thanks to its exceptional fuel efficiency, impressive hauling capacity, durability, and wide availability. These qualities make diesel an ideal option for businesses seeking transportation solutions that can handle substantial loads without breaking the bank.
Now, let’s talk fuel prices in specific regions. It seems like the Gulf Coast is the place to be during summertime. They’ve got the cheapest diesel prices around, sitting at $3.468 per gallon as of July 3rd, as per the EIA. However, if you’re on the West Coast, you might want to brace yourself because they’ve got the highest prices. The government tracker reveals an average of $4.412 per gallon in all West Coast states. But hey, if you exclude California from the equation, it drops slightly to $4.109 per gallon.
So, are these prices here to stay? According to Patrick De Haan, an expert in petroleum analysis at GasBuddy, oil prices have been experiencing considerable pressure recently due to uncertainties in the global economy.
As the summer season progresses and more people embark on travel, De Haan predicts a surge in fuel demand, which could exert additional upward pressure on gasoline prices. He cautions that we might witness gasoline prices facing increased strain as we approach the final stages of summer next month. On a more optimistic note, De Haan also suggests the potential for gasoline prices to drop below $3 per gallon during the fall season!
Shipping companies have a golden opportunity right now to save on their operational budget and create new business. This is a great time to offer some amazing deals to customers with lower shipping rates or reinvest those savings in exciting areas like fleet expansion or adopting environmentally-friendly technologies. If you need ideas on going green, check out Joe Jaska’s latest post on sustainability trends in the transport sector.
Check back with us soon for all the latest logistics; in the meantime, take advantage of these prices and hit the road!
I-95 and the Road to Reopening
The Interstate-95 bridge is back in business! Just two weeks ago, the Pennsylvania highway was shut down after severe fire damage from an unfortunate incident with a tanker truck crash. It’s truly astonishing when you consider the magnitude of the challenge, as the road typically handles an average daily traffic count of nearly 160,000 vehicles, with approximately 8-9% of these being commercial trucks.
Why is this highway a big deal? Well, as per a spokesperson for the trade group, it’s because those vehicles now have to endure a detour of over 40 miles. And here’s the kicker: the detour is mostly on non-Interstate highways, and, believe it or not, there are more than 60 traffic lights along the way.
The Pennsylvania Department of Transportation (PennDOT) enlisted the help of two contractors who demolished the old bridge in just four days. These guys were like lightning! Governor Josh Shapiro gave credit to the fantastic collaboration between contractors, material suppliers, union workers, and local, state, and federal officials. I encourage you to check out this time lapse to get an idea of the level of effort.
Accidents happen – and It’s important to realize the risks and impacts when they do. Consider taking a look at your own supply chain and evaluate whether or not you would be able to handle disruptions like another I-95 incident. Being truly prepared requires implementing risk management strategies, diversifying suppliers geographically, identifying alternative transportation options, optimizing inventory, and balancing manufacturing strategies. While unforeseen events can’t be predicted, building resiliency and contingency plans into your supply chain helps mitigate their impact.
All in all, it was an impressive and speedy effort to get that highway back up and running. Pennsylvania, it’s time to start your engines because we have freight to move. DB Schenker tips our hat to everyone involved for their hard work and cooperation.
Week 53
Supply Chain Management Professionals Pivot
Supply chain management experts are currently confronted with difficulties, as stated in a recent DispatchTrack report. The report reveals that 72% of supply chain leaders have encountered a range of obstacles within their organizations, including the following:
- 59% are grappling with the rising costs of fuel.
- 46% are dealing with inflationary pressures.
- 41% are experiencing delays that are beyond their control.
- 38% are facing unpredictability in their operations.
- 32% are struggling with shortages of drivers.
- 30% have lost business due to prevailing economic conditions.
Despite these hurdles, the report conveyed an optimistic outlook for the future. 61% of these supply chain leaders expressed confidence in the business landscape of 2023 and are proactively gearing up for the future by recognizing the importance of embracing new strategies.
With over half of the respondents planning to accelerate technology adoption, these leaders understand that leveraging advanced solutions is crucial to streamline operations, boost efficiency, and maintain a competitive edge.
Moreover, supply chain leaders are keenly aware of the significance of expanding delivery capacity to meet growing customer demands. Approximately 55% of respondents prioritize hiring more drivers to strengthen their workforce and effectively address driver shortages. By investing in human capital, organizations can enhance their delivery capabilities and ensure a seamless flow of goods, not to mention enhancing customer satisfaction and loyalty.
As these supply chain leaders forge ahead, DB Schenker stands ready to support their ambitions. Our innovative and responsive logistics solutions empower businesses to align their consumer goods supply chains with ever-evolving customer expectations. By partnering with DB Schenker, you gain access to a trusted logistics provider committed to driving the industry forward through resilience, adaptability, and a forward-thinking approach.
It is always important to position your organization for success in the dynamic world of supply chain management, so stay tuned for more updates from me in the coming weeks. In the meantime, check out my next story to find out how SMBs in the US are tackling some of these challenges head-on right now.
Shifting Tides as U.S. SMBs Embrace Nearshoring
Going with the trend of pivoting and navigating supply chain challenges, a recent survey conducted by Capterra, revealed that 74% of 300 small and midsize businesses (SMBs) in the United States plan to reshore their suppliers to North America. This shift, known as nearshoring, aims to bring operations closer to home and shorten supply chains.
The industries leading the way in nearshoring include consumer electronics, food/beverage, and automotive, while industries like apparel and cosmetics are slower to adopt this trend. The motivation behind this move stems from the desire to address three main challenges businesses face: unpredictable delivery times, inconsistent product quality, and sustainability issues.
Olivia Montgomery, an associate principal supply chain analyst at Capterra states, “It’s clear that SMBs believe in a ‘shorten to strengthen’ approach for their supply chains… In fact, 92% of SMBs believe it’s crucial to shorten supply chains for long-term success. As manufacturing activity picks up across North America, supply chain leaders should take this opportunity to refine their nearshoring strategy.”
What’s the catch? Well, switching vendors is a complex and time-consuming process that requires careful planning and consideration as the transition poses risks and complexities that need to be navigated strategically.
To determine fair pricing when evaluating potential vendors, SMBs commonly compare prices directly from other suppliers (66%) and review market pricing data from financial infrastructures such as the Chicago Mercantile Exchange (55%). In addition to pricing concerns, the survey suggests considering other factors such as experience, expertise, production capacity, and quality standards when choosing suppliers.
With a growing emphasis on environmental responsibility across the world, I believe nearshoring will enable companies to reduce their carbon footprint by minimizing long-distance transportation and associated emissions. This shift towards localized suppliers supports environmental sustainability goals and helps meet the increasing consumer demand for eco-friendly products and practices. If you’re curious how DB Schenker does their part, check out one of the ways we can help your business reduce emissions through effective recyclables logistics and circular thinking.
Whether this nearshoring trend continues, or trails off, be sure to check back with me for all the latest in supply chain news and everything logistics.
Week 52
DB Schenker Expands Operations in ALogis Calamba, Driving Logistics Growth for the US and Philippines
DB Schenker has recently reached an agreement with AyalaLand Logistics Holdings Corp. (ALLHC). They will be leasing 18,000 square meters of space in their impressive ready-built facility in ALogis Calamba, just a 50-minute drive from the Batangas International Seaport.
The United States is the Philippines’ third-largest trading partner and remains one of the key foreign investors in the country. They have a longstanding trade and investment relationship that began in 1989 with the signing of a Trade and Investment Framework Agreement.
Over the past 26 years, the Philippines’ exports to the United States have shown consistent growth, from $7.17 billion in 1995 to $13.3 billion in 2021. The Philippines is an important supplier of various products to the United States, such as semiconductors, computer peripherals, and automobile parts, while the United States exports agricultural goods, machinery, electronics, and other goods to the Philippines.
Irma Diaz-Guevara, the Director of Contract Logistics at DB Schenker, emphasized the significance of the partnership, stating, “ALogis is viewed by DB Schenker as one of our strategic partners in this market. We are confident that ALogis can build strategic facilities that intend to showcase the quality of operations of DB Schenker in contract logistics.”
It’s great to witness such strong and mutually beneficial economic cooperation between these two nations. The future holds great promise for their continued partnership, and here at DB Schenker, we are always excited to help our customers reach new territories. If you’re looking for more partnership opportunities like this, check out one of my latest stories about the KLC 2 Warehouse opening in South Korea.
West Coast Port Shortages Continue
Important updates regarding the west coast port shortage — The situation is becoming more severe as the number of containers waiting outside the port limits has seen a significant increase, as reported by MarineTraffic data.
During the week of June 5, the Port of Oakland experienced a notable rise in the number of TEUs (ton equivalent units) waiting off port limits, jumping from 25,266 to 35,153. Similarly, at the Ports of Los Angeles and Long Beach, the average TEUs waiting outside the port limits surged from 21,297 to 51,228. To put it into perspective, according to customs data, these containers hold an estimated value of $5.2 billion, considering each container’s value to be around $61,000.
While ocean carriers haven’t indicated any sailings being canceled, Kyle Henderson, CEO of Vizion, expressed concern, “If these labor disputes continue to affect port efficiency, we could see backlogs similar to those experienced during the pandemic.”
Skilled workers are still not showing up for duty, and certain port terminals are neglecting to post work orders for additional labor. The Pacific Maritime Association faces challenges in verifying the fulfillment of terminal orders due to restricted access to the union hall. If these job postings were displayed, they would likely reveal unfilled positions.
The International Longshore and Warehouse Union also refused to dispatch lashers at the Ports of Los Angeles and Long Beach. On one occasion, 260 out of 900 ordered jobs were left unfilled, and 559 longshore workers were denied work opportunities. Fortunately, the situation improved when the ILWU ceased withholding labor, effectively averting a major supply chain crisis.
Key sectors of the U.S. economy are still urging the Biden administration to intervene and broker a labor agreement. The estimated cost to the U.S. economy could be nearly half a billion dollars per day, with a larger strike along the West Coast potentially reaching $1 billion daily.
In the meantime, shippers are still exploring alternative supply chain options in their quest for reliability and resilience. According to industry experts, the longer this situation persists, the more severe the repercussions will be for shippers and terminals.
Unfortunately, The ILWU has chosen not to comment, implementing a media blackout during the ongoing labor talks. Nonetheless, I will monitor the situation, so please stay tuned for further updates as this story unfolds! And rest assured, our team is always ready to manage risk and evaluate alternative routes.
Week 51
Modernizing Southern Border Ports for Economic Success
During the 2023 North American Leaders’ Summit, Presidents Joe Biden and Andrés Manuel López Obrador made a strong commitment to boost trade between the US and Mexico. The US will invest a whopping $3.4 billion from the bipartisan infrastructure package to upgrade 26 land ports of entry, while Mexico has agreed to contribute $1.5 billion. As industries recover from the COVID-19 border shutdown, experts are optimistic about the positive changes these investments will bring.
It’s clear that the southern border plays a vital role in international crossings and has a major impact on both economies. The trade between these two countries is so massive that it exceeds $1 million per minute.
According to a February 2023 analysis by the Atlantic Council’s Adrienne Arsht Latin America Center, it was discovered that by reducing wait times at the border by just 10 minutes, we could witness an additional $25.9 million worth of goods to enter the United States every month. And that’s not all! It would also result in an extra $547,000 in spending across the four border states.
U.S. Transportation Secretary Pete Buttigieg recognizes the importance of the southern land ports and has prioritized them for infrastructure funding. He believes it is all about tackling the challenges and fostering economic growth.
However, while the funding for ports of entry is exciting, there are concerns about how to successfully utilize it. Historically, communication between the US and Mexico on constructing ports of entry has been problematic due to various agencies and protocols on both sides of the border.
Diplomat Earl Anthony Wayne wants us to understand how crucial it is to coordinate, plan, and implement things properly to achieve positive outcomes and modernize the border infrastructure.
At DB Schenker, we highly value our partners in Mexico, who enable us to access new markets. That’s why we are always eager to support new procedures that ensure our customers’ freight’s safe and efficient transportation. There is a solid need to streamline border processes and I believe that the data is clear that continued funding will be a great investment for both countries.
Marine Corps Commandant Berger Puts Spotlight on Logistics as Top Priority
During an event at the Brooking Institution, Marine Corps commandant Gen. David Berger highlighted the importance maintaining competitive advantages as a world leading country. He emphasized that “logistics, logistics, logistics” should be the focus. War games underlined the need for the Marine Corps to adopt a more naval, lighter, and distributed approach across its operations.
Berger shared an example of the Landing Ship Medium to highlight the frustrating delays caused by the Pentagon’s acquisition process. Berger emphasized the necessity of medium ships to transport goods efficiently, stating, “We need medium ships to move things around… we’ve got to move quickly.” He explained that some shipping delays could last nearly a year.
To enhance intra-theater operations, the Marine Corps intends to purchase around 18 to 35 of these vessels. In the Fiscal Year 2024 budget, the Marine Corps requested $255.8 billion, about $11 billion over last year’s approved budget, with approximately $15 million allocated for program research and development.
So, what are the benefits? Control stocks, distribution, and equipment levels.
U.S. Transportation Command is strongly emphasizing logistics to support the joint force, recognizing the need for a web-like approach rather than a simple chain. Adapting to the web-like approach and embracing technological advancements will enable logistics professionals to stay at the forefront of the industry, effectively meet the changing demands of customers and partners, and contribute to the success of joint force operations.
Speaking of innovation, we’ve been talking about how Air Force Gen. Jacqueline VanOvost, the TRANSCOM commander, is all for using machine learning and artificial intelligence to make the most of the massive amounts of data coming our way. It’s crucial to stand by our allies, so it’ll be fascinating to see how Japan, Australia, and the Philippines handle these changes to safeguard their security in the Indo-Pacific.
When questioned about the origins of Force Design 2030, Berger emphasized that the ideas didn’t solely originate from him—They were a necessary response to changing circumstances. Logistics play a huge role in making our nation more secure, improving our ability to respond to disasters, boosting the economy, and supporting humanitarian efforts.
Sending our best wishes to CMC Berger as he perseveres in securing funding for his 2024 initiatives! DB Schenker is proud to stand behind CMC Berger’s efforts in advancing coastal business safety, ensuring secure transportation of our customer’s goods. Rest assured; I’ll keep you informed about any developments in the funding process. Semper Fi!
Week 50
California Port Challenges and the Path to a Comeback
California’s $2.8 trillion freight industry is facing challenges that could threaten its position as a major ocean gateway. Southern California’s ports are losing market share due to the pandemic-induced cargo congestion, labor talks at West Coast ports, near-shoring of factory production, and shifting US demographics.
We recently discussed negotiations between West Coast dockworkers and employers – which have now been going on for almost a year. It appears the impact has finally begun to surface. Many businesses are redirecting their cargo away from LA’s San Pedro Bay to ensure reliability and some importers have even chosen to divert their cargo to other ports until a labor agreement is reached.
So, what steps can be taken to ensure a strong comeback? Port of LA Executive Director, Gene Seroka, advocated for a share of the $17 billion in federal dollars designated to ports and waterways. Seroka intends to use the infrastructure funds to improve their prospects, digitalization, workforce training, and purchase cleaner equipment. The freight industry is a crucial driver of California’s economy, supporting one in five jobs and contributing significantly to the state’s GDP. This funding would be critical to their comeback.
Even while navigating these changes, California continues to possess significant strengths. The LA-Long Beach ports still offer the most direct route from the Asia-Pacific region and maintain double the capacity of their closest competitor. While shippers are not currently contemplating a return to Southern California, their stance may evolve over time, influenced by the outcome of labor negotiations and infrastructure improvements.
While challenges persist, I believe the freight industry in California is resilient and adaptable. With a focus on stability, reliability, and innovation, the industry is well-positioned to navigate the changing dynamics of global trade, maintain its role as a vital gateway, and continue driving economic growth for the nation.
KLC 2 Warehouse Opening
DB Schenker Korea is going all-in to support their customers in Northeast Asia. They’ve just opened the impressive KLC 2 warehouse in South Korea’s Incheon Free Economic Zone, marking a key logistics hub for their global network.
This spacious facility offers over 40,000 square meters of storage space, and it’s not just about the size. With certifications like TAPA A and LEED GOLD, along with adherence to NFPA standards, DB Schenker prioritizes top-notch quality. Dr. Niklas Wilmking, CEO of DB Schenker Asia Pacific, announced that “KLC 2 is one of the largest investments in the history of DB Schenker in the APAC region”.
In my other post this week, I mentioned the challenges California ports are facing. I am optimistic that this investment will help drive business back to those ports. According to OEC, In March 2023, South Korea exported $9.77B and imported $6.69B from the United States.
South Korea shipped off over $2B in cars, tractors, trucks, machinery, mechanical appliances, and electrical machinery, highlighting the high value placed on South Korean products in the American market. South Korea’s imports from the United States reflected a nearly $3B demand for advanced technology and equipment, particularly in mineral fuels, machinery, and electrical machinery.
The development and growth of the new warehouse will undoubtedly be an exciting journey to witness. The South Korea Free Economic Zones are designed to foster balanced regional growth and enhance both local and national commercial competition. By conducting business in the Incheon Free Economic Zone, DB Schenker is actively contributing to creating dynamic social and economic change while leading global trends. This investment not only positions DB Schenker as a key player but also reflects our commitment to shaping the future of trade and logistics.
Week 49
Canadian Shipping Adopts Next-Gen Technology
The shipping sector in British Columbia is trying out artificial intelligence with ChatGPT, and it’s already showing some impressive results. This module was able to pinpoint some major takeaways about how artificial intelligence is changing the game when it comes to global goods movement.
Canadian companies like Seaspan corp. are “AI-enabling” their vessels’ connectivity and software so that they will have the flexibility to deploy AI in the future. Others are still developing their strategy for using AI and its impact on the shipping industry. It is fascinating to see international maritime shipping lines, known for their conservatism and competitiveness, gradually embracing AI technology in their operations, despite their reluctance to share data. Sharing data is crucial for efficient business operations, and AI has the potential to simplify the process.
While AI can provide solutions for digitization and data sharing, it lacks the negotiating algorithms required to convince shipping’s major players to agree on the optimal approach. Seaspan Corp’s Chief Operating Officer, Torsten Pedersen, acknowledges that AI could improve decision-making, ease the workload and safety for crew onboard a vessel, and fundamentally change how shipping operates. Still, at the same time, the company is aware of the need to balance business benefits with cybersecurity concerns.
To make AI work for the shipping industry, we must have some tough conversations, maybe even marriage counseling. Why? Well, according to Chris Hall, the president of the Shipping Federation of Canada, AI is becoming the most important tool in the game. Everyone involved in the supply chain, from shippers to carriers to logistics providers, is jumping on board with AI in some form or another. It’s everywhere you look, and we must figure out how to make it work for us.
It is promising to see many key players taking steps towards adopting this technology and working towards a more efficient and secure supply chain industry. I’m curious about what impact AI will have on the future of shipping and logistics and how we can ensure that we’re prepared for any potential challenges along the way.
The Growth of Transportation Management Systems and the Future of the Industry
On the topic of automation, According to the latest analysis by Emergen Research, the global transportation management system (TMS) market is expected to grow to nearly $45 billion by 2030 and is expected to grow at a Compound Annual Growth Rate (CAGR) of 19% from 2023 to 2033.
The report also reveals that North America dominated the market in 2022 while Asia Pacific is expected to have the highest CAGR from 2023 to 2033, making it the fastest-growing region. This growth is primarily driven by strengthening bilateral trade relations between various countries and increased use of cloud-based software solutions.
These cloud solutions are helping the logistics and transportation industry produce better customer service, increased productivity, improved tracking of deliveries and inventory, and lower shipping costs. Yes, our team at DB Schenker is a strong component. If you are not already using our Connect 4.0 to get instant rates and arrange online bookings, please check it out. You can compare prices and timings in real-time, save time, book your shipment online, and stay ahead with seamless tracking.
In the present era of international trade, interactions between individuals, businesses, and organizations are becoming more complex, with supply chains extending beyond international borders. This is why multinational logistics companies stay current and adopt innovative solutions. Failure to do so could result in increased costs, decreased productivity, and, ultimately, the loss of valuable customers. Adapting and implementing cutting-edge technologies can make all the difference in staying ahead of the curve and securing long-term success.
Week 48
Stop & Shop Chain Partners with FlashFood
In today’s world, we waste an incredible amount of food every year. Fortunately, technology is now being utilized to tackle this issue head-on, with an app called FlashFood leading the charge.
The app shows consumers where they can buy groceries nearing their best-by date up to 50% off. The supermarket chain, Stop & Shop announced that they are adding the FlashFood program to more than 60 of their stores across Long Island, New York City, Westchester County, and the Hudson Valley. This is a big deal for consumers’ wallets and the environment.
“Our partnership with Flashfood has been a successful addition to our food waste diversion programs, helping us prevent more than 140,000 pounds of food from ending up in landfills since 2021,” said Gordon Reid, President of Stop & Shop. That is an estimated 265,998 pounds of CO2e that was prevented from being released into the atmosphere – about the equivalent of driving 300,000 miles in an average car.
While reducing wasted food on store shelves is a significant accomplishment, Retailers should look toward the planning phase and implement technologies that can help with demand and forecasting. Even the most basic investments like tracking systems can help find where products are at any given time and their status (e.g., temperature, time on the road).
DB Schenker uses some pretty sophisticated Sensor Technology we call Smartbox. This provides shippers with a detailed overview of their freight – around the clock, worldwide, and with real-time tracking. Some benefits include online temperature and humidity monitoring, geofencing, and multiple detections such as force, door alarms, inside movement, light, vibration, and intrusion.
There are plenty of ways to get involved in reducing our carbon footprint, and we can all work towards a more sustainable future by utilizing innovative technologies. You can check out some of our latest innovation and digitalization insights here.
Port Worker Shortage and Crucial Labor Negotiations Hit Southern California
Southern California dockworkers got back to work after a shutdown that lasted nearly 24 hours at the Los Angeles and Long Beach ports. The shutdown occurred after several thousand workers attended their monthly member meeting on a Thursday night, followed by the Good Friday observance.
International Longshore and Warehouse Union (ILWU) Local 13 and The Pacific Maritime Assn. are currently negotiating a new contract that will cover 22,0000 dock workers and 29 West Coast ports. The agreement is focused on wages and the role of automation and is expected to prevent a situation like this in the future.
The PMA alleged that the absence of the workers was an outcome of a deliberate strategy by the ILWU to abstain from work while the contract negotiations were protracted. ILWU rebutted with a statement of their own, claiming that their members are “still hard at work and remain committed to moving the nations cargo” and it was merely an opportunity for union members to celebrate the religious holiday with their families.
The Los Angeles and Long Beach dock ports make up almost 40% of US imports from Asia, and this dilemma on Easter weekend will likely have permanent effects that will drive business to the East Coast. “It’s likely that some of that business will never come back,” said O’Connell, who works for Beacon Economics. According to O’Connell, the stoppage will likely cause a ripple effect across various employment sectors and industries indirectly associated with the transportation of goods across the area.
The pressure is on to renew this contract, which expired in July 2022. You might just be hearing about this now because both sides have agreed not to publicly discuss the collective bargaining process, as per the understanding articulated in a joint statement issued in February. The parties have tentatively agreed on certain pivotal aspects, such as health benefits, and are unwavering in their determination to reach a final agreement.
We will keep you updated with all the latest developments in these negotiations and will be hopeful for a positive outcome. “One of the best ways to persuade others is with your ears – by listening to them.” This quote is by former FBI hostage negotiator Chris Voss.
Week 47
Congress Approves Plan for Sealift Recapitalization
Back in 2019, Congress purchased seven used vessels as part of the Sealift Recapitalization effort to modernize the United States naval fleet. Last week, General Jacqueline Desiree Van Ovost met before the Subcommittee on Seapower and Projection Forces and the Subcommittee on Readiness to emphasize the importance of continued funding to preserve the United States’ logistical dominance against other countries.
Van Ovost stressed that the U.S. military is a generation late in recapitalizing the ready sealift fleet to meet U.S. national objectives. 37 out of 50 large roll-on/roll-off vessels from the sealift fleet will be retiring within the next decade. The general noted she wants to continue buying used vessels at a consistent rate of two per year, and perhaps at a higher rate if the market cools and the government can afford to recapitalize faster. Van Ovost requested that the Secretary of Defense be given discretionary authority to purchase foreign-built, used ships under favorable market conditions without limitation on the number.
There are a few core reasons why I believe Van Ovost deserves continued funding. Beyond maintaining military readiness and projecting power abroad, the United States need to think about supporting global trade and how we can effectively provide humanitarian assistance and disaster relief. Additionally, if congress continues investing in air refueling fleets and fostering the partnership of the US Airforce and Transcom, we have a greater chance of maintaining leverage in battle networks, resourcing cryptographic modernization, cybersecurity, and ensuring PNT resilience. Future operations are going to require high degrees of battlespace awareness and we need to be able to leverage data to align scarce mobility resources with the greatest strategic need.
To some, the sealift recapitalization effort may appear to be a mere procurement action, however, I believe this endeavor holds critical significance for both national security and global stability. Stable and secure environments are imperative for our industry to function effectively and efficiently, and disruptions to global trade or conflicts that disrupt supply chains can have far-reaching consequences for businesses and economies around the world.
DB Schenker tips our hat to General Van Ovost and we will keep you updated with the latest updates on this recapitalization effort. If you didn’t catch it last time, be sure to read my post on FastRig Wing-Sails for Cargo Ships to learn more about recent maritime developments.
Digit 4.0, The Humanoid Robot
You may have heard of Digit, but you couldn’t put a face to the name. That was probably because the most obvious difference between the new Digit 4.0 robot and its predecessors is the addition of a head with animated eyes. The goal of this update is to make it easier for humans and this humanoid robot to work side by side.
Agility Robotics created Digit, the first human-centric, multi-purpose robot made for logistics work. Digit is intended to function safely in areas designed for humans, accompanying them wherever they go and performing practical tasks, starting with the management of bulk materials in distribution centers and warehouses. They’ll even send representatives to your site to get a good grasp of your workflow and issues and demonstrate how Digit can be of help.
This is attractive to any company whose laborers are struggling with mental health, injury, or fatigue from their workload. Damion Shelton, co-founder, and CEO of Agility Robotics explained the enormous interest in Digit from multinational logistics companies and how they are working closely with them to understand how they want to use Digit to improve warehouse and supply chain operations.
Jonathan Hurst, CTO of Agility Robotics, explains how developing robots capable of imitating human movements is a significant undertaking, but it’s essential to mimic the human body’s structure. Digit will lift “anything that a person would handle … Think about things that are larger than a small box, but smaller than a giant bag of dog food.” says Shelton.
I’m hopeful that by creating more intelligent and robust humanoid robots we can increase efficiency, cost savings, and the ability to perform dangerous or physically demanding tasks without putting human workers at risk. In our previous discussion, we highlighted how Zipline, a drone delivery service, was utilizing its resources to accelerate the delivery of blood and critical medical supplies. I’m impressed with the approach Agility Robotics is taking with their creation of Digit and I am optimistic about seeing Digit being utilized in the healthcare industry or providing aid to emergency responders – land or sea.
Ensuring the safe and secure delivery of every load is a top priority for DB Schenker, and it’s vital that we keep that promise to our customers, employees, and partners. So, would you be able to work side by side with Digit 4.0?
Week 46
Exploring the Potential of FastRig Wing-Sails on Cargo Ships
There is a new initiative aiming to move towards wind power shipping, but with a modern twist that can potentially revolutionize the industry. The University of Southampton’s Marine and Maritime Institute (SMMI), supported by Innovate U.K., aims to explore the applicability of FastRig wing-sails on cargo ships.
They call this 2-year project “The Winds of Change,” and the goal is to develop cutting-edge software tools to predict the performance of modern vessels equipped with these sails at sea.
They plan to use a retractable FastRig wing manufactured by Smart Green Shipping that will stand 20 meters tall! The first vessel to be fitted with this novel technology will be the British 105-meter Pacific Grebe.
Lead scientist Dr. Joseph Banks from SMMI comments, “Cargo ships powered by wind is obviously nothing new … [however], the technology can be retrofitted to pre-existing vessels to quickly reduce emissions from existing cargo ships and help create quieter, emission-free ships in the future.” Banks’ research team will study the intricate interplay between the wing sails and ship hydrodynamics to make precise estimates regarding the vessel’s performance, which they will then compare to the demo cargo ship.
The University of Southampton’s Marine and Maritime Institute experts are optimistic that their innovative tool will pave the way for further investment in the U.K.’s marine technology industry. Ultimately, wind power coupled with cutting-edge software and well-engineered equipment is currently the most expedient method for the sector to reduce its carbon footprint significantly. They hope this will inspire the next generation to explore the exciting field of Maritime Engineering.
Sails present an opportunity to take the green shipping initiative to an entirely new level. We have previously discussed using a biofuel component to reduce our carbon footprint with MSC Mediterranean Shipping Company, so it is exciting to hear other organizations getting on the same page. It is important to acknowledge that this endeavor may pose risks, safety, and efficiency challenges, but we remain hopeful and supportive of the University of Southampton’s maritime researchers.
Sustainable Drone Solutions
Zipline is a logistics startup that specializes in autonomous electric delivery drones. The company began its operations in 2014 in Rwanda to deliver medical supplies to clinics and hospitals. Today, Zipline has broadened its scope, operating in six additional countries, and has already flown a collective 38 million miles, intending to make quick aerial deliveries a convenient everyday option for customers across the United States.
Zipline unveiled its latest aircraft on Wednesday, the P2 Zip or Platform 2, which has a maximum cargo capacity of eight pounds and can operate within a ten-mile range. According to Zipline CEO and co-founder Keller Rinaudo Cliffton, this weight capacity is crucial because a significant proportion of e-commerce packages in the U.S. weigh five pounds or less.
Although Zipline takes pride in its accomplishments for the general consumer, the company remains focused on the bigger picture of bringing sustainable solutions to front-line workers. According to a Lancet-published study, hospitals utilizing Zipline’s services reduced their yearly blood supply wastage by 67%. Zipline will continue to explore this practice in numerous countries, as the availability of blood and blood products remains problematic due to the intricate supply chain of perishable products, time-sensitive access, and variations in demand at the hospital level.
Zipline is on course to complete approximately 1 million deliveries by the end of 2023 and is projecting to operate more flights per year than many commercial airlines by 2025! I can only imagine Zipline will continue making technical improvements tailored to the needs of its consumers so long as it can continue operating with green energy.
The potential applications for drone technology are vast and varied, and we are only beginning to scratch the surface. It was just three years ago that DB Schenker invested in Volocopter.
As technology advances and becomes more accessible, we can expect to see drones being used in many different industries and situations that would be too dangerous or impractical for humans to undertake. Whether it’s delivering vital medical supplies to remote areas, monitoring and repairing critical infrastructure, or capturing stunning aerial footage, drones are poised to revolutionize the way we work and live.
The future looks bright for this exciting and innovative technology! Are you incorporating the newest technologies into your enterprise? Stay tuned for our next update on the latest advancements in our industry.
Week 45
DB Schenker & Mediterranean Shipping Company: Green Partnership Expansion
Big news is happening. DB Schenker is expanding its green ocean freight services by partnering with MSC Mediterranean Shipping Company, the world’s largest container line. This partnership agreement represents a significant milestone as one of the largest carbon-insetting biofuel deals between a shipping company and a freight forwarder.
DB Schenker has agreed to utilize 12,000 metric tons of biofuel components for all its consolidated cargo, including less-than-container load (LCL), full-container-load (FCL), and refrigerated containers (reefer containers) from MSC Mediterranean Shipping Company. These second-generation biofuels will derive from recycled cooking oil instead of fossil-based marine fuel.
By blending the fuel at 20-30%, around 50,000 metric tons of biofuel will be utilized for MSC’s container ships. That issufficient to reduce 35,000 metric tons of CO2 equivalents (CO2e) throughout the market’s entire production chain. This includes emissions from drilling for oil, refining it into gasoline or diesel fuel, transporting it to distribution centers, and burning it in an engine.
The MSC Biofuel Solution is intended to benefit all parties involved, enabling them to transition from merely having goals to taking tangible action. My colleague Thorsten Meincke, Global Board Member for Air & Ocean Freight at DB Schenker,said, “the more customers demand climate neutrality throughout supply chains, the faster we achieve clean container ocean freight.”
I love to see the innovation in the eco-friendly business models, and it will be exciting to see customers booking regular net-zero ocean transport. Clients who opt for biodiesel will receive an annual certificate that documents the extent to which their carbon footprint has been reduced, providing them with a tangible representation of the impact they are having. We are optimistic that the data provided in these reports will encourage businesses to evolve toward a greener future and continue to reduce their carbon emissions.
We look forward to working with future partners who wish to adopt more environmentally friendly solutions into their supply chains. Stay updated and discover more about DB Schenker’s dedication to achieving a carbon-zero objective by checking in with us regularly for the latest updates.
New Record – Canadian imports from China reached $100 billion in 2022.
According to data from Statistics Canada, the country’s imports from China hit a new record of $100.03 billion in the past year, marking a 16% increase from $86 billion in 2021. The biggest category of imports were consumer goods, at $31 billion, followed by electronic and electrical equipment, worth $28 billion.
Economists and industry experts believe the business community is moving beyond the political tensions between the two countries. They believe the new focus is on the growing demand for goods and services and the re-establishment of established supply chains in the wake of the pandemic. This trend underscores the resilience of the Canadian economy and its ability to adapt to changing circumstances.
StatCan also reported that Canadian exports to China reached a historic high of $27.9 billion, recovering from challenges around political leaders in China back in 2018. Rumors continue to speculate that there are high tensions between Ottawa and Beijing, but the Consulate of China in Vancouver recently denied a report claiming there were attempts to remove candidates deemed unfavorable to Beijing.
Despite these ongoing geopolitical uncertainties, the trade relationship between Canada and China continues to strengthen, providing mutual benefits for both nations. James Brander, an economics professor at the University of British Columbia’s Sauder school of business, believes “economic or trade flows, and economic activity in general, isn’t affected very much by the political tensions unless there is some explicit policy”. Businesses often prioritize their bottom line and seek cost-effective solutions, which may lead them to continue trading with countries even amidst political tensions.
We hope to see the trend of imports between Canada and China remain steady and create more opportunities for logistics companies to transport these goods. Improved relations between any country can lead to the development of new trade routes, which in turn can create more opportunities for companies to expand their operations and tap into new markets. Moreover, positive relationships can increase the overall stability of the global trade system, reducing the risk of disruptions and trade tensions that can negatively impact the industry.
DB Schenker is always looking for ways to connect new and existing customers worldwide. Read more about our clientele and how we can implement cross-trade solutions for your business.
Week 44
How IoT is revolutionizing the Future of Logistics
The Internet of Things (IoT) has the potential to revolutionize supply chain management by providing unprecedented levels of visibility and real-time data. Recent advancements have shown that IoT in supply chain management can help companies improve efficiency, reduce costs, and enhance the customer experience.
In today’s world, the only way to know someone doesn’t have a cell phone is if they tell you they’re living the off-the-grid life! Juniper Research’s report from last year states that the global count of roaming IoT connections will reach 1.8 billion by 2027. However, even at a 500% yearly growth rate, users who rely on cellular connectivity to handle logistics across various regions and countries still face challenges, especially the smaller players. Since eSIM hit the market, we have seen drastic improvements in network connectivity industry-wide. ESIM technology increases processing capacity while enabling substantial reductions in the size of the circuit complexity, manufacturing expenses, and power requirements.
The 4G and 5G rollouts introduced the concept of over-the-air (OTA) updates which have significantly improved the process of remotely distributing new software, configuration settings, and encryption keys to devices such as mobile phones, tablets, set-top boxes, cars, and secure voice communication equipment. These are devices our team uses to connect and do business every day, so it is encouraging and exciting to see our industry’s increasing speed, security, and visibility.
Having a reliable network for our fleets is crucial for efficiency and safety. I believe it is important for everyone in the industry to be aware of their strengths, weaknesses, and opportunities in their operations; leveraging IoT’s power can help you fill in the gaps and gain a competitive advantage. We look forward to and embrace technological advancements that will help us improve our security and operations.
Check out some of our most recent innovations here.
Reverse logistics in the Supply Chain
As more people shop online and the world aims for a net-zero future, dealing with returned products (reverse logistics) is becoming increasingly crucial for retailers. This market is growing, thanks to the massive rise of e-commerce during the pandemic, when in-store shopping was no longer possible.
Regular logistics is the process of moving resources – people, materials, inventory, and equipment from the source to storage. Reverse logistics switches this model so that products move from a customer back to the original seller or manufacturer. This usually occurs for incorrect orders, damages, or defects.
The returns market even has a vital role to play in recycling. Let’s say; for example, when someone unsubscribes from home broadband or on-demand TV, return logistics helps ensure that hardware like routers and decoders can be reused or recycled and not end up in landfill.
According to the National Retail Association in the US, retailers incur an average of $165 million in merchandise returns for every $1 billion in sales. Online purchases generally have a return rate of 20-30%, while in-store purchases typically have a return rate of 8-10%.
There are companies today that provide a service that makes it easy for retailers and manufacturers to maximize recovery on returns by using reverse commerce. Of course, DB Schenker can support your full reverse logistics, aftermarket, and repair services – see more details here.
Our contract logistics can also be integrated with third parties selling second-hand goods to buyers who intend to repair, reuse, recycle, or resell them. Furthermore, Reverse logistics providers are increasingly focusing on wholesale, as purchasing from a wholesale platform reduces shipping emissions by sourcing items from a single facility, involves only one journey to the retailer, and lowers costs for retailers by offering second-hand or refurbished products.
Seeing the environmentally friendly yet competitive developments in the supply chain is fantastic. It’s a clear indication that businesses are taking their responsibility toward the environment seriously and are actively seeking innovative ways to reduce their carbon footprint while maintaining a high standard of service. DB Schenker also offers a broad range of transport and contract logistics solutions that cater to diverse industries. See for yourself!
Week 43
Going Up
The NASA Deep Space Logistics Project at Kennedy Space Center is responsible for delivering the necessary cargo and payloads for NASA astronauts as they venture into space. Due to the sensitive nature of the journey to space, every kilogram counts, and the team explains that most of the packaging can outweigh the contents inside. The challenge of packaging becomes more complex when there is a need to arrange and protect numerous small items from 3gs of force and adverse environmental conditions. Unfortunately, the production of durable packaging results in an overwhelming increase in packaging waste. Deep Space Logistics is investigating ways to convert this cargo packaging waste and other materials into useful items through its technology, says Smith.
Dubbed by NASA as “Point-of-use Recycling for Optimized Space-Age Logistics,” the solution needs to be efficient, compact, user-friendly, and require minimal upkeep.
The recycled products must be practical for the crew and reduce the need for future supply deliveries. Some of the most recent ideas include 3D printing waste into objects such as usable items for the team, such as Ziploc bags, plastic containers, paper towels, wipes, gloves, radiation shielding, tissue paper, or other paper or plastic products made from recycled packaging materials or other common waste streams. Another idea is converting waste plastic into hydrogen through catalytic conversion.
Organizations are utilizing innovative solutions, including AI and machine learning, to optimize their supply chains and achieve various objectives. The recent shipping disruptions have shown the importance of having resilient supply chains, and technology can play a crucial role in achieving this. By investing in supply chain technology, companies can improve operations and increase customer satisfaction.
How will the logistics industry adopt this approach in a way that is suitable for them? Currently, LTL truckloads are maximizing their space by stacking pallets carefully, like a game of Tetris. With the advancement of 3D printing and manufacturing, will this method continue, or will innovation bring change? By designing custom cargo crates that fit precisely to each customer’s order, shipping warehouses can eliminate the risk of miscommunication between brokers and drivers about the available space in their trucks. As time goes on, we should begin to see point-of-use recycling providing an effective solution for individuals and households to utilize the unwanted packaging waste generated in our own homes.
Will you let AI take the wheel, or will you do it yourself? Check out more of our content to see how the industry adapts daily.
Truckers on the Road to Recovery: Inventory Boost Ahead!
The Cass Freight Index, which tracks the trucking and rail shipments in the United States, decreased by 3.3% from November to December, marking the fourth consecutive monthly decrease. The index finished the year with a 3.9% decrease compared to December 2021.
According to Tom Nightingale, CEO of AFS Logistics, trucking is currently declining due to a change in consumer buying behavior. The fall in volume is affecting the profits of major transportation companies.
Can they make a comeback? According to carrier executives, customers have indicated that they plan to return to a more typical ordering pattern in 2023 and increase their volumes in preparation for the fall shopping season. The past year’s volatile retail spending and distribution led to overstocking, but retailers are now looking to get their inventories in line. U.S. consumers redirected their spending towards services instead of goods. The increase in inflation resulted in reduced demand and reduced sales, and surplus inventory at major retailers such as Walmart, Target, and Kohls.
The feeling of recovery is the consensus among industry leaders. David Parker, the CEO of Covenant Logistics Group Inc. based in Tennessee, predicts that consumers will resume spending habits when the weather improves. He believes this shift will occur in the second quarter when inventory levels have been corrected. Helena Helmersson, CEO of H&M Hennes & Mauritz AB, stated in a recent interview that the first quarter of the year would be challenging. Still, things are expected to improve, particularly in the latter half of the year.
This means that if you oversee logistics, you must stay one step ahead as demand and supply change to ensure you can deliver your goods on time and at the best rates. Stay tuned for more insights and updates from DB Schenker.
Week 42
West Coast Labor Talks Showing No Progress
According to people familiar with the West Coast port labor negotiations, the parties have yet to agree on regional issues, which has delayed further discussion. There has been a growing sense of frustration from the industries affected as workers and retailers wait for answers regarding major contract provisions such as wages or automation.
The talks cover more than 22,000 dockworkers in 29 ports on the West Coast. Some are working without a contract that expired this past July. Retailers are also re-routing their imports, diverting their goods to ports on the East and Gulf Coasts.
When asked about the negotiations’ effects on the industry, Jonathan Gold, vice president for supply chain at the National Retail Federation, said, “The uncertainty regarding the contract has everybody on edge.”
By this time, retailers usually start planning their supply chain for the fall peak shipping season. We can expect those retailers to ship their goods to the East throughout the year as they prepare for the peak season without using the West Coast ports.
What mitigation should you be considering? We will continue to monitor the situation and have several routes and modes of transport which can offer great alternative solutions when used together.
How is Technology Changing the Logistics Industry?
With logistics practices and technology changing faster than we’ve expected, IT strategy is now business strategy, and that speed of execution will define winners and losers.
At last year’s Deliver 2022 conference, Lio Ron, CEO of Uber Freight, said, “The logistics industry was built for a world that we no longer live in.” As scary as that may seem, he might be on to something. Technology like automation and machine learning are making a significant impact on the industry. As companies in the industry start to digitize networks, we can see greater efficiencies and can mitigate for more resilience.
Ultimately, retailers need to look for logistics partners with technological advancement when choosing their partners. This will lead to more transparency in the industry and successful collaboration between partners. You can check out the latest technology and digitization we’re involved in here.
Week 41
SAF Stakeholders Invest Heavily into Sustainable Fuels
Government leaders and manufacturers are racing for ways to scale sustainable fuel supply and lower prices as shippers opt out of air cargo flights.
Sustainable aviation fuel prices have skyrocketed over the past few months due to lower supply and higher demand. Some shippers and forwarders have since started taking on higher costs to mitigate the demand.
Bollore Logistics, for example, purchased just short of 10 million liters of SAF for 2022, which sold out in July, forcing them to double their investment this year. This is a trend across the air freight industry, making stakeholders across the industry ramp up to find more sustainable opportunities with biofuels.
With sustainable airline fuel being nearly three times more expensive than Jet Fuel and only being produced in select U.S. locations, companies such as United Airlines and Freed Pins Fuels are actively driving up capacity for 2023.
Government leaders have started pushing for incentives to increase production as well. States like California have recently introduced some initiatives. Their low carbon fuel standard is expected to encourage the use and production of SAF. The federal government has announced something similar, committing to increase production, scaling annually by 2030.
We’re all about sustainability – you can check out some of our initiatives here.
Economic and Geo-Political Disruptions Have Exposed Weaknesses in the Supply Chain
The latest McKinsey Global Institute (MGI) report on globalization details the economic and political disruptions that have exposed significant weaknesses in the global supply chain. According to the report, we are expected to see new trade patterns precisely due to the impact on the sourcing of goods and interdependencies.
In the section on Complication of Concentration in Global Trade, “in a highly interconnected global economy, every region relies on imports of critical goods, and none can be considered self-sufficient.” with such inter-dependency, supply chains evolved “in the most efficient manner,” but major disruptions over the past three years have highlighted their vulnerability.
The report goes into even more detail regarding companies and governments creating interdependencies, the benefits of a “scenario analysis”, and even doubling down on “concentrated sources that offer a competitive advantage.”
With the supply chain experiencing a few significant disruptions since the pandemic, supply chain vulnerabilities are continuously being highlighted, resulting in companies reevaluating long-standing trade ties and focusing more on the diversification of their goods.
These intuitive insights on what’s to come in the 2023 supply chain are crucial to moving forward and overcoming future economic and geo-political disruptions.
Week 40
North American Countries Collaborate to Bring More Resilience to The Supply Chain
This past week leaders of the United States, Mexico, and Canada met in Mexico City to discuss regional supply chain efforts, among other priorities. Before the meeting, the three countries shared mutual intentions to collaborate on efforts to bring more of the supply chain to the western hemisphere.
Last year, the U.S. passed the CHIPS Act, which incentivizes semiconductor manufacturing investments. U.S. Secretary of Commerce Gina Raimondo met with Mexico’s Economy Secretary, Raquel Buenrostro, during that same time to discuss the relocation of the trade from Asia to North America and regional supply chain enhancements.
The conversation was continued last week when President Joe Biden discussed ways to increase manufacturing across North America with Canada’s Prime Minister, Justin Trudeau, the President of Mexico, Andrés Manuel López Obrador, and other counterparts. The meeting highlighted industries that will impact, such as electric vehicles and semiconductors.
According to an official readout from the White House, President Biden and the President Andrés Manuel López Obrador of Mexico discussed “greater economic integration to increase productive capacity and promote inclusive growth, including incentives under the CHIPS and Science Act to promote investment in semiconductor clusters along the border.” Biden and Trudeau also emphasized strengthening the supply chain and working together to prevent another disruption.
Creating resilience in the supply chain is their top priority. I’m looking forward to seeing how these efforts are brought to life as manufacturers continue to move west.
China Seeks Growth as Supply Chain Moves West
China has seen its most significant export decline since February 2020. China Customs reported a 9.9% drop in exports from a year earlier. The month before that, China saw an 8.7% drop. This significant slowdown signifies that the pandemic boom is coming to an end.
Last year, China’s economy grew at the slowest pace in over twenty years. Chief Asia-Pacific economist at Moody’s Analytics, Steve Cochrane, reports that he can’t imagine exports being a strong driver in 2023. He claims, “there’s still so much uncertainty in [demand from] the developed economies.”
With a shaky economy, buyers are spending less on big-ticket items. Chinese manufacturers feel that impact, already reporting the slowdown as consumers opt out of purchasing made-in-China goods such as computers or furniture.
Although we are waiting on Chinese officials to release gross domestic product figures on Tuesday, we can expect to see even more slowdown in Chinese exports as interest rates increase on the rise and spending slows in 2023.
Week 39
Supply Still Chain Managers Skeptical of West Coast Ports
Over the past few weeks, we have seen the West Coast supply chain landscape change and adjust to the low volume of containers in their ports. With a key labor deal and potential strike threat in the works, among other concerns, logistics and supply chain managers are wary of what’s to come once the deal is complete.
In CBNC’s latest supply chain survey, CBNC asked 341 logistics managers if their companies were diverting trade from West Coast ports. 40% of those managers answered “Yes” with concerns about the ongoing negotiations, a new California law, AB 5 “Gig worker” impacting the trucking industry, and rail delays.
Negotiations between the International Longshore and Warehouse Union and their employer, Pacific Maritime Association, have been ongoing since the Spring of 2022. California’s AB5 “gig worker” law concerns those surveyed as well. Concerning drivers’ employment status, the gig worker law has provided another threat to the Western supply chain.
These unresolved fears have migrated trade away from the western ports, leading companies in the supply chain to divert to the east. Now, we are seeing ports fill up on the East and Gulf ports, more Port-to-rail trade, and a new sense of normalcy for logistics managers.
I don’t expect the Supply Chain to return to normal with a higher volume of containers in West Coast ports anytime soon. However, I expect companies to get used to a new trade system where the East Coast ports dominate. That is until the West Coast ports have mitigated those industry concerns.
Recession Fears Hit the Supply Chain
Fears of a recession have slowed companies down from finding new storage and distribution space as we enter the new year. In the last quarter of 2022, companies leased 132 million square feet of industrial space across the U.S., down 23% from the previous quarter. According to a new report from Cushman & Wakefield, that was the second straight quarterly decline in leasing last year.
We’re seeing this decrease after the pandemic pushed the supply chain, and everything else, into unprecedented times. During the Covid-19 pandemic, companies pushed to find as much warehouse space as possible to be close to their consumers. Now, those same companies have been pulling back on their inventory needs and are rethinking their logistics expansion plans.
Amazon, for example, doubled the size of its fulfillment network over the past two years and has since paired back on space. Last week, Amazon reported that they are gearing up to lay off more than 18,000 employees as they seek cuts as sales slow.
We expect to see more of this as slow down for retailers over the next few quarters. So how can you best mitigate risk, and change quickly to market demands? One of the simplest ways is to outsource your warehouse and fulfillment with DB Schenker Contract Logistics.
Week 38
Steep Container Volumes Continue to Decline Across the U.S.
Ports across the country reported steep declines in container volumes this past November, which could signify a downturn in imports and what’s to come in 2023.
As big box retailers pull back orders due to buyer behavior, executives from retailers like Walmart Inc and Costco Wholesale Corp., have reported customers spending less on big-ticket items due to rising interest rates and inflation.
According to the Commerce Department, November retail sales have shown sharp declines. It’s reported that shoppers are spending more on healthcare, groceries, and eating out instead of purchasing those high-ticket items or clothing.
As a result, the supply chain is experiencing a decline in imports. Descartes Datamyne, a data analysis group, reported the most significant October-to-November imports decline since 2016, with a 12% decrease. The supply chain analysis group reported 1.95 million imported containers last month, 19.4% of last year’s level, the lowest monthly volume since June 2020.
I expect this trend to continue into the new year. Most big box retailers were prepared with stocked-up inventory, maxing out their supply chain levels in response to the previous pandemic and as consumers continue to worry more about their health and less about their retail purchases.
Three Companies Have Lost Importing Rights in the U.S.
In the last week of December, U.S. Customs and Border Protection barred imports from three companies that are assumed to be using forced laborers unless proven otherwise.
With the U.S. leading a growing movement to prevent goods made with forced labor reaching store shelves, Cutsoms and Border Protection cracked down on Jingde Trading Ltd., Rixin Foods Ltd., and Zhejiang Sunrise Garment Group Co.
This broad crackdown stems from China’s Xinijang region, where goods are presumably made with forced labor by North Korean workers. North Korean workers are being used in dozens of countries, such as China, with manufacturers taking up to 90% of their earnings. And as of December 5, 2022, Customs has begun detaining merchandise from the three reported companies.
The agency, among other federal institutions and lawmakers, have started pushing local companies to source supplies elsewhere as the U.S. starts to block importers using force-labor-linked suppliers.
An agency representative, AnnMarie Highsmith, reported, “CBP is committed to keeping America’s supply chains free of goods produced with forced labor and to eliminating this horrific practice… Legally and morally, we cannot allow these goods into our commerce.”
As decision-makers in the supply chain, it’s our responsibility to continue CBP’s efforts, sourcing from suppliers that do not use forced labor and can provide proof of their labor’s origin. 2023 is the year of ethical supply chains!
Week 37
Say Goodbye to Private Charters
Private charters are no longer worth the expense to big box retailers. According to the WSJ, Costco, Home Depot, and Party City, among others, have pulled back from using ship charters and switched to container ships amid lower shipping rates and more space on ships.
After seeing space clear up in global shipping over the past year, these companies are reevaluating their charters. For instance, Costco’s CFO, Richard Galanti, reported a $93 million bill last quarter, mostly related to reducing their charters. Other retailers, such as Home Depot, ended their use of chartered vessels altogether.
Chartered ships were once an affordable alternative due to the high demand in 2021. So much so, that even the nation’s largest importers struggled to secure space on cargo ships. With rising rates of $20,000 or more to send a container across the Pacific, chartered ships were simply the next best thing.
Party City, for instance, used chartered vessels during 2021 to prepare for their holiday rush. Unfortunately for them, this alternative did not work out so well. Party City took a hit, with their ships running into massive backups in the Californian ports after leaving Asia late. It caused Party City to arrive too late for Halloween, some coming just in time for the following holidays. Since then, Party City continued using charters into 2022, with a new route, before switching to container services during the year’s second half.
Other companies tried running their own vessels, but most encountered complications over logistics and returning empty containers to Asia. As leaders in the supply chain, it’s important to note the changes that come with the ever-changing logistics landscape and forecast accordingly.
Container Dwell Fees in LA to End in January 2023
The San Pedro Bay ports of Long Beach and Los Angeles have opted to end the Container Dwell Fee Program in response to the underwhelming cargo volume on the West Coast.
Official, Port of Los Angeles Executive Director Gene Seroka, announces, “We’ve got wide open capacity here in Los Angeles.”
Port Officials teamed up with the Biden Administration last year to tackle the congestion hitting the Los Angeles and Long Beach ports, which resulted in shipping containers being moved to the East Coast and Gulf ports to avoid the heavy Dwell Fees. Now, those ports are full, leaving the West Coast ports empty and needing business.
Seroka stated, “I said when we launched this program that I hoped we would never collect a dime because that would mean that containers were moving off our docks, and that’s exactly what occurred.”
With this policy in place, ocean carriers could be charged for container dwelling at the terminal longer than nine days. While shippers avoided the West Coast over the uncertainty in cost, Port Officials plan to phase out the option to collect a Container Dwell fee on January 24, 2023. They are now more focused on rebalancing their docks, hoping to bring containers back to the west coast.
This is exciting news for the Supply Chain as suppliers opt to move their shipments back west to avoid more delays from backups in the east. I look forward to seeing more variety across the United States ports as we head into 2023!
Week 36
Lower Ocean Shipping Rates Reported Across the U.S.
A decline in shipping rates? What does that mean as we enter the new year? As 2022 ends, some of the world’s largest ocean carriers discuss their optimistic 2023 predictions.
Lower rates have been reported across the U.S., suggesting the supply chain is softening. The November 2022 supply chain activity was “softer coast to coast.” Los Angeles, for instance, saw a 24% drop in imports. Long Beach’s imports fell 28%, and Savannah’s were down 7.6%.
Despite the dropping rates, leaders predict supply chain costs could improve as we transition into 2023. In addition, some expect an uptick in shipping rates come late January, indicating that container rates are “way below cost again” and suggesting a rebound in the coming months.
With consumption rates in the U.S. continuing to be quite strong, some in the industry are forecasting that we can still be optimistic if there’ll be a recession, as it should be fairly short.
What does this mean for shipping rates over the next year? First, weaker volumes mean less shipping time, so the supply chain is most likely to level out after the recent period of unprecedented times.
My takeaway is that this benefits any logistics manager without tight delivery windows. Furthermore, regarding upcoming rate changes, working with a logistics partner that can help you see into the future – rather than one that needs to fill a container – gives you a competitive advantage.
The Supply Chain Is Slowing Down Solar Power Expansion in the U.S.
Despite the Inflation Reduction Act (IRA), trade and supply chain barriers continue to slow progress in the U.S. solar power expansion. The IRA was designed to boost clean energy capacity rollouts, but the solar market declines in the third quarter continued.
The U.S. Solar Market Insight Q4 2022 report found that the United States added 4.6 gigawatts (GW) of new solar capacity in the third quarter of this year but was still down by 17% compared to the same period of 2021.
As industry leaders fight to build an ethical supply chain, they find supply bottlenecks and trade restrictions preventing manufacturers from getting the necessary equipment to invest in U.S. facilities.
Abigail Ross Hopper, president and CEO of SEIA, says, “America’s clean energy economy hindered by its own trade actions,” as she explains what’s hindering SEIA. “…We cannot afford to waste time tinkering with trade laws as the climate threat looms.”
For example, power plant developers lack solar panels due to new laws banning imports manufactured in China using forced labor. Although this act is necessary to build a more ethical supply chain, the industry is experiencing a slowdown due to the Uyghur Forced Labor Prevention Act (UFLPA), affecting China’s Xinjiang Uyghur Autonomous Region (XUAR).
While XUAR is home to half the world’s polysilicon, used in solar panels, this reveals a problem as companies must provide a track record on the supply chain to continue ethically continue the supply chain.
According to Michelle Davis, principal analyst and lead author of the U.S. Solar Market Insight Q4 2022 report, explains, “It has proven more difficult and time-consuming to provide the proper evidence to comply with the UFLPA, further delaying equipment delivery to the U.S.,”
While this highlights what is happening in the solar panel space, imagine, for a minute, if ethical supply chains could affect you in the future. We watch this space closely and update our trade logistics clients regularly – find out more here.
Week 35
Visibility into Carbon Emission Hot Spots
Accenture’s newest research report analyzes emission reductions in companies around the world. Those fighting climate change are experiencing a lack of visibility due to Scope 3 emissions. What’s the best way to implement sustainability into your supply chain?
The Thought you knew the Scope 3 issues in your supply chain? Think again. report from Accenture takes a deep dive into carbon-intensive “hot spots” in supply chains, identifying where the problem is and how to use the data to serve the environment better. Accenture also provides a data model to help companies predict where the most impactful emissions are in the supply chain.
Kris Timmermans, Accenture’s Supply Chain lead notes, reports, “Scope 3 emissions are elusive and difficult to track in today’s complex supply chains. Many large companies don’t even know the suppliers beyond Tier 1, let alone have any sort of influence or control over them or their sustainability practices, which is why we have seen little progress in reductions to date….”
With preventative cautions in mind, Accenture’s new data model in the report shows upstream emissions by country, industry, and supplier tier, making it easier to identify where the emissions are coming from. The report reveals that upstream emissions “tend to occur deeper in the supplier network,” which can help leaders tackle the emissions with the right supplier.
“Tapping into carbon intelligence is an important piece of the puzzle in converting those ambitions into action and impact.” Peter Lacy, Accenture’s Sustainability Services lead and chief responsibility officer, notes, “Tomorrow’s leaders are collaborating today to enable circularity and increase sustainable outcomes across the value chain.”
This report could bring positive change to your company; find it here to explore their model. Are you ready to collaborate with your supply chain peers to fight climate change?
As the business environment takes Scope 3 more seriously, you must be working with a logistics partner that can provide you both visibility and easily understood environmental solutions. You can check out our global sustainability approach and how it can support your supply chain here.
Supply Chain Issues Affecting Small Towns Nationwide
How can the supply chain issues in 2022 affect a small town? Well, the impact is much more substantial than you might think. The nationwide shortage of electrical transformers due to supply chain issues has left a small-town electrical company using its reserves to cover its daily operations.
Due to the town growing substantially, with 128 construction-ready projects, new neighborhoods on the rise, and replacement equipment needed for older areas, Denton Municipal Electric is urging the town and state to address these significant supply chain issues.
This shortage is affecting not only this small town but communities all over the country, even states, that are gearing up to upgrade their power grids. For example, Florida was also impacted, needing transformers to recover from the aftermath of Hurricane Ian this past September. Learn more here.
Denton Municipal Electric alone has nearly $16 million in outstanding purchase orders and substantial delivery wait times, some climbing into 104 weeks. In response, Denton’s mayor, Gerard Hudspeth urged Texas governor, Senator John Cornyn, to provide $1 billion for the Defense Production Act implementation so the Department of Energy can address the supply chain issues for the transformers.
According to Hudspeth, “One in five infrastructure projects by public power utilities were being deferred or canceled because they are unable to procure the additional distribution transformers required for these projects,” which poses a threat to the resiliency of the communities, he claims.
This showcases both the complexity of the supply chain for power related equipment, but also how the changing landscape of distributed warehouses impact communities.
We put a lot of resources behind designing and building logistics centers. This allows our customers to move quickly and avoid adverse political comment. In fact, we serve as contract logistics partners for businesses across all key markets. Our worldwide network covers more than 725 locations in over 60 countries with a total warehouse space of more than 8,000,000 square feet.
Week 34
Ocean Carriers Are Reducing Capacity and Diverting Cargo in Response to Declining Demand
As demand falls, ocean carriers plan to reduce capacity to the West Coast. Peaking in the summer as retailers ordered earlier to avoid delays, the market has shifted, creating a new rate of blank sailings and carriers hitting 100% capacity before sailing. In response to the declining demand and lower rates from retailers, we are expected to see up to a 20% decrease in capacity.
In a Nov 11 report, Sea-Intelligence reported the number of blank sailings ramping up drastically on the Transpacific, indicating how a carrier will allocate their shipping capacity over the next few quarters. “We would never sail two ships with 50%, but would always sail one ship with 100% because we simply can take out a tremendous amount of cost,” Hapag-Lloyd CEO Rolf Habben Jansen said on the company’s Q3 earnings call.
Other companies are acting on this as well. Matson, for example, forecasts a challenging start to 2023, expecting reductions as they meet lower levels of demand. Maersk has already removed 15% of capacity from their western trade lanes as they also prepare for the lower volumes.
What you need to know today: Watch the developments in this area, as we are, and be ready to act quickly. The longer your lead times, the more flexibility you will have.
Labor shortages, Product shortages, Potential Attacks & Supply Chain Resilience
We’ve experienced a slowdown in the supply chain since Covid-19, but are you ready for what’s next? Companies are waiting for the next big disruption, another unexpected impact on the supply chain.
In this MIT article, Jim Rice, deputy director for the MIT Center for Transportation and Logistics, claims “It does not matter if you lost your factory because of a labor strike or a hurricane. You still need a plan to recreate your core capabilities. Resilience is not mitigation — it is creating the capability to recreate lost capacity.”
Since the likeness of supply chain emergencies continue to rise, Jim reminds us to always be prepared for the worst. Labor shortages and product shortages happen, however, there are ways to prepare. Decentralizing supply and production, developing workers for less turnover, being flexible with the resources used, even investing in more automation, can be implemented to provide more long-term stability for companies.
“Organizations still face the challenge of justifying investments in resilience when the return on investment is dependent on an uncertain event — a disruption.” Jim says, reminding us to expect the unexpected and always have supply chain resilience.
My takeaway is that professional logistics managers are finding their way to the C-suite to deliver business value. Do you have the right team on your side?
Week 33
McKinsey Sees Globalization’s Next Phase as a Rewiring Not a Retreat
When we talk about globalization, we initially think we are offshoring to decrease costs. But, according to a new report from the consulting firm McKinsey, we should consider what is going on today as a retreat; it’s just “reconfiguring.”
Today, according to McKinsey, international businesses are confronting the “complexities of an increasingly contested global order” where war, national security, supply-chain disruptions, and technological change are all driving a shift in global trade flows.
The result of this shift is that some supply chains could “shorten and become more regional” in the coming years.
If you keep your eye on the news, you’ll see several stories this week, this month, and I’m sure – in the coming months that support precisely this claim.
My takeaway from this is that professional logistics managers today – more than ever – need a global logistics partner that has the experience, depth, and foresight to understand the future of our industry and can help you plan accordingly.
Making New Green Initiatives Soar
I’m always excited to see new sustainable initiatives in our industry, and I’m very excited to share DB Schenker’s most recent. We have just extended our portfolio of climate-friendlier logistics solutions by opening the next chapter of greener transport in air freight.
As of immediately, our customers can choose Sustainable Aviation Fuel (SAF) for their air transport to anywhere in the world, irrespective of the type of aircraft or airline used. This is possible through the virtual allocation of biofuel, and it is possible to avoid up to 100 percent of CO2 emissions.
As Thorsten Meincke, Global Board Member for Air & Ocean Freight at DB Schenker, said, “Reducing the carbon footprint in supply chains is possible not only in a far-distanced future but already today. Yes, sustainability comes with a price. But now the choice is available: No DB Schenker customer needs to use traditional kerosene for their air freight anymore. We hope that this message will give further momentum toward sustainability in aviation. Customers who have tested or are already regularly using our SAF offer are very satisfied.”
For our customers with ESG reporting, deciding to pay the premium for virtual allocation of SAF for an air freight shipment receives certification for the number of greenhouse gases avoided. While the actual physical insertion of SAF might occur on different flights, the climate is protected as the actual CO2 emissions of a flight or shipment with conventional kerosene are avoided. This process is called a virtual application and can also be exercised for upstream emissions originating from the production and transport of the biofuel itself.
You can find out more details here, and for our existing customers, you can speak to your service representative to find out how you can take advantage of this new initiative.
Week 32
Retailers Turning to Specific-Day Delivery Over Speediest Shipping
Retailers this holiday season focus on delivering packages to customers on specific dates rather than competing on the speed of delivery.
The shift marks an easing in a race for delivery speed in e-commerce in recent years that has pushed goods to shoppers’ homes at an ever-faster pace.
Online shoppers are now more willing to wait for certain deliveries, having gotten used to supply-chain disruptions at the height of the Covid-19 pandemic, said Terry Esper, associate professor of logistics at the Ohio State University’s Fisher College of Business.
The most important factor for consumers has become “the visibility of it all and being able to know when to expect a delivery, as opposed to the assurance that it’ll be a superfast delivery,” Dr. Esper said.
Main takeaway. While this is focused on the end-user consumer, the ability to increase the specific date – or even time – that a package reaches a consumer has many ramifications for the entire supply chain. By speaking to an expert now, find out what this trend could mean for your logistics.
Rail Union Approves Deal Offering Hope of Avoiding Strike
Another one of the 12 railroad unions narrowly approved its deal with the major freight railroads Saturday, offering some hope that the contract dispute might be resolved without a strike even though two other unions rejected their agreements last month.
Now that 52% of International Association of Machinists and Aerospace Workers members who voted approved their deal, seven railroad unions have ratified contracts that include 24% raises and $5,000 in bonuses. Still, all 12 have to approve contracts to prevent a strike.
Concerns remain about the possibility of an economically devastating strike because the Brotherhood of Maintenance of Way Employees Division and Brotherhood of Railroad Signalmen unions voted down their contracts. Many workers say these deals don’t address their quality-of-life concerns. No strike is imminent because those unions agreed to return to the bargaining table to try to work out a new deal, but those talks have been deadlocked over the unions’ demands for paid sick time, and there is a Nov. 19 deadline.
What this means to logistics professionals: While no strike is imminent, we’ll keep an eye on rail union developments and update our customers accordingly.
Week 31
Shifting to Net-Zero-Carbon Emissions Logistics
Goals to shift to a net-zero-carbon emissions economy in the next few decades will demand rapid and exponential deployment of clean energy technologies that are made and transported sustainably. This will trigger significant changes in supply chains—where companies buy materials and parts and how they get to and from factories.
In response to an executive order and in consultation with the White House and other federal agencies, The U.S. Department of Energy (DOE) released a comprehensive federal strategy to strengthen America’s clean energy supply chains, accompanied by 13 topic-specific deep-dive studies.
Dozens of actions outlined in the strategy report aim to reinvigorate domestic manufacturing, keep costs in check for American families and businesses, create new jobs, and more equitably distribute clean energy benefits—all while fighting climate change. The reports focus on materials, components, and systems used to produce, distribute, run on, and store clean power from sustainable solar, wind, hydroelectric, nuclear, and hydrogen energy sources.
Main takeaway: it takes public and private initiatives to reach a net-zero-carbon emissions economy for future generations. You can find out about DB Schenker’s global sustainability aspirations here.
What is the Future of Tech Global Logistics?
In October, the Department of Commerce (DoC) announced that 31 Chinese tech companies specializing in supercomputing and artificial intelligence were being placed on its “unverified list.” This means that the U.S. government has not been able to conduct end-user checks to ensure that U.S. tech is not being diverted for military purposes.
The DoC is reportedly preparing to extend the foreign direct product rule (FDPR) — meaning that any product made using U.S. technology, wherever it is made in the world, requires a DoC license to sell it to a sanctioned entity.
At the same time, The CHIPS and Science Act, which offers incentives worth $280 billion to stimulate domestic manufacturing in semiconductors, advanced computing, and next-generation communications, is the signature policy of a new industrial strategy. Still, the implementation of many of the recommendations of the 2021 supply chain review report are ongoing into 2022.
In October, the White House also released a National Strategy for Advanced Manufacturing, which contains detailed recommendations on building resilience into manufacturing supply chains and ecosystems, enhancing supply chain interconnections, and expanding efforts to reduce supply chain vulnerabilities.
The big picture: Multiple strategies are in play, and they are likely to change the global supply chain significantly. Are your long-term logistics strategies ready?
Week 30
Don’t Overlook the Inland Waterways
While we generally understand that our economy depends upon viable international ocean shipping, trucking, and rail transportation, the essential role of our inland waterways is often overlooked. For example, the Mississippi River reached a record of -10.70 feet this past week.
The Mississippi River is a vital waterway for trade, and the lower water levels have impacted the amount of commodities that can be imported or exported out of New Orleans. As a result, barges cannot be fully loaded. According to the U.S. Department of Agriculture’s weekly transportation report, southbound barge tonnages were reduced on the river by more than 20%.
Agriculture shippers for corn, soybeans, and wheat use barges as a cheaper alternative to trucks or rail to move their grain in bulk. According to the USDA, just under half (47%) of all grain is moved by barge. In addition, approximately 5.4 million barrels of crude and 35% of thermal coal are moved on the Mississippi.
Main takeaway: your logistics partner needs the experience, depth, and foresight to see all logistics modes of transport and plan your cargo accordingly.
Ocean Imports – where did all the cargo ships go?
Container ships are still waiting to get space at North American ports. As of this past week, there were less than 100. That’s excellent news.
The not-so-good news is that there were still 99 container ships offshore. And yes, the pre-COVID norm was in the single digits.
The rates we are seeing today are less than 35% off the highs we have recently experienced – approximately 150 ships were waiting for ports in January of this year. This was primarily a West Coast backlog, and there was significant progress as Los Angeles and Long Beach improved their cargo flows. But that was short-lived, and then the East and Gulf Coast ports experienced larger than usual backlog.
The most recent data shows 27 container vessels off the West Coast and 72 off the East and Gulf coasts.
The critical thing to consider is who’s your international ocean logistics partner – and how they can manage the delicate balance of price and speed to your best advantage.
Week 29
The Supply Chain and Venture Capital
So far this year, investors have put over $7 billion in seed through growth-stage rounds globally for supply chain-focused startups. That puts funding this year on pace to roughly equal 2021’s record-setting levels, which is no small feat considering the investment in most startup sectors is contracting.
Looking at global and U.S. funding over the past five years, one standout takeaway is that supply chain funding numbers have remained at high levels for years. While one early unicorn, construction supply chain-focused Katerra, may have bitten the dust, others have emerged and raised even more capital.
Some are eye-popping rounds. So far this year, the sector’s largest funding recipient by a long shot is supply chain software provider Flexport, which raised $935 million in a February Series E co-led by Andreessen Horowitz and MSD Partners.
With the IPO market mostly shuttered for the past few months, it’s tough to extrapolate what kind of exit environment and ROI startup backers in the supply chain space will face in the coming quarters.
What we can take away from the research is that we don’t expect many significant supply chain debuts. But, hopefully, behind the scenes, all that investment in logistics startups will pay off in the form of more efficiently run supply chains.
DB Schenker sparks innovation that moves our customers and industry forward – by actively engaging in innovative networks such as the International Data Space Association, IDG (International Data Group), HOLM (House of Logistics and Mobility), CIMT (Cross-Industry Maker Tank) and the Deutsche Bahn Group. Find out more here.
Don’t Get Fined
Large retailers grappling with supply-chain snarls, inflation, and increased automation are cracking down on orders from their vendors.
Stores such as Walmart and Target have long fined suppliers that fail to deliver products on time, in the right amount, or with the correct specifications. But after the pandemic allowed for some leeway, U.S. retailers are coming back with more demanding standards and tightening expectations on how goods are received.
Anything less than exact compliance can result in penalties from fines to losing shelf space when contract negotiations arise, which is a challenge for small brands that often have limited resources to scrutinize shipments. The changes among retailers are varied. Target is beefing up the team in charge of policing orders, according to someone familiar with the matter.
The number of companies levying supply-chain charges also is growing, said David Friedler, managing partner at consumer-goods consultancy Simpactful. And Walmart recently rolled out extra levies for suppliers using its transportation services.
Main takeaway: No matter the size of your supply chain, suppliers desire distribution via some of the leading U.S. retailers. For that to happen, your supply chain needs to be in order. If your distribution to leading retailers needs to step up, call us.
Week 28
Clarifying Ocean Freight Ambiguity
I’m a big fan of anything that makes logistics clearer for shippers, and that’s precisely what The Federal Maritime Commission is doing. A new FMC proposal defines ‘unreasonable’ export rejections by ocean carriers. In addition, the new rule details the criteria for violations under the Ocean Shipping Reform Act and establishes a framework for proving improper refusals.
The problem occurred recently when ocean carriers were incentivized to leave the U.S. for Asia with shiploads of empty containers so they could be refilled with goods as quickly as possible amid high import demand.
According to the proposed rule, the FMC will determine what constitutes an unreasonable refusal on a case-by-case basis. A shipper must have made a good faith attempt to secure vessel space accommodations, which is “something more than one communication with no response or reply.”
Carriers will be unable to refuse space due to “commercial convenience alone,” according to the rule. It could also be considered unreasonable for carriers to prioritize certain shippers over others or for carriers to refuse to respond to telephone or email requests from shippers over an extended period.
In summary: We see this is a bold move that only benefits our customers. Our economy becomes stronger when we can obtain capacity on an even playing field.
The White House Supply Chain Strategy Shifts
Port and Supply Chain Envoy Gen. Stephen Lyons said the current Biden administration’s plan for addressing supply chain congestion would shift away from urging ports to move to 24/7 operations.
This is according to Lyons’s conversation at the Association of Supply Chain Management Annual Conference in Chicago last week. Instead, efforts will remain focused on data collection and identifying potential incentives to encourage shippers and carriers to move cargo faster.
Main takeaway: We operate in a free economy, and ports will offer services that make sense financially for their multiple stakeholders. We know at DB Schenker that digitization and supply chain transparency is crucial to efficiency. You can read more about our Innovation and Digitalization strategy and some fantastic projects we’re working on today.
Week 27
The Supply Chain and Our Weather
A fascinating article in the New York Times highlights how climate change could adversely effect the supply chain.
It points to Chinese factories that were shuttered again in late August, a frequent occurrence in a country that has imposed intermittent lockdowns to fight the coronavirus. But this time, the culprit was not the pandemic. Instead, a record-setting drought crippled economic activity across southwestern China, freezing international supply chains for automobiles, electronics and other goods that have been routinely disrupted over the past three years.
The article goes on to highlight that the supply chains that have stretched around the world in recent decades are studies in modern efficiency, whizzing products like electronics, chemicals, couches and food across continents and oceans at ever-cheaper costs. But those networks have proved fragile.
In summary: It is unclear how the climate changes will affect our supply chains in the future, but if recent events are an indication, much is needed to prevent adverse weather. That takes a conscious effort. Check out our global sustainability approach here.
Let’s Talk Trucking & Driver Training
Good news – people are interested in joining the industry.
Bad news – truck driver training programs require more resources and instructors to handle an influx of people interested in joining the industry.
Pay raises have certainly driven increased interest but getting a foot in the door is more challenging than ever for those interested in becoming drivers.
Many smaller carriers that do not have training programs still require at least a year of experience. And now, training programs are booked out months in advance, making it more difficult for drivers to get the training they need to join the workforce. This puts pressure on finding a carrier that has a training program.
Main takeaway: this is a good problem for an industry needing an influx of talent. As DB Schenker expands into asset-owned trucking in North America, you can expect to see more from us in this area.
Week 26
The Inflation Reduction and What it Could Mean to the Supply Chain
As its name suggests, the Inflation Reduction Act of 2022 (IRA), signed into law by President Joe Biden earlier this month, is designed to reduce inflation. It also includes $300 billion worth of grants and incentives for clean energy and initiatives to combat climate change.
The incentives aim to accelerate electric vehicle adoption, green ports, increase renewable energy capacity, and support products made in the U.S. There are also tax reforms and provisions for health care.
Here are four ways the Inflation Reduction Act could impact supply chains:
- More electric trucks
The tax credit for purchasing an E.V. covers the price difference between a diesel truck and
an electric truck, or 30% of the truck’s purchase price, whichever is lower. But it’s capped at $40,000 per vehicle purchase.
New heavy-duty electric trucks can cost over $300,000, so it’s unclear how much this tax credit would incentivize fleet owners to invest in E.V.s. However, one observation is that it is this way to promote smaller, last-mile urban delivery solutions.
- Renewable energy incentives
The IRA includes production and investment tax credits for battery storage and renewable wind and solar energy. This should make it greener and cheaper for supply chain companies to power their warehouses, distribution centers, and stores.
- Supporting domestic supply chains
The IRA is expected to drastically increase the demand for components needed in solar panels, wind turbines, and E.V.s. This could create more jobs in the clean energy and manufacturing sectors.
But there’s a catch. Some of the incentives hinge on a certain amount of raw materials being sourced in the U.S., the final product being constructed in the U.S., or meeting worker training and competitive wage standards.
- Making out domestic ports greener
The IRA includes $3 billion in grants and rebates for port authorities and marine terminals to purchase zero-emission cargo-handling equipment until September 2027. The goal is to address air pollution in and around ports.
Zero-emission cargo handling equipment or technology must emit no air pollutants or GHGs, or it must capture 100% of those emissions produced by vessels at berth to qualify for the grants.
In summary: The federal government is prioritizing the environment regarding our supply chain. Check out our global sustainability approach here.
More Reshoring Thoughts
Billions in federal spending to boost the production of computer chips is an essential step toward making the U.S. more competitive in the global marketplace. Still, it doesn’t guarantee that a manufacturing boom will follow.
The bipartisan CHIPS and Science Act, signed into law by President Joe Biden earlier this month, provides $52 billion for companies making computer chips and billions more in tax incentives and funding for research.
The spending is part of the administration’s effort to help the U.S. compete with China, Taiwan, and South Korea, producing 75% of the world’s computer chips combined. Just 10% of chips are made in America, a deficit spotlighted by pandemic-related supply chain issues that have caused shortages in chip-reliant products ranging from cars to refrigerators.
The federal funding is significant because East Asian governments heavily subsidize the chip industry to maintain their dominance in the market. Meanwhile, the U.S. has experienced a long-term decline in sourcing and manufacturing. Making chips here could help reshore production, although many other factors matter.
Main takeaway: Supply chains are complex, with many tradeoffs to be considered – this is just another one – and it may be big enough for some manufacturers.
Week 25
Can Your Entire Supply Chain Really Go Green?
Ensuring that procurement is sustainable is no easy task, yet when implemented and managed correctly, it can lead to better decision making, significant cost reductions, and a more successful brand.
More importantly, it puts so-called greenwashing practices in their place, replacing them with strategies that make a difference.
Procurement departments should know their suppliers inside out, and have regular conversations with them, to understand the provenance of what they are procuring. Without such knowledge, businesses cannot make meaningful sustainability claims about the products they sell.
One of the sustainability problem areas for businesses of all sizes is Scope 3 emissions in the supply chain. These are difficult to measure, and to control, and there’s is a lot of talk from businesses about Scope 3 progress being made.
Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly impacts in its value chain. Scope 3 emissions include all sources not within an organization’s scope 1 and 2 boundary. The scope 3 emissions for one organization are the scope 1 and 2 emissions of another organization. Scope 3 emissions, also referred to as value chain emissions, often represent the majority of an organization’s total GHG emissions. You can find out more from the United States Environmental Protection Agency here.
Sustainability strategies in procurement do create challenges. But if organizations get it right, they can build a sustainable supply chain that they and their suppliers can be proud of.
A last word: You can find out DB Schenker’s global sustainability approach here.
In response to the challenging supply chain environment, more than two thirds of make, move, sell companies shifted their business model in 2021, and 85% of them saw growth. That’s the top line from the 2022 Insights Report from Epicor.
The survey also showed that 78% of businesses surveyed changed their core business competencies over the last year to better compete. In addition, 85% agree that they achieved growth by diversifying their offerings. The primary strategies behind that growth include direct-to-consumer sales and delivery (47%), e-commerce (40%) and configure-price-quote (39%).
The seismic shifts of the past two years have turned industries upside down, and businesses of all sizes are adopting innovative supply chains, moving into previously inaccessible markets, and competing in new ways. This wave of change is ushering in a newfound confidence and a priority of business growth. Of all survey respondents, 56% are prioritizing growth. This approach is even more optimistic among distributors (63%) and retailers (59%).
In years gone by, your supply chain was considered a cost of doing business. For today’s successful businesses, the supply chain is a competitive advantage, a differentiator, and a place for innovation. Are you ready?
Main take away: Partner with the leading supply chain experts who offer more strategic insight than purely moving cargo.
Week 24
America’s Ports See Continued High Numbers
A couple of weeks ago I shared the news that June was a Record Month for The Ports of Long Beach and Los Angeles. And still, America’s ports keep racking up historically high numbers. July looks like it will be the best or second-best July. According to The McCown Report, imports to the top 10 US ports rose 5.9 percent year on year to 2.16 million twenty-foot equivalent units in June, exceeding the 3 percent year on year gain in May and 5.1 percent gain in April.
Volumes continued to shift eastward. Imports to the top East/Gulf Coast ports rose 9.7 percent year on year in June, driven by double-digit surges in New York/New Jersey, Houston, and Savannah, Georgia. Imports to West Coast ports rose 2.3 percent. Compared to June 2019, pre-COVID, import volumes to the top 10 US ports were up 26.9 percent last month, said McCown. East/Gulf Coast ports were up 40.3 percent, and West Coast ports 15.8 percent.
Key takeaway: review your supply chain with a reputable logistics professional. As the environment changes, so might your route to market.
West Coast Ports Reduce Idling Vessels
The queue of vessels waiting to unload goods at the Port of Los Angeles, North America’s busiest container port, has fallen 80% since the start of the year as global container prices continue to slide, pointing to more easing in supply chain disruptions.
The backlog of vessels waiting outside Los Angeles has fallen from a record high of 109 to 20 and the port moved 876,611 twenty-foot equivalent units (TEUs) in June in its best record in over 100 years.
According to Drewry’s recently published container leasing report, the global pool of shipping containers increased by 13% to almost 50 million TEUs in 2021. There is now a surplus of 6 million TEUs globally.
A final thought: Are you ramping up for the holiday supply chain?
Week 23
Your Customers Want Faster, Cheaper Delivery… enter q-commerce
As it turns out, two-day delivery is no longer enough, not for consumers or for e-commerce leaders wanting to provide the ultimate customer experience. The aspiration now is for near-instant delivery and at no extra charge.
Two main factors traditionally hold commerce back. First, warehouses are large and located far away from city centers. The typical Amazon fulfillment center is 800,000 square feet, the equivalent of 16 football fields. There is no way to fit this in a city center, so the resulting distance from customers increases delivery time.
Second, large e-commerce retailers carry many different products. Amazon, for example, carries more than 353 million SKUs (stock-keeping units), of which only about 12 million are fulfilled by its Prime two-day delivery service, while the rest face longer delivery times.
The desire for near-instant delivery has spurred the emergence of q-commerce, or quick commerce, a new, faster form of delivery that can deliver in under 15 minutes. In q-commerce, online retailers fulfill orders using a network of urban-located micro-fulfillment centers that are usually only 2,000 to 5,000 square feet. This reduces the distance to the customer, dramatically increasing delivery speed. This approach fits especially well with household and perishable items, such as groceries.
To further increase delivery speed, q-commerce retailers minimize complexity by carrying far fewer items for sale. While a traditional grocery store has up to 60,000 SKUs, q-commerce micro-fulfillment centers generally only hold 2,000 to 4,000 SKUs of the highest turnover items.
The q-commerce model is working for customers, but also for the operators who’ve been achieving profitability early on. For example, Gopuff ($40 billion valuation) has been EBITDA profitable from Day One, attributing its profitability to the high bargaining power achieved from only purchasing a small selection of SKUs at high volume.
As a result of q-commerce’s innovations, this sector is seeing explosive growth globally, with six unicorns minted in just the past couple of years: Gopuff, Getir, Gorillas, Flink, Glovo and JOKR.
Key takeaway: monitor your customers and be one step ahead of their needs. When it comes to your supply chain, are your partners speaking the right language?
June Was a Record Month for The Ports of Long Beach and Los Angeles
The ports of Long Beach and Los Angeles moved a record number of containers in June amid increased consumer demand and ongoing supply chain backlogs, the agencies announced last week.
In Long Beach, dockworkers and terminal operators moved 835,412 20-foot-equivalent units (surpassing June 2018 record). At the Port of Los Angeles, 876,611 TEUs were moved last month, marking the busiest June on record. Through June, the Port of LA has moved more than 5.4 million TEUs, matching last year’s record-setting pace, according to the agency. Long Beach, meanwhile, moved just over 5 million in the first half of the year—up 5.3% from the same period last year.
The influx of cargo is due to several reasons, according to port officials. The lifting of pandemic-induced shutdowns in China, retailers restocking, and robust e-commerce are all driving the record-setting number of containers through the ports.
A last word: Do you need capacity through The ports of Long Beach and Los Angeles? If so, give us a call.
Week 22
The Trouble with Trains
Port bottlenecks that have tied up US supply chains are spreading from the docks to the country’s freight rail networks.
The congestion is raising costs and adding complications for importers managing the flow of goods in a fragile U.S. economy
Some retailers are waiting weeks to move cargo by train out of Southern California’s ports of Los Angeles and Long Beach, while others are giving up on the railroads and shifting shipments of furniture, apparel, and other consumer goods to trucks for long inland journeys on highways.
The backups stretch to major freight hubs including the key transit point at Chicago, freight executives say, where containers have been piling up at rail yards. The congestion has led BNSF Railway Co., a unit of Berkshire Hathaway Inc. and one of the main rail operators connecting the U.S. West Coast to inland points, to limit the number of boxes the railroad will carry out of the Southern California port complex.
About 29,000 boxes were being held in container yards at the Port of Los Angeles this month awaiting pickup by rail, more than triple the usual number, according to Gene Seroka, the port’s executive director.
Key takeaway: manage your intermodal freight very carefully in this changing logistics environment.
Drone Logistics and Transportation Market Size Predicted to Rapidly Increase
The global Drone Logistics and Transportation market size is projected to reach USD 12180 million by 2028, from USD 5752.2 million in 2021, at a CAGR of 10.8% during 2022-2028, according to a report just out.
The report suggests there are two major factors driving is growth. Firstly, the increasing use of drones for faster delivery and the booming eCommerce sector will drive the growth of the drone logistics market during the forecast period. Secondly, the growing demand for last-mile delivery solutions, warehouse operations, and military use will fuel the growth of the market in the coming years.
Drones are immensely beneficial for the transportation of goods in urban areas with high traffic congestion. They are effective in pallet scanning at distribution centers, enabling the operations team to view the inventory stored at the facility and look for lost items in hard-to-reach spaces. Drones can reach areas that are inaccessible to other modes of transportation thereby increasing the radius of action for companies making shipments. Faster and rapid transport of essential relief packages and medical supplies to remote areas can be performed smoothly. These factors will drive the growth of the drone logistics and transportation market during the forecast period.
The lack of a skilled workforce and the need for fulfilling ever-increasing consumer expectations has intensified the requirement for enhancing efficiency in warehouse operations. Drones can fly and hover autonomously, avoid obstacles in warehouse layouts and navigate the indoor land precisely. They are being deployed in inventory audits, cycle counting, item search, buffer stock maintenance, and stock taking. Drones increase inspection accuracy, reduce unnecessary labor costs, and save the existing workforce from hazardous tasks. These rapid changes will create lucrative opportunities for the drone logistics and transportation market during the forecast period.
Week 21
New Shipping Legislation
Legislation aimed at restraining the power of the container shipping industry, which has seen prices increase during the pandemic, ran through the House last week and could head to the Oval Office for a signature as soon as this week.
The administration believes the law, which is designed to slash the bargaining power of container shipping companies and their industry alliances, will address a critical bottleneck in global supply chains — an issue economists widely believe is a key factor driving inflation.
That said, it’s not that clear cut. Many professionals in our industry caution that supply chain fixes for inflation can be elusive and that interfering with the logistical channels can have unexpected consequences.
Whether it’s the right economic call or not, is not for debate here – the reality is that it is going through the legal system right now. What is up for debate is how you react to this news, and how you forward plan your supply chain considering possible changes on the horizon. Do you have the right logistics partner advising you?
Your Supply Chain is Board Room Important
In March 2020, the arrival of the COVID-19 pandemic delivered global supply chains a rude awakening. More than two years later, amid China’s strict zero-COVID policy and the ongoing fallout from Russia’s invasion of Ukraine, it’s not new news that supply chains face their most acute crisis in decades.
In a post-pandemic world, supply chain and logistics will make or break profits. As businesses try to acclimatize the centrality of logistics to their operations, both technology adoption and capital allocation have become top of the agenda. Changes forecast to take years—and even decades—to occur are happening in a much shorter time.
Industrial surveys have found over and over that U.S. businesses want to “reshore” substantial parts of their operations back home. The appetite for reshoring is acute in critical sectors like pharmaceuticals, semiconductors, and defense hardware, and Congress is paying attention (see story above).
Businesses are prioritizing supply-chain visibility and resilience more than ever.
If you are a supply chain professional, you should have a direct line into your board room. The profitability and long-term viability of your busines could rely on it. When that call comes, make sure you have one of the largest supply-chain companies backing you up. With over 150 years of experience, we’ve weathered a recession or two.
Week 20
Secure Your Cargo
The latest data from Verisk Analytics Inc.’s CargoNet suggests that cargo theft is on the rise. Higher-value goods such as vehicles and electronics are targeted, as inflation pushes up the cost of goods in the supply chain.
Estimated cargo theft losses in the United States and Canada jumped to $19 million in the first quarter of this year, a 73 percent increase over the prior-year period even as the number of reported thefts remained unchanged at 319.
The average loss value in the first quarter was $232,000, a 68 percent increase over the same period last year and more than double the average loss value
Companies can take steps to reduce the risk of theft, including installing tracking technology and hard-locking devices, using teams of drivers, and avoiding theft hotspots. When you use DB SCHENKERsmartbox, you get unparalleled transparency, security, and savings; including the monitoring of cargo conditions, increased lead-time and GPS real time tracking via web (24/7)
US is Stepping Up International Trade Negotiations
In the past week the US has been stepping up negotiations on international trade.
US Trade Representative announced May 25 – under enforcement action of the United States-Mexico-Canada agreement – dispute settlement consultations with Canada over the handling of its dairy tariff-rate quota allocation measures. There are claims of allocation denial to eligible applicants and failure to fully allocate its annual dairy quoters in a timely manner.
On the other side of the globe, US Commerce Secretary Gina Raimondo said Tuesday that the US is mulling adding more Chinese firms to the government’s banned entity list, which effectively blocks access to US exports. The US says some firms on the blacklist have aided China’s military operations by providing resources and know-how.
US firms are barred from selling some types of technology to Chinese companies because they’ve been designated as threats to national security by the Commerce Department’s Bureau of Industry and Security.
To stay ahead of the upcoming changes, shippers should use a leading global logistics company that offers single source comprehensive risk management & transportation compliance solutions, including cargo insurance, customs bonds, trade documentation, and compliance.
Week 19
What Automotive Manufacturers Can Learn From Big Tech Companies
“It takes 2,500 parts to build a car,” Peter Hasenkamp, former head of supply chain strategy for the Tesla Model S, once said, “but only one not to.”
Latest research suggests that in 2021, automakers were obliged to cancel plans to build ten million cars. It is forecasted that they will cancel a further seven or eight million in 2022 and four million in 2023, as demand for semiconductors outstrips supply by 10 per cent.
How can business leaders prevent this from ever happening again? Very simply, they need to transform the way they interact with their suppliers. That’s every mission-critical company in their supply chain. And not just the semiconductor supply chain — while the shortage of semiconductors may be keeping them awake at night right now, in the future their sleep may be interrupted by a shortage of some other critical components — such as, batteries or tires.
Interestingly, when the semiconductor crisis struck, Apple, Dell, and large technology companies immediately swung into action, operating 24/7 procurement and supply chain war rooms. Unlike the automakers, they had learned from the last semiconductor crisis in 2017 and left nothing to chance. To fix their current situation, the leaders of automakers (and other companies impacted by the crisis) should take a series of urgent Big Tech-inspired steps:
- Establish their own bill of materials for semiconductors
- Make a non-cancelable and non-returnable commitment to suppliers for an 18-month to 24-month time horizon
- Ensure their suppliers earmark specific components for their sole use
- Collaborate with suppliers to track and trace every order
And, ever so importantly, ensure that parts that are produced, are delivered effectively and efficiently to where they are needed. That requires a global, fully integrated supply chain that can operate over all modes of transport, so your supply chain is flexible to the present economic and political trends.
And what goes for automakers also goes for many industrial companies because they too rely on semiconductors in their products. As the U.S. government noted in its “Briefing Room” blog, the paucity of semiconductors has not only been affecting the automotive industry, it has also been “dragging down the U.S. economy” and “could cut nearly a percentage point from GDP growth.”
Pay Your Suppliers on Time
Malcolm Harrison, the CEO of the Chartered Institute of Procurement and Supply has come out and said it. Too many large businesses are holding back on paying suppliers, forcing some out of business.
Harrison says, “Too many big companies have imposed unfair payment terms on suppliers who are grateful for the business, or they have taken many months to pay, which can result in bankruptcy for their smaller suppliers.”
Writing in a supply chain supplement that appeared in the UK’s Times of London newspaper, Harrison went on to say that strong relationships with suppliers has never counted for more.
He continued: “After the shock and turmoil of the past two years what has changed is a greater focus on resilience in supply, and not just cost savings.
“A built-in contingency that can flex quickly to handle fluctuations in demand, including switching to local supply or building up additional stock, has now become the strategy for many organizations.
“Developing the right resilient approach will depend on individual business objectives. For some, it can mean a clear onshoring or offshoring strategy, and not relying on only one supplier or one market for an essential component.”
And of course, as suppliers change, or become more fluid based on supply, your supply chain becomes ever more complex. That’ when you need to call in the professionals.
Week 18
Are the Familiar COVID-19 Logistics Complications Just the Beginning?
We all know that the supply chain is a delicate and forces such as COVID-19 can cause mass disruption. But what if COVID-19 was just the short term, dress-rehearsal for more disruption? That’s the premise of the information and analysis in the Yale Environment 360 article by Austin Becker, a maritime infrastructure resilience scholar at the University of Rhode Island.
In Becker’s words, COVID-19 is “a temporary problem,” but climate change is “long-term dire. Climate change is a slow-moving crisis that is going to last a very, very long time, and it’s going to require some fundamental changes. Every coastal community, every coastal transportation network is going to face some risks from this, and we’re not going to have nearly enough resources to make all the investments that are required.”
The article suggested that climate change will further strain and could even break the supply chain. Rising sea level poses the biggest threat, as it will disrupt the existing coastal supply chain infrastructure. And there is more, there are likely to be more supply chain disruptions due to extreme weather events. We’re already seeing hurricanes, floods and wildfires that more intense, severe or long-lasting than they were a generation ago.
Which leads us nicely to…
DB Schenker Plans to Operate a Zero-Emission Autonomous Coastal Container Feeder
We just revealed plans to operate an innovative zero-emission coastal container feeder in Norway. The fully electric vessel has a unique design, making it the first of its kind in the world.
Along with our strategic partners, we have taken the first steps in an ambitious joint project to replace the traditional feeder vessels utilized along the stretch of the Norwegian coastline around Ikornnes and Ålesund. The new autonomous and electric, short-sea container feeder leverages Naval Dynamics’ NDS AutoBarge 250 concept that was developed in partnership with KONGSBERG and Massterly.
The vessel will operate between Ekornes’ own port, Ikornnes, and the port of Ålesund, which serves the main ocean freight ports in Europe. The ship will complete the 43-km (23-NM) journey within three hours, at a speed of 7.7 knots. The vessel will be 50 meters long and will be able to carry 300 deadweight tons of cargo. It is designed from the keel up for autonomous and zero-emission operation. It will run without a crew but will be monitored and controlled by staff at Massterly’s Remote Operation Center (ROC), whose team members include certified navigators and naval engineers.
The planned two-way data communication solution between the vessel and the ROC is destined to be another game-changer in the ocean freight sector.
The benefits here will be numerous, and include zero emissions, faster and more efficient transport, and reduced traffic on roads. As they lead the way to climate neutrality, the parties’ common interest is to unveil this pioneering vessel in Norway and then take the next crucial steps forward by obtaining approval from the Norwegian Maritime Authority, and possibly governmental incentives for the sustainability and technology aspects.
Exciting times when technology can truly advance us closer to environmental goals.
Q1 Updates | Week 17
Reshoring and Nearshoring: A Practical Approach
I’ve written a couple of times about the trend we’re seeing in manufacturing for reshoring and nearshoring, so I thought it was time to make that a little real. Here is a snapshot on the strategies some of our clients are using to achieve this.
1 – Map your offshore supply chain
Identify all tier 1 and critical tier 2 and tier 3 offshore suppliers. While this mapping should have already been done, it is still not too late to start. It probably needs at least an update. This insight provides a good visual clue as to the actual locations of your suppliers, allowing you to be one step ahead when delays could be forthcoming.
2 – Reestablish relationships with previous suppliers of offshored products
Who have you worked with previously, and would you consider working with them in the future? In fact, those suppliers may have already been in touch, sensing a sales opportunity given the supply chain turmoil.
3 – Identify new sources of supply
The pandemic and related economic fallout has changed the supplier landscape. Your previous sources may have changed their business model or even closed their doors. Part of a reshoring and homeshoring strategy is to find new sources of supply.
4 – Commit to a new, long term supply strategy
Reshoring and nearshoring is about making a new strategy. It takes effort in time, energy, and money. By learning from the past 2+ years, you can build a stronger supply chain. Build in standard operating procedures and quality success factors into these relationships.
Supply Chain Technology Trends We’re Going to See This Year
Technology is a cornerstone of our industry. Here are three trends I expect to be remain critical as we continue in 2022:
1 – Shift to more automation in the warehouse and hub space
Companies will be leveraging technology like telematics that can give them real-time data to address ongoing labor shortage issues as well as automate key processes. One process is inventory management and tracking the flow of goods in and out of facilities. This has a cascading effect on driver wait time and can minimize human errors and streamline the accounting of goods being transported from site A to site B.
2 – The need for better quality data (not just more of it)
We will all be looking for actionable information that can exchanged and used to collaborate with all partners across the supply chain—shippers, transportation & logistics providers, 3PL, etc.—to help make more informed decisions.
With longer cargo wait time on docks, capacity issues on multiple modes of transportation, and the increasing costs associated with each mode, we need want better data—as opposed to more data—on their shipment of goods. Data such as utilization data or stationary time of cargo, captured from telematics devices, edge computing solutions and third-parties (such as ocean and flight data) can provide contextual and actionable insights when integrated into management solutions.
3 – Cold chain monitoring will continue to be critical
Have you seen our latest cold storage facility in Indiana? This is cutting edge. In the past year, the logistics behind COVID-19 vaccine shipping have driven new innovations in cold chain monitoring solutions designed to ensure the quality and integrity of vaccine shipments. We can expect to see new improvements in cold chain technology, including devices with better battery life, sensors delivering real-time data on light, temperature, humidity and shock to monitor perishables like food, pharmaceuticals and biomaterials with greater environmental granularity to ensure compliance with regulations.
I continue to write about technology in logistics, because this is the critical factor for so many of our clients.
Q1 Updates | Week 16
China – COVID – Your Supply Chain
Concern is growing that the spread of COVID cases and city lockdowns in China will have massive downstream effects for global supply chains globally that could dwarf previous disruptions since the start of the pandemic.
Last May, the huge Yantian container terminal at the Port of Shenzhen throttled down to 30% of normal productivity for a month to stamp out a handful of positive cases there.
The difference this time is that an entire metropolis — and highly interconnected global trade center — is essentially shut down. Not since the initial 2020 COVID-19 outbreak in Wuhan have lockdowns been this extensive in China.
Spanish financial services firm BBVA predicts Chinese authorities will stick to the “zero-COVID” strategy and lockdowns until at least June. Other China observers say it could take even longer to meet China’s infection standard.
Most warehouses and plants are closed, nine out of 10 trucks are sidelined, the port and airport have limited function, shipping units are stranded in the wrong places, and freight is piling up.
The downstream effects for global supply chains are massive. If I had one piece of advice for clients today – irrespective of whether their supply chain is physically in China — it’s the ability to forward plan. Speak to us today for more information.
What Do We Want from Supply Chains?
As we move to a post-pandemic supply chain, it’s time to start asking some serious supply chain questions. In the past 2-years, logistics professionals have been focused on crisis management, some of which get to the core of what supply chains are even about.
What do we want from supply chains, and what do we want most?
Should companies focus on delivering same day or on being more environmentally friendly?
Should a chain be more resilient and able to withstand disasters, or should it be efficient above all else? Should it be shorter? Closer to home? More flexible? Can it be all those things at once?
Key to these questions is the subject of visibility. Survey responses in the Business Continuity Institute’s 2019 Supply Chain Resilience Report indicate that 57% of global companies surveyed likely lacked complete visibility into their supply chain – this is before the pandemic – and another 20% were unsure if they had it.
But let’s get real, not all companies have a strong incentive to be more transparent. Each individual link in a chain has different goals and makes decisions in its own best interests. This is a major obstacle to sharing data within the supply chain.
As I have already noted, Blockchain can be used to improve transparency by streamlining transactions. And once good data are available and accessible, they also can be shared selectively.
Bottom line – we have the technology. We have the need. Now let’s ask the serious questions.
Q1 Updates | Week 15
Who’s Driving the Trucking Industry’s Supply for Drivers?
The trucking industry needs an additional 80,000 commercial truck drivers to meet consumer demand. What are we doing about it?
The need for a strong, stable, and safe trucking workforce is not in contention. The facts are, however, that truck drivers are retiring at a faster pace than new members are entering the workforce, further widening the gap between need and availability.
The White House went into overdrive at an April 4 event to showcase the administration’s progress in easing the truck driver shortage and unclogging supply chains. It was a photo shoot.
The Biden administration is urging employers to use the Department of Labor’s Registered Apprenticeship Program for truck drivers to attract a next generation trucking work force. That’s a great start.
But we need more. And we need it now.
What do you think should be done to push progress on driver shortage?
US <> China Route Update
The two-phase lockdown in Shanghai that was meant to end April 5 is being extended indefinitely as the latest Covid outbreak is not contained and a massive testing campaign continues.
Although Shanghai’s air and ocean ports remain open, labor shortages are slowing operations. In addition, the availability of goods has dropped significantly as manufacturing and warehouses are closed. Trucking is increasingly unavailable because of quarantine rules and travel restrictions.
With limited goods available to ship, air cargo demand out of Shanghai is decreasing quickly.
Congestion is growing at Shanghai’s ports and at nearby alternatives like Ningbo. And though the outbreak in Yantian last May sent rates climbing just days after the shutdown began, transpacific ocean rates have remained stable, so far.
We’re predicting a volatile availability in the short term, so speak to one of our professionals if you are planning shipments on this route .
Q1 Updates | Week 14
Lifting of US/UK Tariffs
The United States, this past week, reached a deal with the United Kingdom to partially lift tariffs on steel and aluminum exports from the UK beginning June 1. The deal eases duties imposed in 2018 by former President Donald Trump. Trump imposed 25 percent tariffs on steel imports and 10 percent tariffs on aluminum imports as part of a strategy to prioritize domestic production and address an overcapacity of steel in China.
The deal also requires UK-based steel producers owned by companies in China to undergo a financial audit to evaluate whether there are any market distorting practices that “would materially contribute to non-market excess capacity of steel,” according to a statement. Aluminum shipments are subject to novel “smelt and cast” provisions, and producers must prove that products contain no aluminum from China, Russia, or Belarus.
More Tariffs – Tit for Tat
The 2018 tariffs on US goods like whiskey, peanut butter, and jeans were a retaliatory response to the Trump administration’s taxes on steel and aluminum from the EU, which at the time included the UK.
Once the US lifted its tariffs (see above), the British government said it would end the 25 percent tariff that had been imposed on these goods. The deal goes into effect on June 1, 2022, establishing the return of duty-free trade in spirits across the Atlantic.
The news provides additional relief for US producers who say that the 2018 tariffs caused a “significant slump” for exports in 2019 and 2020. EU tariffs impacting whiskey were lifted in January 2022, and in March 2021, an agreement between the EU and US lifted tariffs for US wine, along with certain other domestic spirits.
Q1 Updates | Week 13
Cybersecurity and Your Shipments
As if we needed reminding, data is ever critical for the smooth operations of our supply chains. Last week I highlighted that The Administration is focused on digital infrastructure to connect the supply chain with the launch of Freight Logistics Optimization Works (FLOW) – see the details below.
There have been recent ransomware attacks on the U.S. supply chain which are undermining national security (according to a U.S. Customs and Border Protection intelligence bulletin last week). Hackers and ransomware groups are targeting American logistics and shipping companies, the bulletin states, and the ongoing attacks threaten to cripple the already strained supply chain, limiting customs enforcement capabilities and undermining national security.
Ransomware persists to be the most common and destructive form of cyber-attacks, allowing malicious entities to threaten data leaks on illicit markets, and expose information on critical infrastructure.
There are proactively two strategies that should be considered as a shipper. Firstly, cybersecurity is a measure that must be taken at all levels of the supply chain, so ensure you have a corporate technology plan in place. Secondly, prepare for delays that are outside of your control and plan your supply chain accordingly.
Russia’s War on Ukraine: Air Cargo Update
Russia’s invasion of Ukraine has added another obstacle for air cargo-reliant supply chains already challenged by climbing rates and limited capacity.
Rerouted cargo flights and climbing fuel costs have resulted in higher surcharges for shippers and further flight cancellations as some services between Europe and Asia became economically unviable for carriers.
Some air cargo carriers are still traveling freely through Russian airspace. Airplanes for China Southern and Air China were doing so last week. But at least 11 of the world’s top 25 cargo airlines, according to the International Air Transport Association’s (IATA) 2020 rankings, and smaller operators have made some sort of adjustment due to the war.
What does that mean? As a shipper you need to have a logistics partner that can service your needs with multiple carriers and modes of transport.
Q1 Updates | Week 12
Stop Complaining – Start Strategizing
There is a lot of talk put behind complaining how badly the supply chain has been affected by COVID, the Russian/Ukraine conflict, labor shortages, blocked canals, lack of containers etc. etc.
Maybe it’s time to learn from these ‘unprecedented’ times. Maybe the supply chain is distorted and it’s not returning to how it was.
For decades, some of the best manufacturing were driven by lean manufacturing – or JIT (just in time production). Keep your inventory as low as possible and get everything you require delivered as you need it. This reduces costs and that’s a great thing. Except for then it isn’t.
When supply chains are not predictable; when there are a multiple of factors outside of regular control, lean manufacturing falls apart. If that one chip set that is needed to manufacture a car is delayed, it doesn’t matter that the other 2,000+ chips hit the manufacturing plant on time.
Sometimes, extra inventory on hand is quite helpful. So that’s one thing that supply chain professionals must think about: Do the inherent efficiencies of having just-in-time justify the issues when a lot goes wrong?
Administration Announces New Initiative to Improve Supply Chain Data Flow
The White House is focused on addressing supply chain vulnerabilities and congestion, working to speed up the movement of goods, and lower costs.
As I have covered previously, the Bipartisan Infrastructure Law (BIL) is now making a generational investment in our ports, highways, and other parts of our physical infrastructure, which will help speed up the movement of goods and lower costs.
Next, The Administration is focused on digital infrastructure to connect the supply chain with the launch of Freight Logistics Optimization Works (FLOW), an information sharing initiative to pilot key freight information exchange between parts of the goods movement supply chain.
FLOW includes eighteen initial participants that represent diverse perspectives across the supply chain, including private businesses, warehousing, and logistics companies, ports, and more. The aim is to develop a proof-of-concept information exchange to ease supply chain congestion, speed up the movement of goods, and ultimately cut costs.
Q1 Updates | Week 11
What’s Real?
You probably heard the news about Meta. Mark Zuckerberg announced that Facebook would be changing its name. Of course, this is more than a change in name, this is a strong message as to the direction of technology – and that’s something for us all to take interest in.
How does the Metaverse change the logistics industry?
Maybe the first thing to clarify is what the Metaverse is. Simply put, it’s the technologies that make up a virtual world that continues to exist when you’re not part of it. There are two major technologies to be aware of – and distinguish. There is virtual reality (VR) where you are fully emersed and augmented reality (AR) when a technology is superimposed on the real world in your view. Both VR & AR are accessible through PCs, game consoles, phones and of course headsets.
The reality of virtual reality is that it’s already in our industry. Here at DB Schenker, we have been trialing, developing and using augmented reality for over 4-years through a joint Innovation Lab with Cisco.
How will the Metaverse change our industry? The answer is of course unknown, but we what I see is a world of opportunity where we can increase efficiencies, reduce costs, and give better service and visibility to our customers. And that’s exciting.
Blockchain in the Supply Chain
While we’re focusing on technology – let’s demystify blockchain and how that is changing our industry. The Blockchain was invented alongside cryptocurrencies for powering and tracking that technology. Transactions are organized in blocks and chained to each other through cryptography — hence the name “blockchain.”
In supply chain management, blockchain offers full traceability of goods as well as authentication measures. As a result, supply chains can better monitor quality or products as well as data.
The most important characteristic of blockchains is their decentralized nature. The ledger is distributed to thousands, sometimes millions of different computers around the world. This decentralization means that there is no single entity that governs the blockchain. As such, transactions are made peer-to-peer, without the need for a third party to allow them or provide escrow.
Again, this is not new to DB Schenker, we have had various partnerships and success stories in the development of blockchain over the past few years. More importantly, what does that bring our customers?
1 – Decentralized Structure – because all the assets are created following a consensus algorithm, this gives the ability to the users to transact directly with each other and retain full ownership of their assets.
2 – Improved Security and Privacy – because the ledger is distributed to thousands of different participants, hackers are unable to exploit a single point of failure. Additionally, while entirely transparent, the distributed ledger is also pseudonymous. This means that transactions aren’t linked to the user’s identity, providing additional privacy.
3 – Reduced Costs – especially when compared with traditional financial transactions via banks. This makes them incredibly versatile for international money transfers, as their borderless nature doesn’t incur any additional conversion fees.
4 – Visibility and Traceability – because the blockchain ledger is entirely transparent and free for anyone to review. A single transaction can be traced back to its origin, and users can investigate its source. This is incredibly useful in situations where tracking is essential, such as the logistics industry.
I’m sure we’re going to be greater application and use in our industry as blockchain becomes more understood .
Q1 Updates | Week 10
The Ukrainian Crisis and Logistics
The Ukraine crisis has created logistics and supply chain changes that are being felt globally. As with any crisis, information is often scarce to start with and of course there may be incorrect information being disseminated. Given the fluidity, uncertainty, and unrest this situation has created, things are anything but predictable, but here’s what we can say is happening.
- The price of oil and gas is rapidly increasing – shippers and carriers are implementing contingency plans.
- Port operations in Ukraine have ceased, which in turn could disrupt vital shipping routes that carry much of the world’s wheat and other agricultural products
- Several global logistics and freight transportation services providers have halted service into and out of both Russia and Ukraine.
- Airspace restrictions are adding logistical complexity and cost for the air cargo sector.
- There is a reduction in air cargo capacity – particularly with heavyweight and outsize cargo that don’t fit well in regular cargo jets. Ukraine-based Antonov Airlines is continuing some operations with five AN-124 super-jumbo jets, but two of the aircraft plus a smaller freighter were not able to escape before hostilities erupted. And the company’s behemoth AN-225, which was undergoing repairs, was reportedly destroyed.
- With many industries previously relying on Russian parts/products for their own manufacturing, these are now being sourced from alternative countries, and that changing dynamic will alter logistics routes and assets.
We continue to have a large team analyzing the many factors of this crisis so we can provide contingencies for our customers.
Q1 Updates | Week 9
U.S. Department of Transportation report examines efforts to alleviate nation’s supply chain woes
A report released last week, entitled “Supply Chain Assessment of the Transportation and Industrial Base: Freight and Logistics,” presents steps and approaches, which can be taken by the federal government, Congress, states, and private companies to augment supply chains, both presently and in the future.
In the report, DOT made it clear that the nation’s economic strength and quality of life are dependent on the safe and efficient movement of goods both throughout its borders, as well as beyond. And it added that, for supply chains to perform well, they need to be successful in three key areas: transportation, production, and sourcing.
While the report’s findings do not as serve as an immediate solution to the supply chain problems encountered by many today, there are various components of the report’s findings and recommendations that have strong value.
I believe that this is an excellent outline for the next decade, and beyond. If these objectives can be met, then the supply chain that we operate as part of will be in a very strong position.
A thought about sustainability
Finding a way to deliver goods in a sustainable way to mitigate climate change is one of the major challenges that also is creating new opportunities for logistics companies and the companies we support.
As pioneers of innovative logistics solutions, we at DB Schenker are committed to becoming the leading green logistics provider. We are convinced that our success is about more than just our performance — it’s about our social, environmental, and economic impact.
Our goal is to reduce specific CO2 emissions by 30 percent by 2020 and CO2e emissions by 50 percent by 2030 compared to 2006. Currently, we offer Eco Solutions for every mode of transportation, allowing customers to reduce or compensate for CO2 emissions along the entire supply chain.
But there is more to do. The sustainable movement of goods requires a variety of approaches, from more accurate forecasting to re-shoring production and vertical integration. The solutions range from improvements in infrastructure to deployment of clean delivery vehicles with low or zero emissions.
First, we have the desire – and that starts with education. Then we can build the strategies, and finally we can implement sustainability solutions.
Thanks for reading.
Q1 Updates | Week 8
Another Solution for the Ongoing Freight Backups at Ports
Last week I wrote about the ongoing freight backups at maritime ports and how they are disrupting global supply chains. In relation to that I highlighted how some logistics professionals are evaluating a balance between ocean and air freight (see below for more details).
The state of California moved last week to alleviate the same problem by announcing a deal to lease space at six state-owned sites with enough capacity to store 20,000 shipping containers and clear valuable space at ocean-side docks.
State leaders identified these six sites from the California Department of General Services for one year, with an option for a second year. They include three armories (in Lancaster, Palmdale, and Stockton), two fairground sites (San Joaquin County and Antelope Valley Fairgrounds), and a former prison site (Deuel Vocational Institute in Tracy).
We will continue to monitor this situation and bring you more good news as it happens.
Autonomous Vehicles
At the beginning of the year, I mentioned five important logistics trends to watch. The fifth (scroll all the way to the bottom of this page) is autonomous vehicles.
Autonomous vehicles continue to evolve with improved technology making autonomous supply chains closer to reality. Last week I read with interest that a new company was founded (Parallel System), a firm specializing in autonomous battery-powered electric rail vehicles for shipping and freight.
Small autonomous vehicles will hold up cargo, like shipping containers, and allow it to be transported on railway tracks just like larger trains do. Since they’re individually powered, the railcars can be joined together to create a larger fleet or split off to multiple destinations with the cargo in hand. It also means that they’re more flexible, as the “platoons” won’t need to meet a certain amount of cargo before they can start moving. According to reports, the vehicles can carry up to 128,000 pounds, which is double what a semi-truck can carry, and each can travel individually for up to 500 miles.
Keep watching this space.
Q1 Updates | Week 7
Moving from Ocean to Air
As more and more ships continue to queue up outside of major ports, some logistics professionals are moving their cargo from ocean to air. This is being noted by some of the world’s biggest ocean shipping lines who are meeting that need by buying cargo planes.
Logistics clients are willing to pay extra to get around supply-chain snarls at sea resulting from the Covid-19 pandemic. This includes innovative ways to alleviate the current supply chain backlogs that are slowing shipments by utilizing air freight.
I look at this slightly differently. It’s never as simple to choose between air and ocean. Obviously, there is a time/cost payoff. But with ever more sophisticated data available, intermodal solutions can be considered. This allows a shipper to get the timeliness of air freight and the cost-effectiveness of ocean freight — intermodal is a logistics product that combines the best of both.
There are several advantages; a reduced freight costs in comparison with a standard airfreight shipment, a reduced transit time in comparison with a standard ocean freight shipment, it provides a cost-effective freight option for delayed ocean shipments, and it provides an option for tight capacity or expensive airfreight markets and lanes
By combining air cargo and ocean freight solutions, you can find the right balance between cost and time – adding flexibility to your supply chain. You can find out more here.
Update to Canada-U.S. Cross Boarder Trucking
Two weeks ago, I wrote that the U.S. closed its borders to unvaccinated and partially vaccinated Canadian and Mexican truck drivers. That lead to – as I am sure you have seen in the mass media – protests.
The trucker blockade at the U.S.-Canada border ended over the weekend. Commercial traffic resumed late Sunday along the Ambassador Bridge after the week-long standoff. A larger protest against vaccine mandates for lorry drivers has been going on for two weeks in Ottawa, where hundreds of tractor-trailers blocked downtown streets.
The disruptions added costs to already elevated charges for freight between the U.S. and its largest trading partner. We will have to wait and see if the Canadian unrest sparks similar moves by like-minded transport workers in the U.S. and elsewhere.
Watch this space for updates.
Q1 Updates | Week 6
What’s Going On In China?
I thought the opening ceremony of the Winter Olympics were spectacular. They showcased the determination and hope of athletes from around the world. As anticipated, they also thrust the political discussion of China to an international forum.
Companies, and countries, are taking a deeper look into their trading partner relationships for potential forced labor violations. The US has enacted new labor laws that could cause supply chain snarls. The Uyghur Forced Labor Prevention Act adds a presumption under the US Tariff Act that goods sourced from or produced in Xinjiang—home to many of China’s Uyghur and other Muslim minority populations—are made with forced labor.
To import products from the region, companies will have to document that they aren’t sourced from forced labor. Beginning June 21, importers will have to present strong documentation to the US Customs and Border Protection, showing that no part of their products contain components sourced or manufactured in Xinjiang or by Uyghurs.
Automating Warehouses – Update
As you’ll know, I pointed to five important trends to both watch, and act upon, in 2022. One of which is automating warehouses. The latest data is now available.
2021 saw more robots join the US workforce than any other year, and it looks like 2022 will bring about more of the same. Companies across North America laid out more than $2 billion for almost 40,000 robots in 2021 to help them contend with record demand and a pandemic-fueled labor shortage.
I’ve been a believer of this for some time. By blending robotics, automation, and artificial intelligence into the warehousing environment, we’re finding new ways to offset long-standing challenges such as the shrinking labor market and the demands of high-velocity e-commerce business models. You can see some of the advancements we’re making here.
Q1 Updates | Week 5
Do You Ship Canada-U.S. Cross Boarder?
The US has closed its borders in the past week to unvaccinated and partially vaccinated Canadian and Mexican truck drivers.
“These updated travel requirements reflect the Biden-Harris Administration’s commitment to protecting public health, while safely facilitating the cross-border trade and travel that is critical to our economy,” Secretary Alejandro Mayorkas said in a statement.
The impact will be felt most keenly at the Canada border, where around 160,000 truckers cross the border each year. If you have shipments crossing the border now or in the near future, contact your DB Schenker representative to find the best solutions for your need.
Good News for Ocean Freight
The Port of Long Beach is one of a few U.S. container ports that will benefit from the U.S. government’s pledge to invest $14bn in infrastructure projects, to strengthen the nation’s supply chain and its bid for sustainability.
“Long Beach is home to the second-busiest container port in the nation,” said Port of Long Beach Executive Director Mario Cordero. “Improving the ability of ships to navigate channels here will have economic benefits for the entire country. Locally, creating navigational efficiencies will move ships through the harbor faster, reducing air pollution. There will be a good return for this investment, and we thank our federal partners for this allocation to assist with our comprehensive harbor-deepening program.”
Among other features, the recommended plan includes deepening the Approach Channel from 76 feet to 80 feet, constructing an approach channel to Pier J South to a depth of 55 feet, deepening portions of the West Basin from 50 feet to 55 feet, and performing structural improvements to breakwaters at Pier J to allow for depths of 55 feet.
I’m excited to see this development work at The Port of Long Beach as it has great benefits for so many of our customers.
Q1 Updates | Week 4
Ocean News – How High Will It Go?
It’s not exactly news, but shippers are struggling as ocean rates continue to soar. The spot rate for a 40-foot container to the U.S. from Asia – according to some sources – hit the highest it has ever been in 2021. While it’s certainly not that high right now, many in the industry remember prices way lower.
We are now bracing for another round of supply chain disruptions as China imposes sweeping lockdowns in an attempt to keep the Omicron variant contained. Needless to say, a prolonged shutdown could certainly have major ramifications on global supply chains. So far, the effects of the lockdowns on Chinese factory production and deliveries have been limited. Four of China’s largest port cities (Shanghai, Dalian, Tianjin, and Shenzhen) recently imposed narrowly targeted lockdowns to try to control small outbreaks of the omicron variant.
While, as of this writing, these cities had not locked down their docks, logistics professionals should prepare now.
Q1 Updates | Week 3
Leading Maritime Cities of the World
In the last few of days, the Leading Maritime Cities of the World were ranked by Menon Economics and DNV. Ranked by five factors including law, technology, and ports, the top five cities (starting with the top ranked) are Singapore, Rotterdam, London, Shanghai & Tokyo.
Experts see Singapore, Oslo, Shanghai, and Copenhagen as best prepared for digital transformation (something I’m certainly watching), while Oslo tops the list for sustainable technologies and solutions for the oceans, followed by Singapore and Copenhagen.
What’s interesting to me is one city that doesn’t appear in the top five. Hong Kong has slipped out of the top five to the seventh overall position.
In related news, Hong Kong is planning to create a new transport bureau to enhance its status as an international maritime and logistics hub.
Hong Kong’s maritime policies are currently controlled by the Transport and Housing Bureau (THB), which many believe leaves the logistics industry overshadowed by the city’s acute need for housing.
Under the new proposals, the bureau will be split in two, creating the separate Transport and Logistics Bureau, a move welcomed by many of us in the industry. Of course, don’t expect too much over the next few weeks, as the Chinese New Year is almost upon us.
Q1 Updates | Week 2
CES 2022
Every year, it’s fun to see what the latest tech has to offer and of course that gets showcased at CES in Las Vegas every January.
In the area of transport, John Deere’s showcased their self-driving tractor. Deere showed off a tractor accessorized with stereo cameras on its front and back to allow it to operate autonomously. Deere has a somewhat simpler problem to solve than trucking logistics: agricultural vehicles move more slowly and won’t get honked at if they must pause in a field to get their bearings. But Deere will initially support only no-person-onboard plowing, not the more complex toil of seeding or harvesting.
That doesn’t mean there are not some great advancements in the logistics industry. If you missed it previously – check out what DB Schenker is doing in the area of trucking platooning.
Crisis – What Crisis?
Churchill is credited with saying “Never let a good crisis go to waste” in the mid-1940s as the world approached the end of WW ll. Logistics Management published a great article in the past few days: Supply Chain Disruption: A crisis yes, but an opportunity too.
As Logistics Management correctly point out, 2022 is likely to be challenging. But there is one deciding factor that will separate the successful from the frustrated, when it comes those planning their logistics. That’s going to be visibility, which in turn allows business planning. That requires a strong digital foundation.
If you have not signed up for eSchenker, then you should check it out. eSchenker is our most advanced logistic solution yet. It incorporates all eServices into one portal, giving you maximum support at every stage of your supply chain. From tracking and scheduling to booking and reporting, eSchenker has your logistics covered. You can find out more here.
Q1 Updates | Week 1
With the national recovery in full swing, e-commerce sales growing and consumer spending all remaining steady through 2021, demand for all areas of logistics is extremely high right now.
Concurrently, labor shortages, a lack of equipment and persistent supply chain shortages are impacting the smooth flow of commerce. These and other factors drove up freight rates and created capacity crunches that flowed right into 2022.
The transportation trends in 2021 were formed mostly by the necessity to deliver more products in less time, often with closed borders. Moreover, innovation technologies will guide the changes in logistics in the upcoming year.
From my point of view, I see five important trends to both watch, and act upon, in 2022.
Blockchain
Blockchain is one of the most exciting tech trends now. It is a distributed, encrypted database model that has the potential to solve many problems around online trust and security. While many know blockchain is important for crypto, we’re seeing a need for different blockchains for specialized industries. I believe we’re going to see it going into more traditional avenues of logistics.
Big data analytics
All the logistics statistics are essential for planning future deliveries and understanding what goods are needed for the market. I predict we’ll see the availability big data waterfall down from the largest organizations to professionals planning logistics at the business level.
Artificial intelligence
AI already impacted the transportation sector in the last decade. Using AI helps improve the operation’s functionality, finding problems before they occur, and identifying opportunities. New transport technology in implementing AI was influential in the pandemic, as many people in management positions started to work remotely. I’m excited to see the next developments in 2022.
Automating warehouses
Transportation industry trends in 2021 were mostly focusing on the automatization of the manual workforce. Many logistic companies see the potential in automating and using robots for efficient warehouses. The goal of such a decision is to make routine work cheaper and more comfortable for the business. There’s a real need for more in 2022, so we’ll keep a close eye on this.
Autonomous vehicles
Trends in transportation also affect the use of autonomous vehicles for delivery. A few years ago, this trend was unreal for almost every manufacturer. Only a few giant companies were investing in autonomous transportation of goods (DB Schenker being one of them). Self-driving trucks can relieve drivers’ work in the future and be efficient in operating on busy roads to predict and analyze traffic. Watch this space.
Bookmark and come back weekly to find out how the logistics industry is trending in the weeks and months ahead.
