Shippers Have the Upper Hand in 2019. Here’s What That Means:

Freightwaves —Shippers are in the driver’s seat heading into the early days of 2019.

The rapid growth of the freight market through 2017 and 2018 is over, thereby reducing pressure on shippers and stoking the fire under carriers.

Thanks to the oversupply of transport capacity, particularly trucking capacity, manufacturers and retailers have their choice of freight carrier when it comes time to move their goods to market.

So what does that mean for the freight market as a whole in 2019?

For one, digitization will play a key role as companies seek to optimize their supply chain processes.

With shippers in charge of the freight market, analysts expect them to pressure carriers to adopt technology at a faster pace in order to move freight more reliably and quickly — or face the consequences.

Most experts agree that current weaknesses in the supply chains can be traced back to “silos,” with many discrete components that are unable to communicate with one another. By removing the walls between each step of the supply chain, digitization will create a network that is more resilient and responsive to change.

But digitization is merely a means to an end, and that end is greater visibility along all steps of the supply chain. Jeff Tucker, the CEO of Tucker Company Worldwide, said that his goal as a freight broker is to electronically track 100 percent of his loads by the end of the calendar year.

Because of the high number of carriers competing for loads, Tucker said that his team will begin turning down carriers who will not agree to tracking. That tracking is necessary for freight brokers as competition increases to win business from shippers.

Tracking data, along with other info gleaned from electronic logging devices, must become shared among carriers, shippers and brokers to truly increase efficiency, said Kevin Perry, owner of The Domestic Transportation Consultant.

Once the data is shared, brokers and others can forecast supply and demand trends to reduce wasted time and money.

Accurate forecasting and analytics will require “tight, close-knit relationships with customer service and the supply team,” Perry said.
Both shippers and carriers have been dissuaded from pursuing supply chain digitization due to the cost of the investments in the necessary technology. However, major shippers are spending $50 billion in 2019 to update the technology involved in their supply chains, said Jon Slangerup, executive chairman and CEO of American Global Logistics (AGL).

“In our industry, I see billions if not trillions in reductions of overall costs [thanks to the investments in technology],” he said.
While come carriers may be willing to accept digitization as part of the cost of doing business, other 2019 trends will be harder to swallow.
2018 saw the rise of compliance fees — fines which occur when shippers fail to deliver loads on time — imposed by big-box retailers to match increasing consumer demand, and those are likely to continue rising in 2019.

These fees occur when deliveries are missed, rescheduled, or overall service is poor. Fees can range from 2-3 percent of invoices to hundreds of dollars per load. According to Tucker, 2018 was the most disruptive year for compliance fees. The rise of Amazon is increasing pressure on retailers (and the transportation companies that service them) to increase performance and efficiency in order to meet consumer demand for on-time deliveries.

“Never in the 60 years we’ve been in business has customer service and on-time service been as important as today,” said Tucker. “In an environment of compliance fees, some companies are seeing hundreds of thousands in fees every year.”

Tucker also said that while big carriers are still growing, the number of small carriers (companies with fleets between one and 100 trucks) has grown much faster. The number of drivers for hire has increased as well.

The supply chain in 2019 will also likely see the rise of new competitors and changing ground rules in the freight market, said Slangerup.
“We’re probably at a time of the greatest disruption I’ve seen,” said Slangerup. “The top of the list is the uncertainty around the world because of Washington… changes in relationships since the current administration took power. It’s affecting trade relationship and business relationships.”

As transportation companies become more technologically integrated, tech-focused companies are taking note and expanding into logistics operations, Slangerup said.

He singled out Flexport, a Silicon Valley-based freight forwarder as a polar opposite to AGL, which itself is a logistics company moving into technology.

“It’s a new competitive dynamic,” said Slangerup, though he noted that AGL is making adjustments in anticipation of new competitors.

Read the Full Article

 

Feature Image Source: Freightwaves

In Order to Scale, Tech Solutions Need to be Adaptive

Freightwaves —Overall supply chain and logistics tech spending will rise to $87.8 billion over the next three years. That’s according to new research from Logistics Trends & Insights, LLC and American Global Logistics (AGL). The study shows that U.S. companies will spend more than $2.5 billion in disruptive logistics and supply chain technologies by 2022. The report, “Supply Chain Technology Investment Outlook,” explores the rapid growth in supply chain IT investment and which technologies are likely to take the lead in the next five years.

In transportation and logistics it can be hard to predict what’s coming up. We saw a peak in market volumes and extremely tight capacity in July 2018, and then unpredictable softening in September, which few would have predicted. When SONAR data is studied it verifies current industry thinking regarding volumes and tech trends. Will things be soft or not? There are trends and seasonality but who knows about interest rates and tariffs for instance?

Bending the corner into 2019, there is a wide variety of interesting technology coming out. But it’s really only interesting if you can get people to play (and pay!). There’s so much fragmentation on the capacity side of the equation. It’s impossible to get all those companies to adopt a single technology, and if you can’t get to that tipping point a broker’s always going to be able to find a better price. It’s hard to get distribution and change the way a lot of companies do things. There are tens of thousands of truckers that actually value the relationship, and if someone’s getting them down the road and making things connect, then they’re going to value that. If a driver wants to use his TMS, he or she can do that. If someone wants to go online and automate, that can be done. The industry is extremely diverse, and you have to deploy to many levels. A slick tech solution might solve issues for one small niche of the market, but will it ever be widely adopted?

Predictive analytics can play their part, but sometimes the buzzwords get overused. Everyone wants to talk about artificial intelligence (AI) and blockchain and there are uses for both, but neither (or anything else) is a cure-all, end-all. If a company is really scaling you have to use analytics to improve service, processes, price discovery, and margins. It’s all about applying mathematics to the situation. According to Ginni Rometty, chief executive officer of IBM, “One of the reasons why some people say they haven’t gotten as much value from AI is that the workflow didn’t change. You have to reimagine the kind of work and how it should be done for this to work the best.”

Off-the-shelf solutions will work for a small company getting started, but the complexity of processes increases as a company grows. If a company’s workflow has to be adapted to someone else’s tech, you’re out of luck. Will small brokers be able to reap the benefits of the tech and get to the critical mass to use the technology? Probably not. You need a large marketplace, high ratings for service, and the ability to automate.

Massively configurable technology is what you want. Those who have built to scale and have processes and automated it are likely more competitive and successful. You have to be fairly clever with how you develop it on the back-end and make it configurable on the front-end to do what the customer wants to do.

We recently discovered one such company with nVision Global. Their Impact TMS provides the visibility and management of global shipments from creation through delivery. A company can now, in effect, integrate all the features one demands in a TMS solution with nVision Global’s other technologies, such as Freight Audit and Payment, Freight Claims, and Business Analytics. They are one of the few providers we have found that can offer these solutions in a single package and still offer a configurable TMS solution that meets a user’s exact needs and specifications.

While some get swept away by the hype, success will mean being able to build tech and relationships. Yes, relationships still matter. Whether amongst each other or your customers. That’s what life revolves around. That being said, tech makes people and companies more efficient, and that’s the differentiator.

Read the Full Article

 

Feature Image Source: Freightwaves

Supply Chain Optimization Slowly Gains Traction at Retail’s Big Show

Supply Chain Dive —The growing importance of the supply chain in retail operations was a strong undercurrent at the National Retail Federation’s “Retail’s Big Show” in New York City.

NRF itself knows it, hosting its first ever Supply Chain Workshop concurrent with the Big Show this year. The show’s keynote speaker Lowe’s CEO Marvin Ellison knows it — he’s been preaching supply chain excellence as a key part of Lowe’s comeback since his first day on the job back in July. But based on panel discussions and conversations on the expo floor, not all players have realized it yet.

Retail supply chain experts said the sooner retailers embrace the supply chain as a fundamental part of their customer satisfaction, the sooner they can leverage emerging tools and technologies to better serve shoppers and boost profitability. These takeaways demonstrate how modern retailers can leverage their supply chains to either delight or disappoint customers.

Warehouse tools move in-store

Twas the season of BOSS, BOPIS and any other fulfillment strategies that can be made into acronyms in peak season 2018. In the dim light of January, retailers are doing the math on how they made out.

According to Scott Fenwick, director of product strategy at Manhattan Associates, some are suffering from a bit of sticker shock. Some are pulling back alternative fulfillment options, while others are trying to change the equations on the back end to balance labor and inventory for better profitability.

“What we’ve found is that if a fulfillment objective fails, it’s for one of two reasons: They didn’t plan properly and get the right products in place to make it a positive experience, or they didn’t run the cost models well to understand what it is really going to cost to execute. Sometimes it’s just not profitable,” said Fenwick.

What makes the difference is data and planning, he said. “If they’re not putting in the right effective tools, then the customer is not going to have a good experience when they show up to pick up that merchandise.”

A starting point is good visibility of the inventory in the network, followed by optimizing labor in the store. For some retailers, that means moving warehouse fulfillment tools like “pick-path optimization” into the store to gain efficiency and fulfill orders faster.

Fulfillment is a marketing opportunity

A growing sentiment among supply chain managers is that they work for the consumer. It’s a new frame of mind for work that for decades was kept separate from seemingly related tasks like demand planning and even procurement. Amit Sharma, founder CEO of Narvar, a tech company focused on the “post-purchase experience,” said some retailers are catching on.

“A select few progressive [retailers] understand that every touch point is a consumer touch point. A vast majority are still in the mindset that the supply chain is a cost center — not a consumer engagement opportunity or a marketing opportunity,” Sharma said.

Sharma emphasized that since the consumer holds the retailer responsible for the entire transaction, every element of that delivery is part of its brand.

Robots are on the payroll

On a panel with Badger Technologies and Giant Food on the subject of robots in stores, the moderator asked Tim Rowland, CEO of Badger Technologies, which makes inventory robots in wide-use in Giant stores, about cost. He answered, “The robot’s salary is… ”

Consumers, so far, love seeing robots in store, but the value of robotics versus the benefit can be difficult to parse because robots don’t directly replace humans in most operations. But giving them a wage simplifies the math much more so than Rowland’s other question: “What is it worth to know that you’re out of stock as soon as you are?”

Another robotics company, Locus Robotics, which makes warehouse robots that help with picking in fulfillment warehouses, uses a robots-as-a-service model. Locus also talked about what the robots “make,” this time in an hourly figure. It’s a surprisingly simple way to think about robot ROI.

Clean data is a good place to start

The NRF Big Show floor is covered with tech vendors, and most will explain that the first challenge when working with a new retailer is essentially getting to zero.

Before using data to glean insights and drive efficiency, retailers need to be tracking meaningful indicators with reasonable fidelity. John Slangerup, CEO of American Global Logistics (AGL), told Supply Chain Dive many retailers are swimming in an ocean of data that may not be accurate or usable.

“There is a tsunami of data, but how much is meaningful information?” he said.

Jeanette Barlow, vice president of product management for Watson Supply Chain at IBM, told Supply Chain Dive that getting real, accurate data coming in is the first stage of her work with any client.
“Their homegrown solutions are outdated and just don’t have the sophistication to have the flexibility for all the models they need,” said Barlow. Working with retailers to bring in better data is the first step before she can offer better visibility and then, optimization.

Read the Full Article

 

Feature Image Source: Supply Chain Dive

Afternoon Coffee: Brexit Deal Faces Deadly Vote; When Do Retailers Seek Supply Chain Visibility?

Spend Matters —With the latest Brexit plan facing a tough vote Tuesday, British Prime Minister Theresa May is seeking support for the deal, Bloomberg News reports.

If the plan dies as expected, she’ll have some time to formulate a Plan B. See the graphic that lays out the options, and read about the details dragging down this deal.

Big Losses, Mad Bosses
Retailers know the supply chain has the potential to deliver big losses or big gains, but seeking more visibility into it often occurs only after a big problem occurs, Supply Chain Dive reports.

“Usually it’s a major disruption like what has been happening the last two years. … Whenever something happens that causes you to miss your goals, lose money and cause your boss to be mad at you, then suddenly it becomes a problem,” Jon Slangerup, chairman and CEO of American Global Logistics (AGL), told Supply Chain Dive, which looks at the motivations for retail companies to seek technology that helps them see into their supply chains.

Slangerup also said the high numbers of retailers pursuing supply chain visibility (72%) is indicative of the size of the task ahead and not progress already made.

Read the Full Article

What drives retailers to seek supply chain visibility?

Retail Dive —Retailers are quickly learning that supply chains are the place where profits are earned and lost, but motivation to achieve real-time visibility differs based on the size of the retailers, according to experts at the National Retail Federation’s Big Show in New York City.

The second and mid-tier companies that Jon Slangerup, chairman and CEO of American Global Logistics, works with tend to wait for a problem before considering doing the work of achieving full supply chain visibility. They’ve had their pick of calamities recently, from tight trucking capacity to tariffs.

“Usually it’s a major disruption like what has been happening the last two years … Whenever something happens that causes you to miss your goals, lose money and cause your boss to be mad at you, then suddenly it becomes a problem,” he told sister publication Supply Chain Dive.

Jeanette Barlow, vice president of product management for Watson Supply Chain at IBM, is more likely to be working on digital supply chain visibility solutions with top-tier retailers. She told Supply Chain Dive a sense of untapped opportunity is often driving the adoption of technology that allows for greater supply chain visibility.

“A lot of the panic that stores are dead seems to have gotten behind us, and now they’re asking, ‘How can I leverage the fact that I have stores?’ Then it becomes much more critical to have a view of where things are and the capacity and the productivity that you have,” Barlow said. In order to manage a more complicated omnichannel network, retailers need a better handle on where inventory is and how it’s moving, she said.

No matter the motivation, the majority of retailers appear to have gotten the message that visibility is a must whether trying to withstand new tariffs or exploring new fulfillment models.

According to Zebra Technologies most recent Retail Vision Study report, 72% of retailers are working on digitizing their supply chains in order to achieve real-time visibility. This includes investing in myriad new tools, new tech implementations and new ways of thinking to gain that visibility.

Slangerup added that the high numbers of retailers pursuing supply chain visibility is indicative of the size of the task ahead and not progress already made. “When it comes to mapping their supply chains, most haven’t got a clue,” he said.

Read the Full Article

AGL Report: 72 Percent of Retailers are Digitizing Their Supply Chains to Enable Real-Time Visibility

Associated Press —New research from Logistics Trends & Insights and American Global Logistics (AGL) reveals that 72 percent of retailers are digitizing their supply chains to enable real-time visibility through tools like automation, sensors and analytics. In addition, the report shows that many retailers are turning to outside expertise to help fuel their digital innovation, spending $50.7 billion on third-party logistics providers in 2018.

The report, “AGL Supply Chain Brief: Eye on Retail” (download here) was released at NRF 2019, currently underway from Jan 13-15 at the Jacob K. Javitz Convention Center in New York City.

“The demands of omnichannel and just-in-time delivery are forcing retailers to reimagine their supply chains,” said Jon Slangerup, Chairman and Chief Executive Officer, American Global Logistics. “At the same time, we’re entering a renaissance for supply chain technology, with a wealth of solutions available based on shippers’ unique needs and processes. Retailers that couple the right technology with logistics expertise can unlock significant new value from their supply chains.”

Some additional findings include:

— As the U.S.-China tariff battle continues, hefty duties are causing prices to spike and prompting retailers to reevaluate their inventory strategies. Some businesses are forward-buying inventory to get ahead, a practice which requires precise forecasting to avoid dreaded stockouts or a surplus of goods.

— Achieving true supply chain optimization is still a work in progress for most retailers. Among retailers implementing new technologies, only 15 percent are scaling those platforms, and just 4 percent say they’re seeing the benefits so far.

— Businesses that adopt digital supply chains boost annual earnings by 3.2 percent on average – the largest increase in digitization of any business function.

— For retailers, the overarching goals of IT investment are to increase transit speeds, predict trends, minimize the impact of disruptions and plan further in advance. Since retailers typically maintain minimal inventory in their supply chains, particularly fast-fashion brands, speedy response and delivery times are essential.

Download the full “AGL Supply Chain Brief: Eye on Retail” at https://americangloballogistics.com/landing/retail-supply-chain-technology-outlook/

Based in Atlanta, Georgia, Logistics Trends & Insights LLC aims to cut through the content noise and provide customized logistics research and consulting services utilizing a global network of trusted and experienced analysts.

Read the Full Article

As the US Shutdown Drags On, the Threat to Supply Chains Grows

The Loadstar —Initial repercussions for logistics from the US government shutdown have been slight so far, but the prospect of lingering paralysis is raising fears of severe supply chain disruption that may take a long time to mend.

Canine screening of air cargo got under way at US airports on January 1 as scheduled, but the programme has had a bumpy start.

Certified screeners are ready to go, but airlines are not accepting cargo screened by dog teams without an official go-ahead from the Transportation Security Agency (TSA), reported Brandon Fried, executive director of the US Airforwarders Association, who had been one of the driving forces for the establishment of a canine cargo-screening scheme.

As long as the TSA is not accessible, carriers seeking clarification of details of the canine programme are in limbo.

Homeland Security, which encompasses the TSA, is one of nine US government departments affected by the shutdown, as is the Food and Drug Administration and the Federal Aviation Administration.

The shutdown means no funds for affected departments, about 25% of the federal government. As a result, about 800,000 government employees are furloughed or working without receiving their salaries.

They include front line staff, such as customs agents and air traffic controllers, but all support staff and management are furloughed for the duration of the shutdown.

However, for now, air traffic is working and cargo is flowing.

“We have not seen any meaningful delays or disruptions in the ability to move and clear freight,” said Jon Slangerup, CEO of American Global Logistics.

Elio Levy, executive vice-president of forwarder Logfret in New York, added: “We have no issues with CBP or FDA releases, but we did not have anything detained. The processes are all paperless.”

Communication with shuttered government offices over paperwork is a different matter, though. Companies or individuals that require licences or permits are out in the cold until the respective departments resume full operations.

Airlines that intend to add new aircraft to their fleets are finding themselves in a holding pattern. Delta plans to start flying the Airbus A220 on January 31, but it is still waiting to obtain approval from the FAA. Management of Southwest Airlines is reportedly bracing for a delay of planned services to Hawaii.

With every passing day, fears are growing that the shutdown will hit supply chains. Mr Slangerup warns that front line government workers are deprived of support from their shuttered departments.

“Officers work, but over time, if you take away their support infrastructure, it will create cracks. Then you see a snowball effect on customs officers’ ability to respond,” he said. Likewise, air traffic control cannot work for a long period of time without support, he added.

“Long term, it is going to fracture the infrastructure for both ocean and air, regulatory and clearance,” he said.

If paperwork begins to clog up in the system, the results could be dire, Mr Slangerup warned, possibly as bad as the system meltdown in 2014 that paralysed container ports on the US west coast. At the peak of that crisis, the toll this took on the economy amounted to $1 billion a day, and it took over four months to recover .

This is not the first US government shutdown precipitated by a clash between the White House and Congress over federal budgets. There have been 20 shutdowns, two under the current administration, but they were resolved within days.

However, at this point there is no sign that the current confrontation is going to be resolved soon. White House chief of staff Mick Mulvaney said at the weekend he expected the shutdown to “drag on”.

Mr Slangerup said: “This is very troubling. It is unfortunate that this is handled as a political football. It puts our supply chains and passenger air safety at risk.”

Read the Full Article

AGL CEO Jon Slangerup Talks “High-Touch” Supply Chain at NRF 2019 Big Idea Session

1.7.19—Atlanta, GA: On Jan. 13, the opening day of NRF 2019, American Global Logistics Chairman and Chief Executive Officer Jon Slangerup will lead a ‘Big Idea’ session titled “Why service and know-how still win the race to supply chain optimization.” The session begins at 11 AM ET on Stage 5 of the Expo Hall at Jacob K. Javitz Convention Center in New York City.

“Technology, in all its forms, is critical to enabling supply chain visibility and improving efficiencies,” said Slangerup. “But, while technology is a great enabler, it can’t replace the benefits of working with experienced supply chain professionals who understand the complexities and urgency of managing an agile supply chain.”

Closing the NRF week on Jan. 16, Slangerup will co-host a Supply Chain & Logistics Workshop with Stein Mart SVP Rick Schart and The Home Depot VP Colby Chiles titled “Navigating the transportation tightrope.” The session will be held at 1:30 PM ET at the Marriott Marquis in Times Square in the Westside Ballroom.

Before joining American Global Logistics in 2017, Slangerup served as CEO of the Port of Long Beach, a primary U.S. gateway moving more than $180 billion a year in trans-Pacific trade. Earlier, he served as President of FedEx Canada.

Headquartered in Atlanta with operations centers in Virginia and North Carolina, AGL is one of the fastest-growing and most respected international supply chain and logistics solutions companies in the world. AGL is a key player in the trans-Pacific trade lanes and is rapidly expanding its reach by ocean and air into the trans-Atlantic and Latin America lanes, serving customers throughout the Americas, Asia, Europe, Middle East and Africa. The company’s cloud-based technology solutions extend the visibility and global reach of its customers’ multi-modal transportation requirements.

About American Global Logistics
Founded in 2007, American Global Logistics is a specialized supply chain software and services company that provides end-to-end multi-modal transportation solutions, customs brokerage, compliance consultation, carrier allocation management, warehousing, distribution, and advanced purchase order management to select customers. Its proprietary cloud-based technology provides real-time shipment visibility and forecasting and an accountability-based customer service model allow customers to deliver a consistent experience to their end-users. AGL’s client base represents a broad range of industries including automotive, furniture, chemicals, raw materials, perishables and consumer goods, and represents some of the world’s largest importers and exporters.

Media Inquiries:
Will Haraway Backbeat Marketing
william@backbeatmarketing.com
404.593.8320

Download the Press Release (PDF)

Pressure Mounts on Forwarders with Uncertainties over US-China Trade Conflict

The Loadstar —Thanks to the antics of the US president, also jokingly known as the best trade minister Canada ever had, Flying Fresh Air Freight’s Brendan Harnett has found planning for 2019 somewhat challenging.

The chairman and CEO of Canada’s largest perishables forwarder can look back on a strong 2018 when, faced with significant increases in tariffs on US seafood and fruit, Chinese importers ramped up their sourcing in Canada.

The rise in business stretched Flying Fresh, prompting management to recruit new employees and Mr Harnett is also looking to add warehouse space at Vancouver Airport this year.

However, resolution of the stand-off between Washington and Beijing could dent Flying Fresh’s volumes. Anxious US seafood exporters are likely to try to recover lost ground with aggressive marketing campaigns if the tariffs go down.

The uncertainty over the trade conflict makes for tricky navigation for shippers and logistics providers alike. Flexport CEO Ryan Petersen has described the issue as “the biggest question mark and the biggest impact”. Brands don’t know what to do, he said.

The decision of the Trump administration to defer the increase of tariffs, from 10% to 25%, scheduled for January 1 and Beijing’s announcement of a resumption of US soybean imports and holding back on its plan to raise tariffs on US-made cars and auto parts, have given rise to hopes that the two sides are working towards a resolution.

Still, many pundits remain sceptical. They argue that an agreement is unlikely in light of the various bones of contention in play, and are urging importers to make alternative plans for their supply chain operations if they are sourcing from China.

Jon Slangerup, CEO of American Global Logistics (AGL), expressed hope that the US government would defer additional tariffs to beyond March. He noted that pressure was mounting on the administration to find a solution before the next round of tariffs.

“If it goes to the second tier of tariffs, the implications for American small and mid-tier companies will be dire,” he predicted.
So far the tariffs in place have not been passed on to the consumer, being absorbed by the importer or shared with Chinese suppliers, Mr Slangerup noted, but warned there was no room for further absorption.

Raising the tariffs to 25% would have a visible impact, because the rise would have to be passed on, he said.

According to nationwide campaign Tariffs Hurt The Heartland, American businesses paid $4.4bn in tariffs in September, a 54% increase over September 2017, although the total value of imports went up by just 10%. The same month saw US exports subject to retaliatory tariffs drop 26%, the campaign reported.

“Our payments for taxes and duties increased three-and-a-half times – even at 10% tariff. If you extrapolate that into a 25% world, the outlook is dire,” Mr Slangerup said.

And already the 10% tariff level is taking its toll on importers, AGL has found.

“We noticed people are pushing out payments. Cash flow is becoming an issue for SMEs,” Mr Slangerup said.
US camera maker GoPro has decided to rejig its supply chain, announcing in early December that it intends to move most of its production for the US market out of China.

“Today’s geopolitical business environment requires agility,” said chief financial officer Brian McGee. “We’re proactively addressing tariff concerns.”

However, GoPro has indicated that production for other markets would remain in China.

There is broad agreement that, for the most part, the tariffs are a contributing factor to company decisions to shift production out of China, a migration that has been going on for years already in response to rising costs there. Now, the tariff issue has pushed firms to take yet another look at their supply chains and contemplate alternatives.

Mr Slangerup said a number of AGL’s customers were in various stages of exploring alternative sources of manufacturing and supply.

“People are doing the best they can to cope with the uncertainty. They try to mitigate the long-term risk,” he said. “Customers are not only looking for the next sourcing solution, but they also want to optimise their supply chain.”

Read the Full Article

Global 3PLs to Double Down on Technology

JOC.com—Global third-party logistics providers (3PLs) these days might feel like they’re in a vise grip. On one side, logistics software providers, both established and upstart, are trying to arm shippers with systems that render 3PLs less important. On the other side, some ocean carriers are aiming to recapture the supply chain management ground they ceded to 3PLs over the last decade.

If anyone is used to the hustle, it’s logistics service providers (LSPs) experienced in low-margin markets, but the burden to remain relevant is more pronounced than ever. Although much of the focus in 2018 centered on the impact digital freight forwarders worldwide might have on legacy companies, that simplifies the challenges 3PLs face, especially those with extensive forwarding operations.

Margin-based buying and selling of capacity probably isn’t a sustainable model in an environment where shippers have detailed insight into freight rates.

Relying on shippers to use obsolete or user-unfriendly systems when easy-to-deploy, affordable, and browser-accessible freight management tools abound likewise isn’t a sound strategy. And, with large global shippers generally preferring to deal directly with carriers as much as possible, the movement of carriers into services ancillary to port-to-port operations is another cause for concern.

Carriers Change Strategy

Maersk Group’s September decision to hive off the origin services from its 3PL sister company Damco and incorporate those services into its liner carrier business is emblematic of this last dynamic. CMA CGM’s increasingly close ties to CEVA Logistics, including a 25 percent investment stake, is another.

Those carriers, and potentially others, might have seen it as a mistake to forfeit the lucrative supply chain management turf and the deeper customer relationships that come with those services.

Meanwhile, nearly two decades of maturity in the shipment management software market have led to systems such as GT Nexus, CargoSmart, Descartes, BluJay Solutions, and Amber Road becoming entrenched with shippers wanting to reduce their dependence on 3PLs to provide procurement, planning, execution, and visibility functions. Newer competitors to those established providers, most of which have emerged amid a wave of venture capital funding over the past five years, create another challenge with which 3PLs will need to deal.

Putting Money to Work

All of these forces are set to compel 3PLs to double down on investment in two key areas: global supply chain visibility and execution and technology at large. Those two are inextricably linked, and 3PLs focusing on those areas inevitably will move further away from a pure margin-taking model.

“As a forwarder, say your top-line number is $100; that’s sales,” Fauad Shariff, CEO at freight forwarding marketplace CoLoadX, said at the JOC Logistics Technology Conference in October. “Your cost of goods sold is $80. That gives you a $20 gross profit. The next $15 to $17 go in fixed costs. Your EBIT [earnings before interest and taxes] is $3 to $5. Every [forwarder] beats their brains out for the $80 and $20, and that’s never going to change because you don’t control the ships. If you focus on that $15 to $17, that’s where innovation begins.”

Shariff urged forwarders to think of their businesses as valued-added resellers, not brokerages. “Price is the road to commoditization,” he cautioned. “The nature of the business is changing, with customer service, with attention to the complexity of the transaction, and a fundamental understanding of what freight forwarder value is. And it’s not a low price.”

In essence, top 3PLs are having to redefine themselves as technology-based 4PLs, orchestrating their customers’ supply chains in a way that captures the best attributes of shipment management software providers and traditional LSPs.

“We have challenged ourselves internally to say, ‘Do we have the best platform?’” Jon Slangerup, chair and CEO of American Global Logistics (AGL) and a former executive with FedEx, said at the Logistics Technology Conference in Las Vegas. “Is it what our customers need to scale and grow? The answer was no. We’ve invested tens of millions of dollars in the past year-and-a-half to make sure the platform could handle bolt-on technologies. We will be able to offer a robust array; that’s what our customers count on. If we don’t, we lose the race, and we’re no longer relevant.”

Many companies like AGL struggle with the same issues, Slangerup said. “The bigger they are, the bigger the struggle, because those legacy platforms are hard to change,” he said.

Growing Demands

This is an area where top 3PLs have long invested — in tools to help their customers procure, manage, and track their freight. But the demands from the end-consumer have ratcheted up the demands on those customers. Wild growth in e-commerce sales is driving business-to-consumer and business-to-business expectations around fast and cheap delivery, and that eventually rebounds on 3PLs to help shippers keep pace.

This puts the onus on 3PLs to help shippers make quicker decisions on pricing, routing, and modal choice, all in the name of keeping inventory levels manageable while still fulfilling customer demand.

In that world, an intermediary business built simply around securing capacity at a margin is valuable to shippers only in times of distress. It’s not a way to build strategic value.

The other manner in which 3PLs are expanding their reach and interaction with customers is through dynamic pricing. Twill Logistics (Maersk’s digital forwarding channel), DB Schenker, DHL Global Forwarding, and Agility have introduced such tools in the last two years. Among the 12 largest container lines, only Maersk Line and Hapag-Lloyd, through its QuickQuotes tool, have such capability.

Any 3PL, however, can expose its rates dynamically through marketplaces such as Freightos or Simpliship or by using software from the likes of Kontainers, which builds front-end tools to allow forwarders and carriers to quote instantly.

“Pricing information is something you keep close to your heart, like in any industry,” said Toby Edwards, CEO of Shipa Freight, Agility’s instant quoting platform. “The worry is, we’re going to let anyone go in and see our pricing? That’s our bread and butter. But they can get it anyway. Someone calls and you’re not going to hide it from them. We’re entering a new, transparent world.”

Read the Full Article