Preparing For The Unknown In Your Supply Chain

Forbes – An earthquake damages your manufacturing facility, a strike at a port has delayed shipments to your store or political uncertainty has left your planning and forecasting in chaos. Today’s supply chains are complex global networks that face a growing host of risks, including natural disasters, labor unrest, transportation delays, political uncertainty and cyberattacks.

Fortunately, through the use of technology and data analytics, there are ways for commercial shippers and service providers to mitigate these risks. Here’s a closer look at the tools and strategies that are helping businesses manage risk as their shipments make their way around the world.

The impact of supply chain disruptions

Supply chain disruptions continue to grow at an alarming rate, with 73% of businesses experiencing a supply chain disruption in the past year. Equally alarming? The rise in costs associated with these disruptions, which can run into the billions.

For example, the 2011 Tohoku earthquake and tsunami resulted in $210 billion in costs for Japan and affected supply chains around the world. When Hurricane Maria hit Puerto Rico in September of 2017, the supply chains of two of the island’s biggest industries – pharmaceuticals and medical devices – were severely impacted. And according to some estimates, the trade war between the U.S. and China has cost the U.S. electronics industry alone $10 billion since July 2018. Beyond those losses are also costs that are less easily measured, including lost productivity, customer complaints and damage to brand reputation – losses that companies can’t insure against but can mean the difference between success and failure.

The importance of staying agile

In an industry where disruption is a way of life, having the right tools, people and processes in place can help you stay nimble and minimize risk.

The right tools: Many businesses continue to run their supply chains on spreadsheets or over email, resulting in operations that are both inefficient and opaque. By contrast, a technology solution with a centralized booking system can streamline operations and show you the status of every provider’s shipments, up and down the supply chain. Technology features such as mobile track-and-trace and purchase order management make it simple to keep tabs on your freight. For example, if a container of tires is delayed on its way to your warehouse, you can quickly see where you have similar parts and arrange to get them there.

The right partners: Relationships with suppliers are also key to mitigating risk. When disruptions send shipments astray, a supply chain provider with a deep network of relationships can be invaluable. With a little logistics creativity, such as changing the port of discharge for cargo traveling inland, an experienced partner can help lessen the impact of disruptions. Similarly, when an unexpected event forces you to find last-minute capacity with a new carrier, a provider with the right scale and network can help you negotiate a better arrangement.

The advantages of a resilient supply chain are clear during situations like the collapse of freight carrier Hanjin Shipping in 2017, says Jon Slangerup, CEO of AGL Logistics.

“Hanjin vessels were denied entry at ports around the world and $14 billion in goods were basically abandoned,” Slangerup says. “But thanks to our partner network, we were able to find space for AGL customer shipments with another carrier, which honored the original rate with Hanjin. Without that support, the business could have potentially waited months for clearance to dock in the United States.”

The future of risk management

As risks continue to evolve, strategies are changing, too. One of the companies providing that kind of next-level analysis is Resilience360, an innovative supply chain risk management company that helps companies monitor, prepare for and react to potential supply chain disruptions. Originally developed in the DHL Innovation Center, Resilience360 has since grown to become a stand-alone company with employees based in Germany, Singapore and the U.S., allowing for round-the-clock coverage of global supply chain disruptions. In the Spring, Resilience360 released the first annual Risk Report, which outlined the Top 10 potential Supply Chain Risks for 2019— and in the summer released a specific analysis on potential hurricanes, just prior to the beginning of storm season.

“Historically there was a focus on optimizing supply chains, including sourcing,” according to Tobias Larsson, founder and CEO of Resilience360. “While important, risk planning often took a backseat to optimization. Mitigating ‘as best as possible’ was the norm.”

The 2011 earthquake and tsunami that hit Japan changed that strategy, representing a serious wake-up call for global companies and their supply chains. In its wake, determining how a manufacturer’s suppliers, warehouses and shipments could be affected by a significant disruption became a competitive advantage.

When Schneider Electric, a French multinational energy and electrical equipment manufacturer, needed support for its company-wide digitization plan, Resilience360 delivered. The firm provided Schneider with a tool to visualize its entire supply chain as well as to help manage strikes, port or airport congestion, vessel accidents, natural disasters, changes in government regulations, and more. The result has been the ability to respond proactively, not reactively. For example, when the company noted congestion buildup at one of Vietnam’s ports, it was able to implement a contingency plan, including all the required paperwork, at minimal additional cost within 24 hours. Most importantly, Schneider’s containers didn’t miss their delivery deadline.

Maximizing success

Every day, supply chain companies must navigate a world of risk. To do that successfully requires flexibility and the agility to respond quickly to unexpected disruptions. That’s why it’s crucial that companies have the right technology, tools and partners to help manage and mitigate both known and unknown risks. With the right systems in place, businesses can increase their chances of minimizing disruptions to trade and maximizing success in the marketplace.

 

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Author: Cathy Morrow Roberson

Shippers Find Need to Improve Technology Use in Supply Chain

Port Calls Asia – Most shippers are not making the most of the growing number of technology tools at their disposal in optimizing operations, according to the results of a survey by American Global Logistics (AGL).

AGL, a customized logistics solutions provider, said that while technology is driving tremendous change for supply chains and making the appropriate corrections is a struggle.

Many shippers also said it is time to overhaul their processes as technology can’t improve processes that are broken. Nearly two-thirds (65%) of the businesses surveyed said some of their business units could use process engineering, said the report.

The survey also found that purchase order management is the top reason shippers are turning to technology so as to understand what happens between the time an order is placed and when it is shipped. More than half (56%) of shippers said they turned to technology for purchase order management, followed by booking management (30%) and contract management (16%). Another 27% said they are leveraging technology to improve end-to-end visibility, which starts with a clear view into production.

Furthermore, cost and time are the two biggest barriers to a connected supply chain, according to the surveyed shippers. Among the half of shippers who have integrated their supply chain systems, cost is the main challenge in building a holistic, technology-enabled operation. Nearly one in five (19%) cited expenses as a major barrier to integration, followed by the time required (14%) and software incompatibilities (11%).

Finally, reporting is at the top of many shippers’ wish lists. Reporting tools are highly desired by shippers, with 68% saying they would benefit from detailed business analytics and forward-looking recommendations.

 

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Feature Image Credit: Axisadman

How 9/11 Forced Efficiency Upon Supply Chains

Supply Chain Dive – The Sept. 11 terrorist strikes were a wake-up call to the government that our borders weren’t secure. Suddenly, every plane, ship and container became suspect. Back then, vessels carrying freight would arrive at U.S. ports uninspected, and containers’ contents were often unknown to Customs and Border Protection (CBP). Then, the looming threat of terrorism forced the government to demand more information, placing the burden of security on supply chains.

Yet, the post-9/11 supply chain has arguably become much more efficient today than it was before the attack, according to Jon Slangerup, Chairman and CEO at American Global Logistics. In identifying shippers – collecting and sharing data in the process – and better understanding the cargo hand-off points, government agencies and industry stakeholders worked together to improve safety without compromising the speedy movement of product.

“What we encountered since 9/11 was an understanding of how silo-driven the management of those supply chains were, and to some extent still are,” Slangerup told Supply Chain Dive. “The various agencies involved in protecting people and assets pulled together very quickly.”

In the sixteen years since 9/11, these gained efficiencies have translated into bottom-line gains, as the cost of shipping as a percentage of a product’s total cost has fallen. Here are five of the main changes that made this happen:

Data led to supply chain efficiency

Since 9/11, there’s been a lot of attention paid to the points where cargo changes hands: from origin of manufacturing, to shipper, to marine terminal for loading, to ocean carrier, to marine terminal for offloading, to rail and trucking, to the warehouse and distribution centers.

“That’s where the risk and cost lie,” said Slangerup. Once the cargo is on a vessel, the content is already known and screened. With increased pre-shipping data requirements due to post-9/11 security concerns, the supply chain was forced to create efficiencies in the hand-offs, where money and time are often wasted, said Slangerup. As a result, the cost to move goods is a smaller proportion of the sale price to the end user than it was 10 years ago, he said.

Information and data leads to visibility and answers as to when a shipper can expect their goods to show up on the dock or warehouse. Using data, companies can see where the breakdowns occur in the supply chain, to make corrections.

The ocean shipping industry is taking more time from a visibility perspective than the air industry, because of the multi-nation integration needed to share information without giving away a competitive advantage. Like the airline industry has already done, the ocean side is now forming alliances to help integrate information and cross-sell.

“This revolution of information started with the small package industry in the early 1980s, with companies like FedEx and UPS,” Slangerup said. By the time of 9/11, those same companies already had significant information tools available to them to more easily comply with increased scrutiny. Those that didn’t have those tools in place had to scramble to get them. The air freight side was in better shape to do that than the ocean freight side, which is catching up.

 

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Feature Image Source: James Tourtellote, CBP, U.S. Dept. of Homeland Security

Three Strategies for the Peak Shipping Season

The Loadstar – As the 2019 peak season heats up, plenty of shippers are rightfully concerned about a repeat of last year’s turbulent ocean freight season. While tariffs continue to impact shipping volumes and freight prices, emerging issues like the impending fuel sulphur cap could complicate matters even further.

The bottom line? Businesses need to get their goods in hand without breaking the bank before the holiday shopping season begins. As shippers prepare to weather another busy peak season, an agile, technology-enabled supply chain is critical to keep freight moving smoothly and customers satisfied.

A cooler-than-usual peak?

Many shippers started 2019 still reeling from the previous year, when spot rates skyrocketed, carriers cut back on capacity and blank sailings wreaked havoc on freight schedules. The turbulent season gave the ocean freight industry the upper hand going into the 2019 contracting season, with many carriers locking in price increases of $200 to $300 per TEU compared with 2018 contract rates. While higher rates have left shippers grumbling, they could ultimately benefit businesses by stabilizing freight schedules and reducing the blank sailings that left them scrambling for expensive spot capacity last year.

As the 2019 season gets into full swing, import levels are cooling off amid economic uncertainties. Total import levels reached an estimated 1.87 million teu, just 0.8% higher than the previous year, as many businesses take a more conservative approach to inventory replenishment. Staples such as school supplies and holiday items will continue to move regardless, but this strategic shift could mean a very different peak season compared with 2018’s importing frenzy.

The International Maritime Organization’s (IMO) looming cap on sulphur emissions will make its mark on the season as well, with multiple vessel strings being pulled out of service for scrubbing already this summer and more maintenance on the way. While these setbacks could constrain freight capacity, a weaker market means the fallout may not be as severe.

Forecast, forecast, forecast

The more aware shippers are of what’s coming down the line, the more opportunities they have to make informed decisions, hold the line on costs and ensure their goods make it into customers’ hands. As peak season ramps up, some key areas to keep in mind include:

  1. Gaining visibility into purchase orders. Many shippers run into a “black hole” between the time they submit an order for production and when it’s ready for shipping. Businesses need to understand what happens in that timeframe and measure incremental milestones so they can plan accordingly. For example, if production normally takes 60 days but a slower-than-usual order actually takes 73 days, it can create chaos further down the line. Gaining visibility into production progress can help shippers manage customer expectations effectively while determining the ideal freight routes for each order. For example, shippers may be able to cut costs for an order running ahead of schedule by opting for a cheaper 50-day sailing over a 30-day one. The right tech can offer valuable insights into the production process, saving shippers time and resources.
  2. Avoiding shortfalls when possible. Most carriers require bookings 14 to 21 days ahead of time – and they expect them to be fulfilled. Shippers do themselves and their carriers a favor by consistently respecting the advance notice policy. If a business promises 10 containers and only delivers three, the carrier may not be willing to book with them the next time, leaving them stuck with more expensive shipping alternatives. Forecasting can help shippers manage peak season volumes more easily and develop a trustworthy reputation with both carriers and customers.
  3. Keeping an eye on exceptions. When it comes to complex global supply chains, issues are inevitable. When logistics hit a snag, make it a point to learn where breakdowns are occurring to ensure future shipments are hitting the desired delivery day. Leveraging management tools and data can help businesses pinpoint alternate routes and modes to meet price or speed targets.

With the 2019 peak season kicking off at low tide, only time will tell the true impact of tariffs and the sulphur emissions cap on the state of ocean freight. With strategic attention to data and industry trends, forecasting consistency, and a commitment to flexibility, shippers should be well-positioned to maneuver through another year successfully.

 

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Article authored by Blake Shumate, Chief Operating Officer at American Global Logistics.

Vietnam ‘has bitten off more than it can chew’ as it struggles with growth

The Loadstar – Air cargo capacity serving Vietnam is on the rise.

Last week, Ethiopian Airlines started a weekly B777F service to Bangkok and Hanoi, and in line with the carrier’s triangular strategy, the flight is routed from its home base via Europe to Asia.

“These flights make Ethiopian the first African carrier to operate cargo flights from Bangkok, and will also create better opportunities for Thai and Vietnamese exporters to have a one-stop access to the 60 plus African destinations that Ethiopian serves.

“The freighter flight will also link Bangkok and Hanoi to Europe, Asia, Middle East and the Americas,” said Ethiopian Group CEO Tewolde GebreMariam.

The news is welcome to forwarders who have been clamouring for more lift out of Vietnam.

Equally welcome is the arrival of the first of eight B787-10 aircraft for Vietnam Airlines three days after the Ethiopian freighter had taken off. The national carrier is going to use them on major international routes and on the Hanoi-Ho Chi Minh City sector.

Vietnam’s economy is enjoying blistering growth. It expanded by 8.2% in 2018. Exports are going strong, up 9.3% in July, led by electronics, computers and components shipments, which surged 19% year on year. Footwear, textiles and machinery also registered double-digit increases, while Vietnam’s container traffic was up 3% in the first half.

The country is seemingly one of the major beneficiaries of the trade conflict between the US and China, which is in line with trade flows. US imports from Vietnam were up 36.7% for the first six months of this year.

“Vietnam is showing strong growth in its import and export markets,” said John Driscoll, maritime director of the port of Oakland. Last year the southeast Asian country was the Californian gateway’s third-largest import market and fifth-largest on the export side.

Carriers are responding to Vietnam’s rising exports. Asian airlines like EVA Air have boosted their capacity in the market. Over the past year several freighter operators, including AirBridgeCargo, FedEx and Cargolux have upped their presence in the market.

On the maritime side, Pacific International Lines has launched a transpacific service from Haiphong, via Nansha, Hong Kong and Yantian, to Long Beach and Oakland. The operation, in partnership with Cosco and Wan Hai, uses an 11,900 teu vessel.

According to forwarders, more carrier capacity would be helpful, but the bigger issue is infrastructure capacity: airports can barely cope.

This year the government in Hanoi gave the green light for a new airport for Ho Chi Minh City at Long Thanh, which is set to become the nation’s largest. The development, which will be built in three phases, has an estimated price tag of US$5.4bn, but this is expected to increase substantially.

The project has been delayed for years and further setbacks would come as no surprise. Ultimately, Long Thanh will have annual capacity for 100 million passengers and five million tons of cargo.

Ocean capacity is another headache. Last year, Haiphong opened its first deepwater container terminal and capacity is set to increase with the completion of the second phase of the port’s expansion, scheduled for next year. The government aims to bring port capacity up to 200 million tons by 2020 and 400 million tons ten years later.

Theoretically it is already there: Vietnam’s ports have an estimated total capacity of over 450 million tons. However, as much as 80% of the nation’s traffic moves through small feeder ports to regional gateways like Singapore. This can add up to a week in transit times.

“It’s a challenge. They do not have the big ship infrastructure,” said Jon Slangerup, CEO of American Global Logistics.

He does not think the country can readily cope with the shift of production from China that has been accelerated by the mounting tension between Washington and Beijing.

“They have taken on far more than they could handle. They don’t have the skill sets, labour, manufacturing facilities in place, and they haven’t got the transport infrastructure in place yet. Vietnam has serious infrastructure problems,” he explained.

The World Bank estimates that Vietnam needs $25bn-worth of investment every year  for sustainable infrastructure development, but pointed out in a blog that the government does not have deep enough pockets for this.

Private investors have taken note of the rapid pace of development, but they will also be aware of recent rhetoric from the Trump administration, claiming Vietnam has taken advantage of the US-China dispute and threatening tariffs.

US to up all China tariffs 5 percentage points

Supply Chain Dive – UPDATE: Aug. 26, 2019: President Trump struck a more optimistic tone Monday morning after spending the weekend at the G7 Summit in Biarritz, France, making conflicting statements regarding the state of the U.S. trade war with China. Monday morning he tweeted he has “great respect” for Chinese President Xi Jinping and stated “talks are continuing!”

Dive Brief:

  • The U.S. will increase the tariff rate on the remaining $300 billion worth of imports from China to 15%, President Donald Trump tweeted Friday afternoon, confirmed by the office of the United States Trade Representative (USTR). These tariffs, which are set to take effect in stages Sept. 1 and Dec. 15, were originally announced Aug. 1 at a rate of 10%.
  • According to a press release, the USTR will begin the process of raising the existing 25% tariff on $250 billion worth of Chinese goods to a rate of 30% on Oct. 1, after a public comment period.
  • This move comes after China announced tariffs ranging from 5% to 10% on more than 5,000 products imported from the U.S. valued at $75 billion earlier Friday.

Dive Insight:

In a series of tweets, Trump said “China should not have put new Tariffs on 75 BILLION DOLLARS of United States product” and called the move by America’s largest trading partner “politically motivated.”

This set of tariffs, known as list four, has been in the works for months. The United States Trade Representative (USTR) released details on the list in May, saying the rate could reach as high as 25%. The USTR also held seven days worth of hearings on the tariffs where representatives from a variety of industries voiced disapproval of the tariffs, saying they would disrupt sourcing and threaten margins.

In an earlier series of tweets Friday Trump said: “Our great American companies are hereby ordered to immediately start looking for an alternative to China.”

The National Retail Federation responded, saying it was “unrealistic for American retailers” to move out of China. Though Trump does not have the power to give American companies direct orders, he is able to influence their behavior through tariffs, invoking the International Emergency Economic Powers Act and changing federal procurement standards, according to the Washington Post.

The fourth list of tariffs is expected to have a greater impact on consumer goods, including clothing and footwear.

“You can’t just re-source at the drop of a hat,” Lori Fox, VP of Customs Brokerage Services at American Global Logistics, told Supply Chain Dive after the 10% tariffs were announced earlier this month. “There’s no quick and easy answer to this.”

This is a developing story and may be updated as events progress.

When levees break: How retailers are preparing for a riskier natural world

Retail Dive –The march of fearsome weather events has caught the attention of retailers, who collectively have some 26,000 stores at risk to climate-based calamities.

Thousands of stores across the industry lie in the path of hurricanes and flood zones as well as coastal areas expected to experience sea level rises in the coming decades.

Read the full article to see commentary from AGL CEO Jon Slangerup about retailers and risk mitigation.

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AGL’s Jon Slangerup to Speak at USC Global Supply Chain Excellence Summit

The 7th Annual USC Global Supply Chain Excellence Summit will take place August 8-9 in Los Angeles, CA. This event is designed to stimulate ideas and provoke conversation on a broad range of important topics. This year’s theme is Evolution, Revolution & Disruption.

AGL’s CEO Jon Slangerup will participate in a panel discussion regarding Logistics/Transportation Air, Sea, & Ground on Day 2 of the event, August 9th at 11:25 AM PT. For more information regarding the event, please click here. Additionally, please use promo code FRIENDS300 to receive $300 off Summit registration here.

U.S. CEOs Focusing on Supply Chain Agility to Meet Rising Customer Expectations

HubGA –A new report from Logistics Trends & Insights and American Global Logistics (AGL)— “Adapting to the Age of the Consumer with an Agile Supply Chain”—reveals that businesses are focusing their strategic investments on agile, responsive supply chains to respond to rising customer expectations and address the current competitive challenges.

KPMG’s 2019 CEO Outlook reports that 64 percent of U.S. CEOs believe that agility has emerged as a critical capability—that being too slow can lead to obsolescence. In the same report, 63 percent of CEOs agree that ‘over the next three years they need to improve their innovation processes and execution.’ An April 2019 report from Gartner (Raskino, Mark. “2019 CEO Survey: The Year of Challenged Growth.” Gartner, April 16, 2019) indicated that 82 percent of CEOs currently have a digital transformation or initiative in place, up from 62 percent in 2018.

“We’re living in an ‘anytime, anyplace’ environment, where consumers have virtually unlimited options and control over what and how they purchase,” said Jon Slangerup, Chairman and Chief Executive Officer, American Global Logistics. “The ability of businesses to adapt their supply chains in response to changing consumer behavior has direct implications for their future sustainability and growth. By investing in technology and tools that enable supply chain agility, businesses can position themselves for success in the new age of the consumer.”

While businesses realize the importance of an agile, technology-enabled supply chain, that vision isn’t yet a reality for many of them. A study from North Carolina State University (2nd Annual Data Governance, Data Quality and Artificial Intelligence) found that 95 percent of supply chain leaders face significant obstacles in creating a unified view of their data, with three in four reporting that poor data is making it challenging to achieve their digital transformation goals.

The AGL report, “Adapting to the Age of the Consumer with an Agile Supply Chain” outlines these insights and challenges and provides five ways that an agile supply chain can help organizations keep up with the needs of the modern consumer:

1. Enable faster deliveries: Customer expectations for delivery continue to rise, with a UPS survey finding that 45 percent of shoppers expect purchases made between 1 and 4 p.m. to be eligible for next-day shipping.

2. Connect bricks and clicks: While e-commerce has transformed how consumers shop, in-store purchases still make up most of all U.S. sales. According to a Retail Dive study, 62 percent of shoppers visit stores to “see, touch, feel and try out items,” with many going on to purchase online. By gaining shipment-level visibility, organizations can quickly locate and move their inventory – or see which manufacturer can get products to them the fastest.

3. Get closer to the customer: To meet shrinking delivery timelines, many brands are using smaller distribution centers or their own stores for fulfillment instead of traditional warehousing. This move reflects the shift from “just-in-time” inventory to “just-in-time” delivery, prompting businesses to reshape their supply chains to meet customer demand across countless touchpoints. Some businesses are responding by nearshoring manufacturing facilities to shave down transit times, while others are exploring print-on-demand and virtual manufacturing solutions.

4. Keep customers in the loop on shipments: From the moment they purchase an item, every customer has the same question: “Where is it?” Many organizations are responding by giving customers a look into their shipment’s journey, helping to manage delivery expectations and improve customer satisfaction. If a container is stuck at port or a truck is delayed because of weather, an agile supply chain enables businesses to adjust routes and inventory accordingly – and keep customers updated each step of the way.

5. Handle rising return levels: According to an Invesp study, shoppers return 30 percent of online purchases, more than three times the number of brick-and-mortar purchases. As businesses ramp up their reverse logistics capabilities, a technology-enabled supply chain can help them optimize routes to make processing more cost-efficient and identify where returned inventory is needed most across their networks.

Download the full report, “Adapting to the Age of the Consumer with an Agile Supply Chain” at https://americangloballogistics.com/landing/consumer-outlook/

The Panama Canal is thirsty. That’s a problem for ocean carriers.

Supply Chain Dive –With one of the worst droughts in history, the canal is forced to place restrictions on the amount of cargo ships can carry.

The Panama Canal, and Central America more broadly, is experiencing one of the worst droughts in its recorded history. With less water, the canal is forced to place restrictions on the amount of cargo ships can carry, meaning carriers have to limit the shippers they can serve on routes that rely on this waterway.

Read the full article to see commentary from AGL CEO Jon Slangerup on how this is affecting ocean carriers.

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Feature Image Source: Hapag-Lloyd