What’s Driving the Future of Ground Transportation

Current events are reshaping global supply chains with speed and force. Changes to ground transportation, likewise, are whipsawing shippers and carriers.

Supply and demand have seesawed triggering instability in ground transportation operations. Cargo capacity, driver shortages, and technology are in flux. That makes for continued uncertainty and volatility in the future.

The post will reveal the trends reshaping the industry. We’ll look at how current trends can impact your business. Moreover, we’ll provide insights into these trends to gain competitive advantage.

Cargo Capacity is Available but Declining 

 

As the economy picks up, capacity will continue to shrink. Shrinking truck capacity will result in a tight market. Spot truckload capacity has already declined. It dropped 17.5% in May of this year.  Dry-van, refrigerated, and flatbed rates, meanwhile, increased 1.2% (Truckstop.com).

At year’s end, we should see a scarcity of truck capacity as freight demand exceeds capacity.  According to FTR Transportation Intelligence, a truck shortage due to depressed truck orders
will further impact capacity.

As a result of the uncertainty surrounding cargo availability, shipper-carrier collaboration has increased. That’s due in large part to the pandemic’s jolting of supply chains. Operations and costs fluctuated erratically, complicating business decisions.

For the time being capacity is in good supply. But that will change by the end of 2020. Truck capacity will continue to decline at a gradual pace. Then as the economy rebounds, spot rates will increase. In general, spot rates will increase but not at the levels seen in 2014 or 2018.

Unpredictability and instability will challenge shippers and carriers alike. Operating in a tighter market and lacking expertise, shippers will partner with 3PLs. Shippers are already reaching out to 3PLs. That will continue as shippers struggle to cope with increasing complexity.

Truck Driver Shortage Declining but Still Persistent

 

As of May, the Bureau of Labor Statistics (BLS) reported 88,000 truckers had lost their jobs. Rehiring of truckers depends on how fast consumer demand snaps back. The experts are divided on whether there will be a V-shaped recovery or not. Regardless, it’s clear, the recovery will be uneven.

Consumer staples, pharmaceuticals, and eCommerce have been strong during the pandemic. Other sectors, meanwhile, remain weak. But employment is coming back. May’s unemployment rate declined to 13.3% from April’s rate of 14.4%

A slow, but gradual recovery will likely continue until a vaccine is in hand. Then in late 2021 or early 2020, the economy should surge past its pre-coronavirus levels.

Moving cargo will be spotty with urgent products and commodities getting priority. On the upside, we have the emergence of driverless vehicles (DVs) and electric vehicles (EVs). Companies developing trucking solutions include Amazon, Waymo, Daimler, GM, and startups like Nikola.

These developments will help relieve the costs of moving goods by truck. DVs will ease the driver shortage, and EVs will cut operating costs.

Expect driver shortages to decline over the short-term, as artificial layoffs end. But that doesn’t address the longer-term issue of an industry-wide driver shortage. In the long-term, driverless and electric trucks will help address this issue.

In the short-term, the driver shortage will persist as the economy rebounds. In the long-term, as the shift to DVs and EVs gains ground, the driver shortage will see relief.

Dwell Times Improving but Remain a Long-term Issue

 

Dwell times have been an enduring issue facing shippers and carriers. And as you already know, current events compounded that issue.

Loading and unloading times reached 24 hours when we saw panic-buying. Now, with the reopening of the economy, dwell times are improving. With more predictable demand, the driver check-in process has improved reducing dwell times.

As shipping increased nationwide, FourKites reports dwell times declined up to 20 percent. But some states are still struggling. The mixed results are due to the spotty nature of the recovery. Idaho‘s dwell times have increased 8%, and Minnesota’s has increased almost 16 percent.

Putting aside temporary improvements, detention rates will continue to hamper operations long-term. Detention rates have worsened since 2018, indicating a rising trend. This is an issue still looking for a solution.

The adverse effects on operations and costs has stakeholders seeking an automated solution. One solution in beta testing by True Load a software company.

It consists of an “aggregated and anonymized” database of more than 5,000 facilities and docks. Today, most facilities and docks focus on Southeastern states. But the database is expanding to include national coverage.

This solution captures arrival and departure times from shipping and receiving sites. Users, shippers, and carriers can mine the database to create reliable route plans. This solution promises to end planning by assumptions and guesswork.

If successful, this database can help streamline operations and reduce costs.  All in all, dwell times and associated penalty fees will decrease. On the whole, operations will be better, faster, and cheaper.

CONCLUSION

 

Ground transportation is in flux. The trade war with China, Covid-19, and technology have only exacerbated matters. Uncertainty and volatility will continue to batter the economy and supply chains.

The impacts to ground transportation show signs of improvement in the short-term. The long-term, however, presents challenges shippers will have to tackle.

Cargo capacity, truck driver shortages, and dwell times will continue to confront shippers. Confronting these challenges alone is a formidable task at best. A more effective way is to partner with a 3PL who knows ground transportation.

Contact American Global Logistics  to leverage the trends shaping ground transportation. Our Ground Transportation team can put you on the right side of these trends.

5 Emerging Warehousing Trends You Need to Watch

Get Ready for Warehousing’s New, Competitive Landscape

Like all other logistics services, warehousing faces change, disruption, and volatility.

Change, disruption, and volatility stem from uncertainty about trade with China, ongoing global supply chain shifts, and new technologies. Yet, against this backdrop, trade is increasing.

That will lead to more volume and more congestion. All the while, customer expectations are increasing not decreasing.

As a result, the warehousing industry is adapting. Specifically, five key trends are emerging. They will change warehousing as you know it. It’s important to know and understand these trends to compete in the future.

The five key trends shaping the future of warehousing are: (1) Growth of port business in the Gulf and East coasts; (2) Tailored, on-demand warehousing; (3) The advent of precision-based inventory management; (4) The decline of available of warehouse space and the rise in costs; and (5) The expansion of systems interoperability.

 

Trend #1: Growth of Port Business in East & Gulf Coasts

A shift in business from the west cost to the east and Gulf coasts has been underway. The driver of that shift was the trade war with China. The pandemic may have also contributed to that shift.

Many businesses have relocated from China to other countries. Supply chains have moved to new locations in Southeast Asia and the Americas. Since then, we’ve seen more Asian traffic rerouted through the Panama Canal.

East coast and Gulf coast traffic has also increased driven by the rise of eCommerce. Also, the Gulf’s coast’s increase in the manufacture and export of resin contributed to more business growth. In particular, Houston has seen its container volume grow by double digits, since 2017.

As business grows at these seaports, competition for warehouse space will increase. Along with that, the need for customized warehousing will also rise.

 

Trend #2: The Growth of Tailored, On-demand Warehousing Services

The competition for limited warehouse space will challenge logistics service providers (LSPs).  Meeting that challenge requires new, creative solutions focused on shippers’ needs.

One new initiative at the Port Authority of New York and New Jersey (PANYNJ) is to identify unused warehouse space. Vacant warehouse space exists in pockets and is not easily visible. So, PANYNJ developed a database to identify vacant space for short-term use.

This enables shippers to use vacant space to support surges due to seasonality. Likewise, it helps support shippers in managing disruptions like Covid-19.

PANYNJ’s creation of a database maximizes the use of unused warehouse space.  Moreover, it enables shippers’ needs to move slow and fast-moving inventory. That simple idea promotes supply chain flexibility.

This modular, short-term solution also benefits shippers’ bottom line. It may lead to variable pricing, charging shippers only for space used for the time its needed.

In the future, other ports will likely seek to provide tailored, on-demand warehousing services.

 

Trend #3: The Advent of Precision-based Inventory Management

The above-mentioned changes are increasing the demand for precision-based inventory management. Covid-19 has caused the logistics industry to relook  lean inventories. Namely, when does it make sense to go lean and when doesn’t it?

Precision-based inventory management means achieving the proper balance of inventory and cost. We’re now seeing that on a macro-scale, as businesses move their supply chains closer to the customer.

At the micro-level, we will see tighter warehouses and in transit inventory management. By that I mean, the industry will likely see the integration of services. We will see improved end-to-end- supply chain management.

LSPs will integrate management of containerized freight coming into ports down to the less-than-truckload (LTL) level.

This practice addresses gaps as cargo moves downstream from port side to the customer. It extends visibility of the supply chain helping to move cargo out of ports faster. That improves velocity and on-time delivery, promoting supply chain efficiency.

Trend #4: The Decline of Available of Warehouse Space and the Rise in Costs

Currently, available warehouse space is not a critical issue. That’s due to reduced manufacturing activity and blank sailings.

But that’s changing.

Businesses and the economy still face many challenges. Instead, it appears we will see a V-shaped economic rebound.

Relying on the experts, planners expected a long recovery period. So, they reduced capital investment spending on warehousing and distribution. That decision will impinge on future space availability.

We’re seeing early signs now.

First, vacancy rates in the fourth quarter were 2.5%. That’s down from 4% in the fourth quarter of 2019. Second, blank sailings are on the decline. And third, rents are increasing.

CBRE Group projects a 5% increase in rent increase for industrial properties in 2020.  That’s on top of rent increases over the four prior years. And eCommerce is adding price pressure, especially in urban areas.

Over the last five years smaller properties located in cities, increased more than 30%.  Meanwhile, larger warehouses (>500,000 sq. ft,), located outside of city limits where land is cheaper, increased 15%.

As growth picks up, the squeeze on space will continue. Furthermore. as shippers vie for limited space costs will climb.

 

Trend #5: The Expansion of Systems Interoperability (Integration Platform as a Service iPaaS)

The previous four trends focused on external and internal issues. The fifth trend focuses on technology – Application Programming Interfaces (APIs).

Warehousing has become a prime candidate for the use of APIs. APIs have several benefits that augur well for industry-wide adoption.

APIs enable you to leverage data across many systems easily. They are quick to employ, easy to use, and cost-effective.

Moreover, APIs can connect disparate warehouse management and robotics systems in use. They can also connect to transportation management systems. Finally, they eliminate the need to set up EDI for each partner. This simplifies communication with trading partners.

Integration Platform as a Service or IPaaS helps reduce costs and complexity. For this reason, iPaaS will gain in popularity.

Conclusion

Warehousing is changing. As with everything else, it’s not standing still.

Warehousing will continue to operate in an ever more complex and uncertain environment. That’s a given. It will place greater pressure on shippers, as they fight for limited warehouse space.

So, we will likely see shippers rely more on 3PLs to handle warehousing and distribution. Rising customer expectations will further reinforce reliance on 3PLs.

As uncertainty prevails, working with a qualified partner will give you peace of mind. When you partner with American Global Logistics , you’ll get warehousing and distribution services you can count on.

These five trends suggest warehousing and distribution will be more specialized, precise, and focused. We do that today at American Global Logistics. We don’t follow trends – we lead them. Creating customized solutions to meet your needs is in our DNA.

Are You Ready for Tomorrow’s Increased Supply Chain Risks?

It’s a new world for global supply chains. It’s called the New Normal.

Global supply chains are reacting or responding to new trade agreements. They’re reacting or responding to the aftereffects of Covid-19. And they’re reacting and responding to recession.

There’s a big difference between reacting and responding. A reaction is passive, whereas a response is proactive. The former implies a lack of foresight and planning. The latter implies the opposite.

Due to the factors cited above, supply chain management (SCM) is becoming more important. Its impacts to the top line and bottom line are unmistakable. Supply chains are becoming more strategic, more integrated, and more detailed.

In this post, we’ll look at how supply chain risk management is changing. More importantly, we’ll reveal what those changes mean to you and your business.

To succeed and win you will need to adapt your business and supply chain to the New Normal.

Increasing Risks to Global Supply Chains

 

It’s no secret supply chains are undergoing transformation.  New trade agreements, Covid-19, recession, and new technologies are some of the factors impacting supply chains.

Today’s and tomorrow’s market conditions have changed and continue to change. As a result, risk management must also change.

Diversification out of China has been underway for at least two years. Vietnam has increased production of wireless and electronics by 157.8% from 2019 to 2020. Likewise Malaysia has increased its manufacturing by 57.1%. And Thailand has increased its business activity by 32.4%.

In addition, shipping from Asia to the west coast is shifting to the east coast. The following ports have seen increases in cargo: Houston – 52.2%; Charleston – 32.4%; Savannah – 22.8%; Norfolk – 14.8%; and NY-NJ – 12.6%.

Furthermore, businesses are experiencing increased instances of mis-declared cargo.  According to TT Club, an international transport and logistics insurer, ship fires are on the rise. Fires are being reported every two weeks. Ship fires comprise twenty-five percent of damaged cargo.

Theft is another problem plaguing shippers. During the outbreak, masks and other medical supplies went missing without a trace. This issue requires keen attention. Learning from the Coronacrisis, availability of critical supplies is vital.

Combating Risks with New Approaches and New Technologies  

 

Conventional approaches to combating risks will have limited effects. Typical monitoring coupled with fines don’t deter theft effectively. Yet some shipping lines are increasing fines in hopes to stem the rise of cargo fires.

APL LeHavre and Evergreen have increased fines to $35,000/container. Hapag-Lloyd has increased fines to $15,000/container. And HM has increased fines on Chinese exports.

To make headway, industry stakeholders must take new approaches. They must respond to changing conditions as they occur. Two ways to do this are with better business practices and increased use of technology.

Done right, both can lead to reduced risk and increased competitive advantage.

Enhancing and Enforcing Business Practices to Combat Risk

 

Better business practices start with improving monitoring and reporting. To this end, the Cargo Incident Notification System (CINS) is making progress. Founded in 2011, CINS exists to improve information sharing of cargo-related incidents.

CINS is a consortium of 17 shipping lines. It focuses on both loss of life and loss or damage to property. Its members include some of the biggest container lines. CINS’ membership of big shipping containers gives CINS increasing influence in enhancing and enforcing business practices.

Next, let’s look at how technologies can help reduce risk.

Employing New Technologies to Combat Risk

 

IoT offers some promise in fighting risk, but IoT technology isn’t quite there yet.

The industry is exploring the feasibility of fusing sensor-collected data with other information.

For example, sensors can pair data on heat, humidity, etc., with GPS data and cargo movement. Once collected, you  could send this data to decision makers at any level or location in real time.

Keep in mind this capability doesn’t exist yet, but it offers hope. Additionally, IoT is not yet in wide use. Fewer than 1% of container lines use IoT.

That brings us to a technology that is available and can help manage risk.  In particular, predictive analytics is available today in scale and sophistication.

Technologies exist that can transform data and information into actionable intelligence. For example, two weeks before the media began reporting on Coronavirus outbreak, companies using this type of technology received alerts (Resilience 320 and Bluehost).

The merging of public and private data offers a powerful tool in creating actionable intelligence. Coupled with communications, you can notify various organizational levels for immediate decision. Early alerts/notifications translate into quicker action.

Going beyond notification/alerts, businesses can achieve even greater risk reduction. For example, you can improve responsiveness and resilience by integrating these technologies into your business processes. Doing so will result in more fluid operations.

For example, you can re-route a shipment to another port. Or you can change the mode of transportation without delay. Or you can stop payments to a supplier, freeing up working capital. Integrating technology into business processes can expedite your decisions and actions.

Reducing Supply Chain Risk in the Future

 

The operative words describing SCRM are flexibility and anticipation.

As someone said, flexibility is the best defense against disruption. SCRM must change full tilt as conditions change. That calls for rapid better-informed communication and collaboration. Achieving both requires people as well as technology.

To achieve flexibility SCRM plans must be more comprehensive. Your SCRM plan must be broader and deeper. Planning must account for what could happen because the future will not look like the past. It goes beyond planning for the unexpected. You must address possibilities – not just probabilities.

Also, communications must extend beyond your company to suppliers and customers. That will ensure decision makers at the appropriate level take action without delay. This compresses the decision cycle time-to-action.

Deeper planning must take the scope and scope and duration of crisis into account. That’s a lesson learned from the Coronacrisis. Preparing for the Coronavirus shocks required global visibility and early notification .

You can also add precision planning to that list.

Putting this into practice means modeling and testing different scenarios. It implies using new tools to achieve real-time status and end-to-end visibility. And that will facilitate anticipation.

Implementing these measures requires insight into how supply chains can affect your business. Partnering with a 3PL who has some flexibility built into its operations would help. They should be able to scale up/down aligning your changing needs.

You must identify your critical nodes and prepare for the expected as well as the unexpected. This will promote rapid execution when you need it most. One-size-fits-all plans won’t work. Precise planning leads to competitive advantage and will replace general planning.

Is Your Business Responsive and Resilient?

 

SCRM is changing. The need to adapt is more critical than ever. The changes to global supply chains are extensive and swift. Only the most competitive companies will survive.

Your business must be responsive and resilient. It must expect the unexpected and respond with speed and agility. You must position your business for the future.

To do that you need a SCRM plan that will withstand the peaks and troughs of business as well as unexpected crises.  Supply chain management is transforming right now. To survive you must transform your SCRM now to avoid the landmines that lie ahead.

Contact American Global Logistics today if you’re interested in preparing for the New Normal.

Our expert team can help you adapt and compete in the new competitive landscape.

 

What You Need to Know About Changes to Air Freight

The aftereffects of Covid-19 have thrashed global air freight supply chains.

As a result, volatility, and uncertainty prevail at unprecedented levels. This aggravates air freight’s operating environment.

Availability of capacity is unpredictable, making pricing erratic. For example, since February 2020, spot rates for China – Europe have increased 272%.  Likewise, spot rates for China – North America have increased 340%.

Further complicating matters is the unpredictable retail sales cycle due to shutdowns. Adding to the chaos, social distancing has affected loading/unloading of cargo.

Second, much of the cargo leaving China wasn’t palletized. This added time to loading passenger planes carrying cargo. It resulted in unexpected congestion at airports.

Today, shippers must show up four days before loading. That’s twice as long as pre-Covid-19. And charter flights need even more time to load aircraft.

Last of all, clearing customs has also added to significant delays in air freight shipping. In particular, Shanghai, Guangzhou Baign, and Zhangzhou Xinsheng airports have experienced considerable delays.

Chinese regulations stipulate, if planes are not loaded within 72 hours after clearance, customs compliance is no longer valid. That means cargo must go through clearance again.

That describes today’s operating environment. No one knows when global trade will settle down.

To pinpoint what the future holds, two questions emerge.  First, what are the short-and long-term impacts to the air freight industry? Second, how do those impacts affect shippers, 3PLs, freight forwarders, etc.?

Short-term Impacts to Air Freight Supply Chains

The recovery, by all indications promises to be an uneven recovery. Thus, you can expect continued volatility and uncertainty to persist.

Air freight supply chains will experience capacity constraints and unstable pricing, until the pandemic is under control.

At a minimum, governments must control the virus’ spread. Tools available to them are social distancing and expanded testing. At most, the pharmaceutical industry must deliver an effective vaccine available at a large scale.

Medical shipments will decrease in urgency and number. That will ease some of the capacity constraints and pricing pressures.

Additionally, delays at airports due to loading/unloading and customs clearance will improve. Air freight will transition to normalcy as passenger aircraft-for-cargo-only phases out.

Again, no one knows when the virus will be under control. But its plausible that over the next 18 to 24 months, air freight supply chains will see some relief.  That is, capacity constraints, unstable pricing, and Covid-19-related delays should abate.

Long-term Impacts to Air Freight Supply Chains

The long-term picture is more complicated. Long-term changes may result from a global recession due to the global quarantine.

The duration and depth of the recession remains unknown. So an element of uncertainty will continue even as volatility subsides.

Recovery should first occur in domestic markets. Following that, international markets will see improvement. So, domestic air freight operations should normalize sooner. Capacity constraints and pricing pressures should subside.

That said, Lufthansa has published its schedule for June 2020. It plans to international flights from five to fifteen by mid-June. So, the outlook for air freight supply chains to international destinations appears promising.

Yet a return to pre-Covid-19 conditions remains unlikely.

According to Fung Business Research, Covid-19’s impacts may lead to structural changes. In adapting to volatility and uncertainty, air freight supply chains will look different. They will become more responsive and resilient.

Air freight supply chains will become smoother and more effective out of necessity. Intense competition and new technologies will drive some of the structural changes.

The industry will likely shrink due to intensified competition in air freight. Estimates suggest manufacturers, freight forwarders, and trucking companies will decline 7.5% in 2020. And that follows a drop of 1.5 percent in 2019. Stronger companies, meanwhile, will continue to adapt.

They will exploit new technologies focused on improving air freight operations. Specifically, they will merge AI/machine learning with IoT. This enables decision makers to account for weather, unexpected repairs, and clearance delays. This fusion of data and information will result in improved real-time decision making.

Also, companies that adapt will look for ways to improve long-term decision making. You will see more emphasis on analyzing past trends to gain insights into future trends.

A major change to air freight supply chains will come from diversification. We will see continued diversification out of China. Diversification is ongoing today and will continue in the future. That will mitigate some of the issues tied to sourcing in a single market.

Moreover, we can expect another kind of diversification. Supply chains will also diversify. Expanded use of land, rail, and expedited ocean transport will ease capacity and pricing issues.

These changes will go a long way towards reducing uncertainty and volatility.  But consumers’ move to online shopping will likely continue. And that increase in ecommerce will continue to exert pressure on capacity and pricing.

What Air Freight’s Changes Mean to Your Business

Competition in air freight will increase.

The air freight industry will shape up to be smaller, more resilient, and more responsive.  It will be more diversified and operate more effectively and efficiently than today.

To compete and win, in the long term you must ship cargo faster, better, and cheaper. Faster and better will likely be more achievable. Streamlined operations and improved decision making may help achieve competitive pricing.

Here’s what you need to do to survive and win.

Shipper and logistics service providers must think about and plan for the long-term. Short-sightedness reflects poor planning. In contrast, taking the long view wins the game.

Operating in a 24×7 world places a premium on sustained operations. It replaces reaction with dynamic response. Diligent and comprehensive strategic planning results in competitive advantage.

  • Develop agility into your operations and supply chains. In today’s unpredictable world, your business must be more adaptable to changes – on a moment’s notice.
  • Improve crisis responsiveness and resilience by integrating potential changes into your strategic plans. Go beyond mere identification of potential risks to your business and supply chain. Expand risk management planning company wide.
  • Seek new relationships for competitive advantage. As diversification unfolds you will need new partners to secure warehouses and transportation.
  • Focus on improving performance, streamlining operations, and early anticipation of unexpected changes. Capitalize on the benefits of new technologies like predictive analytics and end-to-end visibility

Are you prepared for tomorrow’s heightened competitive landscape

The world of air freight has changed. And it continues to change. Recovery will be uneven. Volatility and uncertainty will persist but decline gradually, as the virus is brought under control.

Consequently, tomorrow’s air freight supply chains will embrace responsiveness and resilience. Likewise, your business must be responsive and resilient.

American Global can help you deal with the changes impacting air freight. Our air freight professionals can guide you successfully through the coming changes.

We’ll ensure your cargo gets to its destination when you want it, at the most competitive rate. We’ll work in close collaboration with you every step of the way.

What You Need to Know About Blockchain … Before You Invest

Blockchain has been heralded as a revolutionary technology for Fintech. But it’s not restricted to Fintech. It also has many applications for supply chains. And some of these applications are potentially transformative.

Some media reports, however, would have you believe Blockchain can run your supply chain on auto-pilot. No more surprises. No data lapses or inaccuracies. And total data security with end-to-end visibility.

It sounds like it’s a complete enterprise solution. Almost like a magic bullet.

But let’s not rush headlong into investing in Blockchain. Let’s take a deeper look at what Blockchain can deliver. Let’s separate fact from fiction and look into the promise vs. the reality.

To start with, we need a clear definition of Blockchain. Put simply, blockchain technology is  “ …a decentralized, distributed ledger that records the provenance of a digital asset”. (Blockchain.com).  At its core, Blockchain increases visibility and transparency across a supply chain.

Blockchain is also known for tight security. One of the most famous claims is it’s un-hackable… we’ll get to that later.

First let’s see why there’s a groundswell of support for Blockchain.  Who’s buying into it?  What benefits can you expect?  And finally, what you really need to know – what are Blockchain’s constraints?

Useful Blockchain Applications for Logistics and Supply Chain

As mentioned above, Blockchain started out in Fintech. And it’s had its ups and downs. But now it seems to be gaining ground in the Fintech community.

Now, businesses are considering other applications. And logistics seems to be an ideal fit. In fact, Blockchain has many potential uses in logistics. Here are a few key areas that could benefit from the application of Blockchain:

  • Supply chain visibility – End-to-end visibility provides real-time status of a part/product. Protects the chain of custody for parts/products that move across borders.  This includes identifying all segments of the supply chain, from origin to destination.
  • Supply chain data – Since Blockchain is a decentralized, distributed ledger, data errors are significantly reduced. This reduces time spent on data auditing and data cleansing. This leads to enhanced trust in data accuracy. It also improves data availability making it more readily available, expediting transactional processing.
  • Smart Contracts – Blockchain can improve contract compliance rapidly in a more secure and dependable way without third party intervention. It self-executes and fill gaps in procure-to-pay digital payments. And it makes payment immediately visible to all network members.
  • Data Analytics – With improved data accuracy, you can achieve better analytics and reporting. Accuracy of data analytics data and reporting leads to better decisions. This can translate into better performance, reduced risk, and increased revenues.
  • Cold Storage Warehousing – Working with the Internet of Things (IoT), you can track, regulate, and record temperatures of cold storage products. This can improve safety as well as accountability of food in the supply chain.

These are five areas that show promise for useful employment of Blockchain.  Now let’s look at some of potential benefits.

Benefits You Can Expect from Blockchain

There are many hyped up benefits attributed to Blockchain. Here are some realistic benefits you can expect from Blockchain.

  • Speedy and streamlined administration –  can improve operational efficiency. This can  enable reduced audit time of supply chain data by up to 85%. In one case, an audit of data declined from 1 week to 1 day due to near-/real-time data updates to the network. (Deloitte Report, 2017)
  • Reduced administrative costs – can achieve of reduced costs from the elimination of third parties, such as lawyers, in executing smart contracts and timely data sharing.
  • Risk Reduction – can enhance visibility and data accuracy throughout the entire supply chain network improving safety and security of each transaction.
  • Enhanced trust – eliminate losses through increased transparency; OECD estimates revenue losses of $450 billion due to counterfeit trade.
  • Improved Brand –  can increase credibility and public trust. Benefits derive from reduced risk that come from higher data accuracy and availability.

Plus, these benefits also may help drive innovation. As you look for solutions to existing problems, Blockchain may offer new ways of solving legacy problems. It offers the chance to transform logistics best practices.

Instead of focusing on improving existing business processes, you can positively disrupt them. Blockchain might enable you to leapfrog competitors. In any case, Blockchain offers great promise in tackling issues plaguing supply chains.

Who’s Buying into Blockchain

Adoption of Blockchain requires cooperation of the stakeholders in your supply chain.  It is not a technology that works alone.  That said, many unique projects are underway to explore and adopt Blockchain.

Among the leaders are Microsoft-FEDEX, IBM -Maersk, and CargoX.  All three are developing standardized Bills of Lading. The former two are private projects that will serve FedEx’s and Maersk’s supply chains.

The latter is developing a public supply chain that will benefit anyone.  The difference is that CargoX is developing standards that the IGP&I or International Group of P&I Clubs. An international consortium, IGP&I shares insurance and liability information that include 22 of the top 2 reinsurers.

Another association leading the foray into Blockchain is the Blockchain In Transport Alliance (BiTA). Only three years old, BiTA is the industry’s largest commercial blockchain alliance. It has almost 500 members spanning 25 countries.

Headquartered in Chattanooga, TN,  BiTA’s mission and membership are broader than  CargoX’s. BiTA focuses on developing industry standards and education about blockchain applications/solutions.

Its members come from a wide variety of organizations. They include organizations from transportation, logistics, supply chain, freight, technology and blockchain. Members include BNSF, Daimler, Delta Airlines, JB Hunt, UPS, and many more.

Constraints to Consider Before Investing in Blockchain

Blockchain seems promising, given the many potential benefits. Also, the myriad of industry stakeholders engaged in testing suggests great interest.  But before investing:

  • Lack of Industry standardizationStandardization remains elusive. Yet it’s a necessary to successful adoption. Two primary factors serve as obstacles: the number and variety of supply chain partners and the number of data gaps in a supply chain.
  • Fragmentation –Lack of standardization, has spawned many independent efforts by various industry stakeholders.
  • Lack of maturity– Blockchain is still in testing. That means it is not yet a robust technology ready for industry-wide adoption.
  • Control over Suppliers/Manufacturers – This helps ensure quality control and compliance with contracts. This is important as sustainability grows in significance in supply chain management.
  • Integration with existing systems – To realize full potential, Blockchain requires end-to-end integration. Integration is not easy any way you look at it. It calls for integration with existing systems – yours and your partners.
  • ROI – Stakeholder are still testing use cases via limited pilots. To date no one has provided solid evidence showing Blockchain’s potential value. Showing ROI as well as other potential benefits requires more testing.
  • Requires stakeholder collaboration – This is not a solution that works independent of supply chain stakeholders.  It is an interdependent solution that takes a team. This requires buy-in from many stakeholders all along the supply chain.
  • Cybersecurity concerns – Although touted as un-hackable, hackers have cracked Blockchain’s code. It’s hackable! Since 2017, cryptocurrency theft has risen, totaling $2 billion in stolen crypto currencies. Also, hackers have exploited bugs in smart contracts. To assess Blockchain’s true security risks, these flaws demand further investigation.

Taken one by one, each limitation is hard to crack. Taken as a whole, these limitations put its potential into better perspective. To achieve the promise and the benefits, you need a strategic road map as well as a unified collective effort.

Blockchain Boiled Down: Fact vs. Fiction

In a nutshell, Blockchain offers promise but it has limitations.  At this point, Blockchain is evolutionary rather than  revolutionary.

It offers data sharing across a vast enterprise occurring in real-time/near real-time. Additionally, it would enable a high degree of data accuracy and transparency. That, in turn, would lead to increased trust among trading partners. And that would promote international trade.

But to revolutionize supply chains, blockchain must scale.  Doing that requires a collaborative group willing to adopt common standards. This is not a solo project.

Moreover, it must fit into a business strategy with benefits for all stakeholders. Yet, to date those benefits have been difficult to verify.

Next Steps

Blockchain technology, when properly implemented has the potential to create significant value.  But it’s not as easy as the media hype would have you believe.

That’s because it’s not a simple, single technology solution. It’s a technology solution with various applications. And it requires a team to make it work. Finally, it will only work when you’ve identified the vision and strategy for your business.

American Global  can help you reduce your risk through identifying a vision and strategy for your business. We make it our business to anticipate what’s around the corner.

Before jumping headlong into a Blockchain solution, contact us to see how we can help you maximize your investments?  We’ll focus on your strategic objectives to give you an edge over your competitors in today’s uncertain and competitive market.

10 Emerging Supply Chain Shifts: Are You Prepared?

Why Global Supply Chains are Shifting

Global supply chains are being whipsawed.

Complexity, globalization, and technology were already a staple of supply chains. Supply chains were adapting, becoming more effective and efficient. Optimization was their mantra.

You’ve survived trade wars, security threats/theft, oil shocks, strangulating regulations, etc.

Now add a pandemic to the mix and wholesale changes are afoot.

Change is not new. But the pace and spread of change is. As your business recovers from quarantine, it’s time to reassess the impacts to your supply chain.

Will you be able to deal with the disruptions to your business? To survive Covid-19’s aftermath, your business must adapt or die.

Here are ten shifts that will impact your business.

Ten Supply Chain Shifts That Will Transform Your Business

1 – The Shift to Regionalization.  Supply chains are transitioning from global sourcing to regional sourcing. This shift began before the Corona crisis but is now accelerating. In fact, technology, pharmaceuticals, and the auto industry are moving out of China. Due to the concentration of manufacturing and sourcing in China, this shift will occur gradually but steadily. Vietnam and Mexico will gain some of China’s former business as will India, South Korea, and Japan. Supply chains will have to adapt. The shift to regionalization will likely continue in the foreseeable future.

2 – The Shift to Multi-Sourcing.  Supply chains stressed supply chains ability to provide basic needs like consumer products. The Coronacrisis stressed supply chains to meet basic needs like certain food items, cleaning supplies, and toilet paper. Global supply chains weren’t built to respond to the unexpected surge in demand. In large part, this breakdown occurred, due to over reliance on sole sources. Now, companies must source materials and products from many reliable sources. Then, if one source fails, your company can fill the gap with local as well as regional sources.

3 – The Shift to Planning for Demand Variability.  The change in demand for consumer goods was swift and volatile. It continued to be extremely variable, and optimized supply chains weren’t built for that. They were built to be lean. Low cost and steady demand helped shape optimized supply chains. Now is the time to reassess leaned-out supply chains since no one can rule out a recurrence of Covid-19. This shift to demand uncertainty will likely heighten. Therefore, businesses must shift from exact planning based on demand stability. They must now account for increased variability of demand.

4 – The Shift to Government Regulation Focused on Continuity of Operations.  After the 2008 financial crisis, we saw greater government involvement. Regulation became more focused on ensuring the stability of banking operations. As a result, the government required banks to undergo mandatory stress tests. Likewise, we may see a more deep-rooted governmental role in logistics. For example, supply chains may also undergo stress tests. Stress tests could address resilience and flexibility in dealing with supply chain shocks. Companies should prepare for a shift to a governmental role based on national security focused on continuity of operations.

5 – The Shift to System Integration.  Another shift comes from disruptions compounded by the lack of system integration.  System integration comes in two forms.  First, businesses must integrate their internal systems. Second, they must integrate with their partners’ external systems. They must integrate upstream and downstream to gain end-to-end visibility. Lack of system integration led to dislocations. We saw late deliveries, missed deliveries, etc. Lack of visibility sub-optimizes smooth-running supply chain operations. Again, this shift is not new and was already underway. But the need for greater visibility during supply chain shocks gives system integration greater urgency.

6 –  The Shift to Increased Independent Stress Testing.  Cyber security issues have plagued business of all stripes and sizes. No business is immune.  With the focus on technology to improve supply chain performance, cyber security looms large.  Prevention and rapid recovery from potential major network disruptions will be key. Without a secure network, you’re  ineffective. It’s that simple. Just as government regulation may demand stress testing of supply chains, companies may now find it in their self-interest to stress test their networks. The shift to independent stress testing of supply chain networks will increase.

7 – The Shift to Hiring Highly Skilled Workers.  You could say Covid-19 has hastened the change in the nature of work and the workforce. Google’s and Facebook’s employees, for example, will continue working remotely until 2021. That works well for technology companies. But manufacturing and logistics companies can’t replicate that. That said, the demand for highly skilled workers will increase. That’s due to the increased reliance on data and technology in logistics. Companies will need to adapt to this shift to attract new kinds of workers for the future.

8 –  The Shift to Balancing Technology with the Human-in-the-Loop (HITL).  As referenced above, businesses must shift to hiring workers in new fields. Companies will seek employees to fill positions in data science and data management. As businesses rely more on AI and Big Data to inform decision making, we will see a shift in the type of workers required. AI in and of itself is not a silver bullet, but it is important in aiding decision making. That said, decision making will still need human intervention. As decision making relies more and more on data, we will see a shift to AI decision making assisted by the HITL.

9 – The Shift to Supply Chain Risk Management (SCRM) as a Co-equal Strategic Planning Factor.  SCRM has, in general, always taken a back seat to operations. Relegated to the back office, SCRM only gained attention during a crisis. Due to the depth and breadth of the disruption Covid-19 caused, SCRM will become a co-equal strategic factor. Strategic planning must now treat worst case scenarios as probable rather than possible. That will mean building in redundancies as well as larger inventories. That will increase costs. Yet customers will demand service continuity, while still keeping costs low.

10 – The Shift to Customer Service vs. Cost. The balance between customer service has long affected businesses. A 2016 Twitter Poll about the value of customer service vs. cost, indicated customer service as the faraway winner: 78% vs. 22%. That’s true four years later given today’s supply chain shortages of basic items. Customers, after all, lie at the heart of all businesses. Notably, customers’ expectations will pressure businesses to provide the high levels of service – supply chain shocks or not. That shift was well under way, but Covid-19 has reinforced that trend.

Which Side of These Supply Chain Shifts Will You Be On?

Global supply chains are shifting dramatically. Supply chains optimized for low cost and steady demand reflect yesterday’s supply chains. Complexity and uncertainty were always present.

Complexity and uncertainty will likely rise. Therefore, strategic planning must account for catastrophic supply chain disruptions more prominently.

Tomorrow’s supply chain will become more customer-centric. They will focus on adaptability and responsiveness to create value for the customer.

To survive, your business must adapt or die.

Are You Prepared for the Coming Shifts?

Dealing with complexity and uncertainty is not going away.  Neither will unforeseen events to  include pandemics. Facing these challenges might seem intimidating. And they can be when you take them on by yourself.

Working with a partner, however, can mitigate or eliminate the pressures you’re facing.

With help, you can prepare for these emerging shifts and sidestep the pitfalls and thrive. Taking a customer-centric approach will help you manage the effects of these shifts.

Working with a trusted partner will help you manage change easier.

Contact American Global Logistics  if you’re looking for help with preparing for these emerging shifts.

 

Why You Need to Rethink Inventory Planning

Covid-19 Swiftly Exposes Damaging Defect in Inventory Management

Covid-19’s effects have reverberated throughout global supply chains. In particular, Covid-19 has upended inventory stockage planning.

Commodities affected includes auto parts, dairy, meat, masks, and toilet paper, to name a few.

Matching supply and demand has always been an industry problem. Over the past ten years, leaning out of supply chains meant increased responsiveness.  It also meant reduced costs and improved customer service.

Smarter inventory planning techniques and Just-in-Time (JIT) seemed to fix that. It was a win-win solution that translated into competitive advantage.

But the lessons of Covid-19 make us ask whether our supply chains are too lean. In particular, Covid-19 has turned inventory stockage planning on its head. With blank sailings still rising, resilience and flexibility have become critical to inventory management.

Continue reading to learn how Covid-19’s after-effects may impact supply chain flexibility and resilience.

The Unintended Consequences of the Dash to Lean Logistics

To get started let’s look at why global supply chains became so lean.

Years ago, cost-cutting was all the rage. As CEOs/CFOs looked for areas to cut costs, logistics provided a promising target for cost-cutting. And logistics is still a promising target today. It’s promising because logistics costs comprise up to 55% of a product’s cost.

Transportation, warehousing, and inventory carrying costs make up the areas that attract cost-cutting. By reducing inventory, you can reduce the cost of all three of the above supply chain processes.

Taking a zero inventories approach, companies did well in matching supply and demand.

Manufacturers achieved Just-in-Time (JIT) inventory best practices and suppliers achieved “just enough” inventory best practices.

Leaning out supply chains worked under normal conditions.  But today’s conditions are anything but normal.

Rethinking Cost-cutting and Lean Logistics

Manufacturers and suppliers succeeded in cutting costs. But Covid-19 has shown us, lean logistics comes with adverse effects. Risks have increased. Customer service and quality have declined. And revenues and profits have fallen. Those are some of the individual but related effects.

When taken as a whole, we now see that leaning out of supply chains has resulted in a loss of resilience and flexibility. That explains the shortages we’ve seen in global supply chains. It also exposes the vulnerability of global supply chains.

In today’s environment, we have uneven, unpredictable demand. That will likely continue even as the economy returns to its former operating level. Additionally, global supply chains will continue to strive for speed, timeliness, quality, price, and customer service.

Likewise, the New Normal will also strive to achieve the same objectives. But in the New Normal, the ability to manage disruptions will rise as a differentiator. The ability to manage disruptions will set leaders apart from laggards. Companies mastering this competency will gain competitive advantage.

What the New Normal Looks Like

Supply chain optimization will take on a slight twist. Businesses will focus on balancing cost with resilience and flexibility. Also, Black Swan events, like Covid-19, will become more important in inventory planning.

Additionally, thriving businesses will strive to reduce complexity in their supply chains. Finally, successful businesses will plan their inventories with the customer in mind.

To do that, businesses must build more resilient and flexible supply chains. High-performing supply chains will entail the following features:

  • Holistic Optimization: Conduct better analysis of total costs.
  • Continuity of Operations Planning: Undertake better disaster recovery planning.
  • Large Inventories: Plan for more buffer stock due to supply chain shocks.
  • Data Analytics: Employ stronger predictive analytics in the ramp up to normalcy
  • New IT Tools: Use artificial intelligence to factor in weather, seasonality, etc.
  • Long-term focus: Seek long-term partnerships with experienced and trusted partners.
  • Customer-centric planning: Place the customer at the center of inventory planning.

The common thread among these features is the customer. That means the customer will take on a more prominent role in up-front planning, replacing cost.

Customers’ demands are not declining – they’re increasing. Only business with resilient and flexible supply chains can meet customers’ growing expectations.

Successful Businesses Must Adapt or Become Extinct

Matching supply and demand still matters from any point of view like cost, customer service, or performance. But smarter inventory planning requires a broader view. It also requires the consideration of supply chain resilience and flexibility.

Martin Reeves, Simon Levin, and Daichi Ueda make the case in an article, The Biology of Corporate Survival that companies are dying young because they haven’t adapted to their environment.  They either don’t grasp the change, as we’re seeing with Covid-19.  Or they are slow to adapt.  Or they choose the wrong strategy.

The marketplace is becoming increasingly complex, meaning uncertainty and unpredictability will abound. Stability belongs to a former era. This places a premium on resilience and flexibility.

Businesses must focus on what’s predictable and what’s controllable. They must also broaden their scope beyond first tier suppliers to second and third tier suppliers.

Not doing so can lead to catastrophic failure. So, digging deeper with the aid of technology and collaborative partners, while focusing on the customer, will define the New Normal.

Companies that fail to adapt rapidly risk losing out to more adaptive companies. Moreover, because control is spread out among second and third tier partners, trust and cooperation will become more important. Success will go to businesses that reinforce collective action.

Preparing for the New Normal

Now is an opportune time to rethink how your supply chain meets your needs.

We are operating in increasingly dynamic times. To survive and thrive your business must have the ability to absorb shocks. And recovery must be quick.

Is your supply chain prepared for today’s dynamic times? Now might be the time to work with a dynamic partner who plans with the customer in mind.

Contact American Global Logistics if you’re rethinking your supply chain. We have a solid record of performance based on customer support that’s second to none. You can rely on to us to help you adapt to the New Normal.

 

Why You Should Care About Data Analytics

Data analytics has reached a tipping point. With the quarantine winding down, the need for first class data analytics is clear.

Only the fittest companies will emerge from the disruption caused by the Coronacrisis.

And those businesses will face an adverse operating environment.

The market will continue to be increasingly complex and fast-paced. Successful supply chains will call for precision made possible by data-driven businesses. Now is the time for embracing data analytics.

Data analytics offers promise because logistics lends itself to the direct application of logistics/supply chain issues.  Add to that, data analytics is faster, better, and cheaper to adopt and use than ever before. Finally, volumes of data are available.  This enables you to extract value and convert data into useful information.

Data analytics for logistics can help you reduce risks from disruptions. Data analytics can also simplify operations, and create opportunities. Specifically, you’ll be able to cut costs, grow profits, and increase your competitive advantage.

Let’s dive into five persistent logistics problems that can benefit from data analytics.

 

5 Logistics Problems That Data Analytics Can Solve

#1 Re-balancing Containers for Improved Availability

Having the right number of containers available in Chinese and U.S. ports is imperative to seamless cargo flows. As a result of Covid-19, visibility of container availability has become skewed. It is neither optimized for nor synchronized with the coming surge in economic activity.

First, Chinese manufacturers shutdown operations due to the virus outbreak.  Then came the Chinese New Year. Finally, the fast-spreading Coronavirus led to further extended factory shutdowns. That led to increased blank sailings over the expected seasonal blank sailings.

To help re-balance container availability, you can use data analytics to forecast demand. That improves visibility of container availability. And that will improve agility and responsiveness. It also reduces volatility, facilitating smoother flows of cargo and improves customer service.

Data analytics enables data-based decision-making replaces instinct. In this case, data analytics enables re-balancing of containers that promotes seamless cargo movement.

#2 Timely Movement of Cargo from Manufacturer to Final Destination

Seamless cargo movement is a critical logistics and transportation process. Container availability will impact cargo movement. But as operations return to normal, the surge in economic activity will negatively impact seamless cargo movement. And the sharp decline in China’s manufacturing activity presents a tremendous challenge.

According to the National Bureau of Statistics, China’s Purchasing Manufacturers Index (PMI) fell to 35.7 from an average of 50.  Additionally, Supplier Delivery Time Index dropped off a cliff from an average of 50 to 32.1.

Shippers and carriers will have their hands full in adjusting as the economy picks up. To help manage shipments meet promised delivery times, data analytics can dynamically change routes as requirements change. Data analytics also helps improve customer satisfaction with predictive analytics.

#3 Managing Supply Chain Complexity

Supply chain complexity comes in many forms. And complexity is increasing, not decreasing.  Government regulations change often and loom large internationally and nationally. The International Maritime Organization’s low sulfur mandate has a potentially huge international impact. Also, a pending Federal Maritime Commission regulation on demurrage and detention will affect the domestic market.

Trade wars also add complexity with new tariffs being levied on a variety of goods. Complexity comes in figuring out which products are under tariff and which are exempt.

Also, even though the U.S. and China came to a Phase One Agreement, that was just a first step.  Based on that, many companies doing business in China have decided to either move out of China completely or partially.

The NIKKEI Asian Review reported fifty companies are moving out of China.  Most of them are technology companies like, Apple, Dell, and HP. Other multinationals reshoring are Skechers, Asics, GoPro, Citizen Watch, to name a few.

Data analytics can help identify optimal ways of meeting governmental regulations, while avoiding penalties.  Data analytics can also help identify alternative sources of labor and materials to diversify outside of China. Finally, data analytics can help you simplify and streamline your supply chain while cutting costs.

#4  Improving Supply Chain Resiliency and Risk Management Planning

Another area where data analytics is useful is in improving resilience and risk mitigation.  All supply chains are vulnerable to internal and external factors. And risks fall into two categories: known and unknown.

For known risks, data analytics can compare scenarios that offer the optimal solution. You can compare costs and benefits of avoiding or eliminating risk.  For unknown risks, data analytics can run “what-if” scenarios. Evaluating “what-ifs” helps you better understand possible outcomes. It addresses anticipation head-on, which helps build resilience into your supply chain.

As we saw with Covid-19 and with the Tsunami that hit Japan a few years ago, Just-in-Time (JIT) logistics isn’t foolproof.  Data analytics can help you address these contingencies using a data-based approach to balance stockage requirements with JIT.

#5  Improving Decision-making and Reporting

Data analytics helps you steer your business confidently with a data-based approach. Real-time data and predictive analytics, for instance, are still in early stages of usage. But they will soon become standard for all businesses.

As the logistics industry favors speed, the need for dynamic decision-making is increasing.  Keeping executives, operators, and customers informed is paramount to supply chain management. Thus, real-time data informing real-time analysis will become the norm rather than the exception.

Business intelligence is gradually becoming “intelligent”.  Data analytics tools and technologies allow for both macro and micro analysis. That former focuses on processes and the latter focuses on customer level information. Micro analysis makes deeper analysis possible and enabling customization and innovation.

That means you can segment performance, financial, and customer service metrics.  In other words, data analytics provides meaningful information about targeted user groups.

Put differently, you can operate more effectively and efficiently while increasing service quality. Data analytics can increase revenues by improving existing business operations and identifying innovative solutions.

Conclusion

Data analytics offers a window into improving 5 long-standing industry issues.

Data analytcis can transform daily operations, financial costs and benefits, and customer service.  Although data analytics haven’t reached their peak, they’ve reached a tipping point.

Improved technological development, increased volumes of data, and the market’s increasing complexity and demand for speed have spurred the need for data analytics.

Deeper analysis can make sense of large and small sets of data, providing hidden insights. That will lead to improved operations, reduced costs, and improved customer service.  And don’t forget innovation.

Next Steps

You should care about data analytics because it’s a gamechanger.

It can differentiate your business from the competition. All in all, it can improve your company’s responsiveness and resilience. Both are important in today’s complex, fast-paced business environment.

Data analytics can do more than navigate supply chain disruptions. When you capitalize on the untapped value of your data, it can create opportunities. You’ll be able to cut costs, improve operations, and increase competitive advantage. Moreover, predictive analytics and real-time data can drive further gains.

A well-run business depends on a well-run supply chain. A well-run supply chain depends on data-driven decisions. With the proper use of data analytics, you can take your business to the next level.

Contact American Global Logistics  to learn how we can assist you in enhancing your competitive advantage with data-driven insights.

Covid-19 Influences the Evolution of Logistics Technology

There’s no argument. Covid-19 has exposed global supply chain weaknesses – quickly and harshly.  And its influencing logistics technology development.

As a result, shippers and carriers are turning to technology to fix these weaknesses. Many of these supply chain weaknesses are long-standing issues.

Now, the use of technology has taken on increased urgency in mitigating risk, improving operating efficiency, and cutting costs.

Some technology solutions are easier to tackle than others. Others need more time and money to implement.

Should you push ahead on schedule with your IT projects? Should you slow down your IT investments and focus on operations? Or should you hit the pause button, until the Coronacrisis ends?

Whether you’re a shipper or carrier, this blog post will give you insight into answering those questions. Those insights can help position your business for success.

Without further ado, here are six supply chain weaknesses intensified by the Coronacrisis.

Supply Chain Weaknesses Exposed by Covid-19

 

#1: Lack of Standardized Bills of Lading (BL)

Today cargo gets delayed at ports because bills of lading are not standardized. Everyone has a different format. E2Open saw the need for standardization ten years ago but failed. And Bolero International created an eformat for Evergreen Line, and it also failed.

They both failed because it’s difficult for a single company to implement a solution that applies to all industry stakeholders. Besides shippers and carriers, add NVOs to the mix and you can see the problem.

Let’s shift to air freight for a moment. The Air Transport Association (ATA) succeeded in creating standardized BLs. And today the air freight industry has standardized waybills. So it’s possible to fix this industry-wide issue. But ocean freight has no similar governing body like the ATA.

Nevertheless, this represents a huge target of opportunity for cutting costs. And technology will play a major role in resolving this issue.

 

#2: Lack of Freight Visibility

Currently, twenty-five percent of booked containers fail to show up at ports. Also, the industry suffers from chronic overbooking. These problems persist as shippers constantly look for the lowest shipping price. Both are areas ripe for cutting costs.

Presently, multiple initiatives are underway to tackle these issues. Maersk, Hapag-Lloyd, CMA CGM, Evergreen, and Cosco are rapidly developing new online tools. Many software companies are also developing a variety of new online tools.  E2Open, Cargo Smart, Infor Nexus are providing shippers access into carriers’ digital platforms to confirm space on ships.

This capability enables the completion of shipping transactions with either a desktop or mobile device. And it opens the way for dynamic pricing based on supply and demand.

 

#3: Lack of Route Optimization

Route optimization is another area of persistent inefficiency highlighted by Covid-19. Today stable and predictable route planning is a challenge. And as you might have guessed, multiple stakeholders are working to address this challenge.

Challenges include last-minute changes, time-sensitive deliveries, and inter-modal shifts (e.g. from rail to road to ocean).

As supply chains adjust to the outcomes of the trade wars and Covid-19, complexity will likely continue in a post-Covid-19 world. As a result, businesses are relying on innovating with technology.

 

#4: Lack of Predictable Pricing

Shipping prices are uncertain. They’re erratic. They’re volatile. They’re unpredictable. And the present environment underscores this persistent problem even more.

Further complicating matters is that competitors are developing tools with different purposes.  Some tools focus on operations and some focus on financials. Further complicating matters is that financial pricing tools come in three varieties: (1) rate-costing software, (2) forwarding contracts, and (3) freight futures.

The bottom line is shippers want to pay a fair price. Yet forecasting accurate prices has been elusive. Consequently, a flurry of activity is underway to find a solution employing technology. That means we will see a surplus of solutions, making it difficult to select the right one.

 

#5: Lack of Data-based Decision-making

Big data and analytics are one of technology’s top trends for 2020. Covid-19 has reinforced that trend. Now, C-suite executives are taking a greater interest in logistics. With logistics in the spotlight, executives insist on more logistics information. And they want their information in real-time.

To meet this urgent need, industry stakeholders are developing creative solutions. Many are focusing on reducing risk, optimizing operations, and cutting costs.

They’re looking at developing prepackaged reports for C-suite executives. They’re looking at eliminating siloed business processes. They’re looking at improving information sharing. And they’re looking at real-time data visibility and Blockchain.

There are many paths to achieving data-based decision-making. While technology aims to simplify operations, choosing the right solution can be complex.

 

#6: Lack of Effective Drayage and Demurrage Management

Drayage suffers from inefficiencies with about 15 million hours wasted at ports. This leads to unfair demurrage charges – a longstanding issue. Also, increased blank sailings due to the Coronacrisis have further inflamed this problem. Today detention fees run from $100 to $200 each day.

As with BLs, drayage and demurrage require a ruling from a governance body. In this case, the Federal Maritime Commission must get  involved.  In particular, it must issue a ruling to establish a platform allowing the challenge unfair penalty fees.

Again, the number of competitors working on solutions is dizzying. And that leads to confusion about improving container visibility.

 

The Way Ahead

The challenges facing your business today are daunting. But you can overcome them.

And everyone expects an uneven return to normal. But an uneven return to normal doesn’t mean your business has to emerge unevenly or feebly.

With a reliable partner on your side, you can ensure your business emerges smoothly and vigorously.

If you’re not sure which direction is right for you, contact American Global Logistics today. We’ll listen and then we’ll work with you to choose the optimal path ahead.

American Global Logistics can help you sort through the technology maze. Working with us will give you peace of mind.

 

 

 

 

 

Covid-19 Response: Infrastructure Investments Coming Soon

In Washington, infrastructure spending is back on the table… thanks to Covid-19.

Last year both the Democrats and Republicans tried to pass legislation for infrastructure.

Democrats floated a 5-year plan worth $760 billion.  The Trump administration floated a 10-year plan with a $2 trillion investment.

Both packages identified the need to address present and future needs.  Present needs included repair and maintenance of roads, bridges, rails, etc.  Future needs included the building of infrastructure for charging of electric vehicles (EVs) .

Funding for repair, maintenance and upgrades are necessary to maintain competitive advantage.  However, the Mueller investigation sidelined any hope of infrastructure legislation.

Now, thanks to the Coronacrisis, infrastructure is in the forefront of discussions as part of a fourth stimulus package.

In addition, an infrastructure bill would serve as a well-timed boost for the economy.  It would employ many people quickly, serving as a jobs program.

Nonetheless, funding a bill both parties can agree to still faces some obstacles.  But those obstacles are likely to be overcome given the state of the nation’s infrastructure.

Before going any further, look at recent trends in infrastructure funding.

Infrastructure Investments Undercut Future US Competitive Advantage

A Brookings Institution study revealed five trends about infrastructure spending.  The findings help shed light on the challenges facing infrastructure funding.  They also provide a profile of U.S. federal, state and local spending.

Without further ado, here are the study’s findings of spending between 2007 and 2017. (Joseph W. Kane and Adie Tomer.)

Key Findings Show Shift to Repair and Maintenance

  1. Total public spending on infrastructure has declined $9.9 billion.
  2. Spending on operations, maintenance, and repair increased $23.2 billion.
  3. State and local spending declined, but it represents 75% of all U.S infrastructure spending.
  4. State spending on transportation infrastructure declined $4.2 billion since 2007 but has rebounded over the last five years.
  5. S. spending on water infrastructure declined $5.6 billion.

The study revealed a worrisome trend that requires immediate attention.  It calls for a new economic vision in the new infrastructure age.  It also calls for improved coordination and partnership between state and local leaders.  Finally, it points out a need for a “better articulated” federal role in investment.

Everyone recognizes the importance of repairing and upgrading the nation’s infrastructure.

Issues and Obstacles to Immediate and Prudent Funding for Infrastructure

The main issue to date for funding infrastructure projects revolved around how to pay for it.  No one wants to raise taxes.  That explains the lack of meaningful progress.

Besides that, both the Democrats and Republicans will have to address funding priorities.  Democrats want to spend money on infrastructure as well as other unrelated projects.  Some of those include funding for housing, school construction, and more Covid-19 testing.

Those are all good causes. But they’re not infrastructure-related.  So, now the Republicans question the need for a fourth stimulus bill.  Yet, everyone concurs there’s a pressing need to fund infrastructure projects.  It’s likely, after much sausage making, a bill will eventually pass.

Another issue revolves around priorities for infrastructure spending.  The Brooking Institution study above also cited the need for a coordinated plan.

Some organizations like the American Truckers Association (ATA) are calling for a focus on highways and road networks.  Others like the Northwest Seaport Alliance (NWSA) point to the need for addressing intermodal infrastructure issues.  And CREATE, Chicago Region Environmental and Transportation Efficiency, program calls for focusing on alleviating the country’s bottlenecks.

As you can see, there are many competing requirements for limited dollars.

This brings up the National Freight Strategic Plan (NFSP). The NFSP aims to address the following questions:

Opportunity to help inform national freight strategy:

  • What are the key challenges facing the U.S. freight transportation system?
  • How should U.S. DOT measure freight transportation system performance?
  • What industry freight-specific data is important to understanding how economic trends impact freight logistics and cargo movements?
  • What approach should the federal government use to invest in the multimodal freight system?  (U.S. Department of Transportation)

Conclusion

The question is not so much whether Congress will act to fund an infrastructure bill.  The question now seems to be when we can expect a funding bill approved and signed into law.

As Congress considers an infrastructure bill, you’ll want to ensure you have a supply chain designed for efficiency.  When infrastructure construction begins, you can expect bottlenecks.

Future competitive businesses will have integrated supply chains that support seamless cargo flows.  Efficiently designed supply chains will ensure seamless intermodal cargo flows.

Contact American Global Logistics  to ensure smooth cargo flows before, during, and after the coming infrastructure construction. We can help you save time and money with an integrated and optimized supply chain.