Wednesday, October 3, 2018

Turning Over a New Rock

Shippers scramble to control costs in the rapidly changing environment.
Logistics managers are scrambling to find new ways to control costs, following a turbulent year with unprecedented spikes in surface transportation outlays, new regulations taking effect, and tariffs both already in place and looming on the horizon.

The new realities have shippers looking for ways to make themselves attractive to truckers, catering to them with extended loading dock hours, amenities for drivers, and working to become or remain a “shipper of choice.” Much like Uber drivers rating their fares, carriers note which customers make it easy to ship for them, and which cause bottlenecks or penalize drivers for being 15 minutes late. Hours of service regulations on long-haul drivers, backed up by electronic logging devices, force truckers to take a harder line and demand matching efficiency from shippers.

Executives in corporate suites have taken notice that logistics efficiency can have a pronounced effect on their bottom line, as company after company has had to cite surging supply chain costs in conference calls and quarterly reports as reasons for subpar financial performance. Consumers are being conditioned to expect that deliveries of their shipments will cost nothing, and happen immediately, adding stress and cost to the businesses that must provide the service to match those expectations.

As the traditional end of year shipping peak season gets underway, so is an incipient trade war with the United States’ major trading partners, notably including China The latest round of US tariffs on Chinese goods just took effect, with tit-for-tat retaliation by Beijing.  Levies of 25 percent have been threatened for essentially all goods imported from China are poised to take effect January 1. Spot rates for ocean and airfreight are volatile, with no one sure how these events will play out.

Rates aren’t falling any time soon, so that means turning over as many rocks as possible in search of supply chain savings. And pardon us if we’ve said this before, but “if you can’t measure it, you can’t improve it” – getting a handle on your logistics operations is the crucial first step to reining in runaway costs.

Kirk Shearer
President & COO
(973) 726-2103
TOTALogistix, Inc.

Tuesday, September 18, 2018

What Doesn’t Kill Me

Retailers learn hard lessons from competing with the Amazon model

Modern retailing has taken some strange turns in the Amazon era. For instance, you can now utilize the services of a “personal shopper” – at Walmart.

Malls are being hollowed out, shops are closing by the thousands, and retailers are going bankrupt. But it may be too early to declare the death of retail. Americans have resumed doing more shopping physically in “brick and mortar” stores.

From the garden section at Walmart to the diamond counters at Tiffany & Company, old-school retailers are experiencing some of their best sales growth in years. The Apple Store, of course, has consistently been in the forefront of improving the retail customer experience, and profitability.

The strong revenues start with a roaring economy and an optimistic consumer, and also reflect a broad reordering of the $3.5 trillion industry, with fewer retailers capturing more of the gains. Stores that have learned how to match the ease and instant gratification of e-commerce shopping are flourishing, while those that have failed to evolve are in bankruptcy or on the brink, reported the New York Times

Many successful stores are now a cross between a fast-food drive-through and a hotel concierge. Target’s shoppers can order sunscreen or a T-shirt on their phone, pull up to the parking lot and have the items brought to their car. Nordstrom lets customers in some stores make returns by dropping their items into a box and walking out — no human interaction required.

Walmart is employing 25,000 “personal shoppers” to select and package groceries for curbside pickup. In recent weeks, all three retailers reported stronger-than-expected sales growth for the quarter. Traffic to Target’s stores and online sites grew at its fastest pace since the company began keeping a record a decade ago.

The scramble to improve shoppers’ experience has major implications for how companies need to organize their supply chains to accommodate them. Customers can order online and pick up at the store. They can order online and have their purchases delivered home, in some cases, on the same day. If they return goods, they expect the process to be seamless and free.

Remember the old adage – “what doesn’t kill me makes me stronger.“ Are you ready to compete in the brave new shopping world?

Kirk Shearer
President & COO
(973) 726-2103
TOTALogistix, Inc.

Wednesday, September 5, 2018

Raising the Bar

NY-NJ Port handles record traffic and takes it in stride

A year ago, the $2.6 billion Bayonne Bridge lift was completed, raising clearance from 151 to 215 feet. This project allowed the new mega-container ships to access terminal facilities at the Port of New York and New Jersey upstream from the bridge, which had limited the size of ships that could call at four out of five of the port’s terminals.

Previously, 9,800 TEU (20-ft. length equivalent cargo containers) ships were the largest that could pass under the bridge, but now, container ships up to 18,000 TEUs have access. Cargo volumes in NY-NJ set a new record for the first half of the year, the Port Authority of New York and New Jersey announced on July 26, up 6.8 percent over 2017, which itself was the record previously. Between January and June this year, the port handled 3,450,469 TEUs, compared to 3,299,675 during the same period in 2017.

While there were fears the new volume of business would overwhelm terminals, which had seen congestion and long wait times for drivers, the darkest predictions of disruption and delays have not materialized. The port has seen no notable rise in congestion, terminal-gate backups, or chassis access problems in the wake of the opening, say port truckers, shippers, the New York Shipping Association and the Port Authority itself.

Since the bridge elevation, the port has seen a near doubling in the number of ships sized 10,000 TEU or above, and the port’s share of East Coast-loaded cargo, on the decline since 2010, has ticked up. The Port of New York and New Jersey is the busiest on the East Coast. During the first half of the year, the port’s Express Rail, a ship-to-rail system serving New York and New Jersey marine terminals, was also on a record pace, up 15 percent from the previous record in 2017. Cargo transported by rail is expected to grow when a new New Jersey rail facility opens at the end of 20118, eliminating two and a quarter million truck trips from local highways.

Along with the bridge raising, the Port Authority is nearly ready to release a master plan to handle an expected 68 percent rise in cargo traffic by 2045, while New York City officials just released a plan for a $100 million overhaul to the city’s freight distribution systems.

Kirk Shearer
President & COO
(973) 726-2103
TOTALogistix, Inc.

Thursday, August 16, 2018

Tough Road All Over

From Europe to Asia, truck capacity is squeezed by many factors

American shippers have seen rates spike and availability tighten as trucking capacity in this country fails to keep pace with demand. Reports from regions around the world suggest the problem is larger than just the United States, with a global capacity crunch underway in over-the-road transportation.

In this country, rising trucking costs are biting into the bottom lines of US manufacturers and retailers, forcing them to sound the alarm to Wall Street on their earnings reports and to look for supply chain efficiencies to reduce or counter higher logistics costs. US truckload rates have climbed 20 to 30 percent year-over-year on the spot market, and contract pricing has risen in the high single digits to low double digits range. Rising freight demand and the ELD, or electronic logging device mandate, has tightened truck capacity and had spillover effects on rail pricing.

European shippers are also paying more for trucking, due to a scarcity of drivers and higher fuel prices, factors at play in the US as well. This is in the face of a concerted effort by the European Union and member nations advocating for containerized rail, looking to reduce emissions caused by road transport.

The European Commission recently unveiled plans to cut new trucks’ CO2 emissions by at least 30 percent by 2030, with an interim target of 15 percent by 2025. The German government is boosting toll rates on heavy goods vehicles and extending toll highways beginning next January, expected to cost the industry around 2.5 billion Euros per year.

South of the border, strong freight demand and higher US trucking rates mean fewer trucks available for northbound loads at the US-Mexican border, even as demand for cross-border truck and intermodal rail grows. Mexico has their own new hours-of-service (HOS) regulations for drivers taking effect this month, and traffic between the two countries continues to mushroom. In April, the dollar value of US-Mexico trade by truck increased over 20 percent to $35.9 billion, according to the US Bureau of Transportation Statistics – and those figures, the latest available, were compiled before the produce season kicked into high gear.

In India, truckers just ended a strike by the All India Motor Transport Congress, which claims to represent nearly 10 million truckers. The proximate cause of the strike was a protest against rising diesel prices, but the drivers also had grievances concerning insurance costs, toll systems, and the awarding of contracts for direct port delivery services.

And while hard evidence is scanty, there are reports of truck drivers in China suspending work, mostly in inland provinces. Because of the sensitivities associated with industrial disputes in China, there is no official confirmation, and on-the-record comments were hard to find, but signs indicate that China, too, is seeing a tightening of the trucking market.

Industry experts say the capacity crunch is likely to be with us for the “long-haul,” highlighting the need for shippers to do everything possible to increase supply chain efficiency. 

Kirk Shearer
President & COO
(973) 726-2103
TOTALogistix, Inc.

Wednesday, July 25, 2018

Caught in the Crossfire

Burgeoning US-China trade war causes uncertainty for exporters and importers.    

With the US-China trade war heating up, American companies and their supply chains are getting caught in the crossfire.

On July 6, the Trump administration imposed tariffs on $34 billion worth of goods imported from China, with the Chinese government immediately retaliating in kind. Another $16 billion in American tariffs on Chinese imports has been announced but still pending.

But the US has a plan to impose an additional $200 billion of tariffs, which would mean more than a third of inbound containerized trade with China would be subject to the levy, a sharp escalation.

China, as it does not import $200 billion in goods from the United States, has not yet announced how it will retaliate, but reports from Chinese ports give an idea. Imported products from the States that used to “sail” through Chinese customs are encountering vastly greater scrutiny and delays.

A Shanghai importer told Reuters that officials at the city’s port had put additional inspections, customs holdups and bureaucratic red tape. For any shipper, such snafus are maddening and expensive, but for time-sensitive and perishable cargo they can be ruinous. As an example, shipments of fresh American cherries that would normally have been cleared in a few hours have been held for 10 days to two weeks, resulting in the fruit spoiling in the shipping containers. More than half of all US cherry exports have been shipped to China.

While having allies working together in a united bloc would help to soften the impact of a trade war with China, the US is simultaneously pursuing trade disputes with Canada, Mexico, and the European Union. Overall, continuing down this path is likely to lead to rising prices and declining trade.

“It’s very difficult to see how this doesn’t negatively impact all Americans of every walk of life,” Matt Priest, president and CEO of the Footwear Distributors & Retailers of America, said in a statement when the tariffs were first announced. “The president claimed that trade wars are easy to win, but what our industry has always known is coming true: Trade wars are costly, unnecessary and do harm to the American economy.”

Kirk Shearer
President & COO
(973) 726-2103

TOTALogistix, Inc.