$87.8B in Supply Chain Investments Captures VC Attention

Sourcing Journal—One sector that venture capitalists believe is ripe for change and disruption is supply chain logistics, where much of the trucking and freight sectors still relies on offline legacy processes such as manual booking and paper records.

According to a study co-sponsored by the American Global Logistics (AGL) and Logistics Trends & Insights on “Supply Chain Technology Investment Outlook” from November 2018, overall supply chain investments are projected to reach $87.8 billion by 2022. AGL estimated that volume using key data points from a June 2018 study on the “Annual State of Logistics Report” from the Council of Supply Chain Management Professionals. The study was produced by consulting firm A.T. Kearney and presented by Penske Logistics.

Companies know that technology is the fuel to improve supply chain know-how. And with tech entrepreneurs looking at where they can disrupt, it’s only natural that VCs follow suit.

There’s a lot of dry powder available for investment, and some venture capitalists see tech-enabled solutions as the next frontier. If they make the right bets, the potential return could be huge. There are benefits to the entrepreneurs too. An investment by a VC in a SaaS (software-as-a-service) start-up can translate to a valuation that’s up to 15 times revenues, and those numbers can help garner attention for future funding rounds.

According to a blog post from Simon-Kucher & Partners titled “Logistics Startups are Booming” from March 2018, the logistics and transportation industry is a trillion-dollar business, and one that could benefit from digitization or automation. That’s a point that hasn’t gone unnoticed by venture capitalists. Simon-Kucher cited equity funding in the U.S. in four areas: on the B2B side, domestic delivery marketplace, freight forwarding and robotics, and companies that focus on B2C in the domestic delivery sector.

The lifecycle of a start-up for VC investments is similar to that in other sectors, such as retail and consumer brands. A new start-up garners smaller angel and seed investments, while those that have been around longer tend to find more equity support for larger rounds.

In the domestic delivery space, Seattle-based Convoy works with shippers on the B2B side to find the best trucking option. Technology via software allows it to create smarter routes–think reduction in carbon footprints–as well as efficiently batch shipments. In July 2017, it raised $62 million in a Series B round, and followed that with a Series C raise of $185 million in September 2018. The raise was led by late-stage VC firm CapitalG, the investment arm of Alphabet, Google’s parent. It’s the Series C raise that gives four-year-old Convoy a valuation of more than $1 billion, and unicorn status to denote the rarity of successful ventures.

Even bigger is Flexport, a freight forwarder that relies on software to help companies transport goods by ocean and air via online booking. The company in February disclosed a $1 billion round led by an affiliate of SoftBank, an amount that values the company at north of $3 billion.

Given that the sector uses antiquated processes, there shouldn’t be any surprise that it’s also ripe for new competitors to enter the space. A London start-up, Zencargo, is building out a platform that relies on software to move cargo globally. The company last week said it completed a Series A raise of $19 million.

Movement of goods on the supply chain side isn’t limited to just transportation by water or air. For example, Fetch Robotics is helping to automate warehouses. Essentially, robotics “precision pack” orders using wireless communication to move product through grids placed on the floor. Fetch raised $25 million in a Series B round, led by Sway Ventures in December 2017. And on Monday, warehouse automation firm Locus Robotics said it just raised $26 million in a Series C round.

The idea of using robotics in warehouses isn’t new. Amazon back in 2012 spent $775 million to acquire Kiva Systems, then a relatively unknown start-up. Kiva was backed by Bain Capital Ventures and Meakem Becker Venture Capital. As the technology has evolved, the use of robotics and drones also is helping with last-mile delivery. In Asia, online marketplace JD.com has been using drones to make deliveries in China. This year saw it begin testing drone delivery in Indonesia.

While there’s been keen interest in the logistics sector by venture capitalists–more than $2 billion and growing–what isn’t clear is how many actually understand what it is they are investing in. They are backing companies run by entrepreneurs who have an idea, but at the early stage there’s obviously no real assets and, perhaps, not much by way of revenues. And more importantly, no profits.

That hasn’t curtailed VC interest. In February, venture capital firm Menlo Ventures disclosed it raised a new $500 million investment fund aimed at Series B and C funding rounds to help start-ups grow into the big leagues. It plans investments of between $20 million to $40 million in companies that do volume of between $5 million to $10 million, with a concentration in sectors such as SaaS, marketplaces and Fintech.

For entrepreneurs, there are risks as well, one of which can result in a flame-out. One example is Shyp, an on-demand B2C shipping player that had a valuation of $250 million in 2015 after completing an equity raise of $50 million. But the company shut down in March 2018, supposedly because it couldn’t find a scalable business model. There’s talk that taking in all those dollars might have caused the company to face pressure from investors to grow, perhaps at a rate faster than it should have.

Much of the VC investment dollars are for firms still in the relatively early stages of their development cycle. And that makes it hard to predict which ones among the current crop will become the key players in the logistics space. And while the economy is relatively stable now, another risk is what happens to the investment cycle when a downturn strikes.

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Logistics Providers Shift Focus with the Rise of DTC

Sourcing Journal—Logistics brokers have been undergoing a steady metamorphosis in recent years, stemming from the influx of direct-to-consumer brands and the unrelenting rise of e-commerce.

“We are living through a renaissance in the logistics space,” said CEO of American Global Logistics (AGL), Jon Slangerup. “It changes the supply chain for all our customers.”

The cultural shift to shopping online represents “the largest disruption in retail supply chain logistics in many years,” Vincent Iacopella of Alba Wheels Up, agreed. The EVP of growth and strategy said the hunger that retail brands feel to compete in the online marketplace “poses challenges for all the players” in the logistics arena. “It also creates new opportunities,” he added.

Brick-and-mortar hasn’t completely given way to e-commerce, but there’s no question that retail brands must maintain an online presence in order to survive. Now, the digital space is becoming crowded with small, specialty DTCs that are conducting all of their business online—much of it through social media. The trend has legacy retailers racing to bolster their web presence. To compete with the agile upstarts, they must deliver an optimal shopping experience from first click through fulfillment.

“There’s no question that the traditional retail storefronts have learned how to merge their e-commerce businesses with their brick-and-mortar operations,” Slangerup said. “They’re grappling with the e-commerce part of fulfillment because they have to.”

Iacopella believes consumers’ reliance on technology is the driving force behind the shift in shopping habits. “I think the biggest factor is digitalization,” he said. “We live in a world where we all connect digitally, and that’s fueled an appetite to make purchases in real time.”
Today’s consumers, Slangerup agreed, aren’t oriented toward going into a store or a showroom and buying anymore. Rather, he added, “Customers are going to go home and price shop and have their things delivered as quickly as possible.”

This reality has AGL’s customers feeling the heat, and the company has responded in kind by ramping up its tech offering.

“We’ve evolved as an organization over the past three years from being a strictly third party logistics company or freight forwarder to a 4PL,” Slangerup said, adding that 25 percent of AGL’s incoming business now relates solely to technology enablement. “The traditional freight forwarder of yesterday wouldn’t survive today,” he explained, without the ability to provide end-to-end visibility to its customers. Arming brands and retailers with a line of sight into their supply chains allows them to better manage their consumers’ expectations, which are growing every day.

AGL is taking a heavy editing hand to those supply chains, too. “We map our customers’ key performance indicators, along with their speed and adeptness,” Slangerup explained. Using mapped data, the company helps its customers redefine workflows and processes. “You can see the light bulbs going off because most of our customers have never done that,” he added.
“In a supply chain there’s typically between seven and 10 critical handoff points,” Slangerup said. “Those handoff points are where the money is made or lost in this business.”

Another potential hangup that both new and established brands can face is in cross-border logistics. If speed to market is the modern mantra, then removing roadblocks is a must. Iacopella served on the commercial advisory committee for Customs and Border Protection, becoming an adept navigator of regulatory issues. He believes that 2015’s Trade Facilitation and Trade Enforcement Act, which raised the de minimis amount for duty free shipments from $200 to $800, was a huge boon to the DTC industry. Around that time, “there was this explosion of online purchases,” he said. “The law made it easier for cross-border small package movement, which fueled DTC.”

Despite tides turning in the favor of DTC brands, Iacopella believes newcomers without the relevant expertise could run into trouble. “At the beginning of DTC e-commerce, I don’t know how many people were paying attention from a regulatory standpoint, but I think they are now,” he said.
“The biggest pitfall with startups is the same thing that makes them great,” he explained. “They have the energy and the drive. But they also have to take a deep breath and look at whether the products are in compliance with our regulatory laws, if they’re safe for the consumer, if they’re infringing upon someone else’s IP or if they’re in a position to have their own IP infringed upon.”

These potential blind spots represent opportunity for logistics providers, who are now embracing their roles as guides on a supply chain journey. With increased scrutiny from government agencies, Iacopella said it’s more important than ever for brands to partner with brokers who are comfortable navigating the issues.

At this point, though, DTC retailers represent only a small part of Alba’s portfolio.

“The majority of our legacy customers are volume movers,” Iacopella admitted. “But even those brands are all starting some kind of DTC vehicle. We have to be open to the new startup mentality, because eventually everyone is going to have to pivot.”

A similar story is playing out at AGL, which Slangerup said has taken on “dozens, but not hundreds” of DTC companies as customers. But he knows not to underestimate the business of fledgling brands because “they’ll become the next iteration of medium-to-large-sized retailers.” Slangerup said this new wave of businesses has inspired AGL to embrace the most effective new technology. “Those brands are a small part of our business, but an important one. They’re the ones who are making the point to us that it’s important to add technology to your supply chain management.”

“Ten years ago, the logistics space was an old, dusty, uninspired environment,” he added. “Now, things are shifting so quickly that you have to be tech-oriented or you can’t keep pace. You’ll become just a commodity player, and that’s the last thing we want to be.”

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5 Technology Trends Poised to Transform Retail Supply Chains

Total Retail —Supply chain technology is entering a renaissance as retailers look to digital tools to transform nearly every aspect of operations. Nearly three-quarters of retailers report plans to digitize their supply chains as they seek to improve real-time visibility and responsiveness in an increasingly challenging environment. With pressure mounting on all sides, a well-run supply chain is becoming indispensable for retail businesses. Continued tariffs are creating inventory volatility for retailers, prompting many to weigh the pros and cons of forward-buying goods to avoid impending price hikes. U.S. imports hit a record 21.6 million TEUs in 2018, with shippers rushing to get goods in hand before additional tariffs take effect. At the same time, retailers are feeling the demands of omnichannel and just-in-time delivery. Deliveries take countless paths to their final destination, and a sharp uptick in product returns is making fulfillment even more complex. One study found that shoppers return 30 percent of items bought online, more than three times the return rate for brick-and-mortar purchases. Growing Needs, Growing Solutions Amid these challenges, more retailers recognize the need to redesign their supply chains. Their goals include faster response and delivery times — a must for retailers that maintain minimal inventory in their supply chains — as well as predicting trends and minimizing impact of disruptions. The good news? These organizations have a wealth of solutions at their fingertips, with a growing number of tools that can adapt to unique shipper needs. As shippers look to go digital, these five tools can help deliver the supply chain optimization they seek: Shipping execution and tracking: Seamless product movement is a top goal for shippers, with 77 percent of firms investing in technology to improve shipping execution, according to American Shipper. By balancing speed with price and managing shipments by exception, these tools can help retailers meet stringent delivery deadlines cost effectively and avoid snags along the way. Supply chain planning: Planning tools help retailers gauge demand, adapt to volatility and plan for accuracy at scale as they fine-tune inventory levels amid ongoing tariffs. According to Gartner, 70 percent of retailers are adopting centralized planning to keep up. Transportation management systems (TMS): In an omnichannel world, nearly every delivery is a last-mile one. As a result, more retailers are relying on TMS to optimize ground transit routes, shave time off deliveries, and ensure they’re meeting customer promises. Artificial intelligence (AI): AI simulates human intelligence to streamline key logistics functions for retailers, from reporting to planning. One area where AI is already gaining traction is in voice recognition technology to simplify ordering. Machine learning: By spotting trends in large data sets exponentially faster than a person, machine learning can help companies make better decisions about routes, prices and carriers, resulting in greater profits for high-volume shippers such as retailers. The Quest for True Supply Chain Optimization Organizations that adopt digital supply chains boost annual earnings by 3.2 percent on average, according to McKinsey. This represents the largest increase in digitization of any business function. However, many retailers have a long way to go to achieve true supply chain optimization. Only 4 percent of retailers implementing new technologies say they’re seeing the benefits so far, and 13 percent of firms still rely exclusively on Excel for supply chain management. By coupling the right technology with seasoned logistics expertise, retailers can unlock significant new value from their supply chains. A trusted supply chain provider can help retailers choose the right tools for their environment, come up with creative solutions when logistics issues inevitably arise, and handle the supply chain challenges of 2019 and beyond. Read the Full Article (PDF)
Article written by Jon Slangerup. Jon Slangerup is the chairman and CEO of American Global Logistics, one of the fastest-growing and most respected international supply chain and logistics solutions companies in the world. AGL’s technology solutions extend beyond the walls of ocean, air and domestic transportation services for customers across the globe. Previously, Jon was CEO of the Port of Long Beach, and prior to that he served as president of FedEx Canada.

How Shippers Can Plot a Course Through the Choppy Economic Waters Ahead

The Loadstar — After  a volatile first quarter, ocean freight is heading into a more stable pricing environment, but uncertainty over fuel costs and trade politics still make for difficult steering, warns American Global Logistics (AGL).

The US forwarder has advised clients to exercise caution in the upcoming round of contract negotiations, urging them to concentrate on total cost rather than just freight rates, to map their supply chains and build in flexibility to deal with the unexpected.

AGL chief executive and chairman Jon Slangerup (pictured above), a former chief executive of Port of Long Beach, noted that spot container rates were considerably more volatile than expected in the first quarter, and dropped significantly in February, but the longer-term outlook suggest a steadier environment for the rest of the year.

Economic factors, the US Federal Reserve’s stance on interest rates and indicators that shipping lines are going to show a more disciplined approach to capacity and pricing, all point to a more stable rate outlook, he said.

According to analysts at the Freightos Baltic Index, recent rate declines in the transpacific market have been broadly in line with seasonal patterns.

“Transpacific prices may be much lower than their November peaks, but they continue to remain significantly higher than last year (China-US west coast 36% up and China-east coast 23% up, year on year),” it noted last week.

Pundits report a broad consensus among shippers that pricing will be higher this year, partly owing to carrier measures to curtail excess capacity, but also as a result of higher bunker fuel costs due to the IMO’s 2020 sulphur cap.

Carrier executives appear poised to reduce excess capacity through blank sailings, Mr Slangerup added. The number of blanked sailings could increase by as much as 300% this year.

“That’s a lot of capacity being pulled out of the system,” he said, adding that demand is forecast to grow 4% this year, whereas capacity seems on a course to rise by 2%.

Preparations for the implementation of the sulphur content measures on January 1 are also going to take a toll on sailings. Shipping consultant Drewry warned that lines would likely try to buffer the rising cost of fuel through slow-steaming and a greater reliance on feeder operations, adding that some ports would likely be dropped to maintain transit times to key gateways.

And it noted that shippers appeared resigned to having to pay more towards fuel costs.

Mr Slangerup referred to bunker costs as a “massive point of confusion” in the marketplace at the moment, as “nobody knows where this is going to end up”.

“We anticipate cost will be rising until capacity catches up with demand in fuel production,” he said. He does not expect that equilibrium to be reached before 2020.

AGL has subsequently advised clients to work with carriers to find a middle ground, that balances cost with capacity, in their contract negotiations to keep their supply chains moving without compromising budgets.

Shippers should focus on total spend instead of rate.

“Trying to negotiate contract rates at the lowest possible level will ultimately wind up costing you more. Rather than trying to nickel-and-dime contract rates, focus on choosing a reliable carrier that will keep your shipments on time and on budget,” AGL advises.

Shippers should also map their supply chain in order to optimize their expenditure. Despite larger shippers tending to have more sophisticated and larger resources, they rarely sit down with their logistics provider to map their supply chains end to end, Mr Slangerup said.

Scrutinizing the supply chain and examining the hand-off points is key to optimization, he stressed.

“A typical supply chain has seven-to-ten points where a shipment is handed to somebody else. Mapping a supply chain, applying technology solutions and then tracking the improvement and economic gains, is going to be transformative, he said.

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Navigating 2019 Ocean Contracting

JOC —Still reeling from the chaotic conditions that dominated ocean freight in 2018, shippers are approaching this year’s contract season with considerable caution. With ocean freight rates holding steady so far this year and tariffs continuing to cast a shadow over supply chains, many businesses are concerned that 2019 will bring continued disruptions to their shipping schedules and budgets.

As this year’s contract season ramps up, there’s little time for shipper hesitation – new contracts must be in place by May 1 for most organizations. Businesses must evaluate their budgets, determine how to keep costs down, and minimize risks that threaten their supply chains and customer relationships. Through the right combination of supply chain technology and processes, businesses can gain the agility they need to navigate this year’s contract season more effectively.

The combination of capacity cutbacks and tariffs created a perfect storm for shippers last year, causing spot rates to skyrocket as US imports shattered previous records. Though the March tariff deadline is now on hold, trade uncertainty and continued high import volumes have kept spot rates higher than usual during the post-Chinese New Year period. With rising bunker costs and the impending 0.5 percent global sulfur cap squeezing margins for carriers, businesses will also likely see the effects on rates in 2019.

As they enter contract negotiations, businesses will need to work with carriers to find a middle ground that balances cost with capacity to keep their supply chains moving. These strategies can help businesses lock in the capacity they need without compromising their budgets.

Focus on total spend, not on rate. Trying to negotiate contract rates at the lowest possible level will ultimately wind up costing you more. Rolled shipments and blank sailings are extremely costly, resulting in higher spot rates and assessorial fees. Consider all the touchpoints and associated costs across your supply chain, from the moment a shipment leaves an overseas factory to its arrival at your warehouse or customer doorstep. Rather than trying to nickel and dime contract rates, focus on choosing a reliable carrier who will keep your shipments on time and on budget.

Keep an eye on fluctuating costs. When negotiating a contract, keep in mind that the rate you see isn’t set in stone. Many carriers update costs such as bunker fuel surcharges quarterly, creating fluctuations in your budgeting. As the January 2020 low-sulphur fuel cap deadline approaches, these variable costs will become even more significant.

Weigh the benefits of BCO status. For shippers with large importing operations, attaining beneficial cargo owner status can make it easier to access cost-effective capacity on specific trade lanes. If you’re new to the application process, an external supply chain provider can take the lead to ensure it’s done correctly and free up time for your team.

Map your supply chain. Truly optimizing your ocean freight spend requires taking a critical eye to your supply chain. Consider all the modes, carriers and suppliers across your network, and look for opportunities for improvement. For example, if you’re shipping out of two ports in China, consolidating production out of a single location could yield significant savings.

Get a handle on historical data. One carrier may offer more attractive rates than the rest, but will you ultimately pay for it with longer lead times? A centralized technology platform helps you see trends by mode, carrier, shipment and more, so you can make informed decisions at contract time. For one U.S.-based retailer, implementing a supply chain platform allowed it to increase container volume by 50 percent while simultaneously decreasing freight costs by 12 percent.

Expect – and prepare for – the unexpected. Disruptions are inevitable in global logistics, with 70 percent of businesses experiencing one in the past year. If 2019 brings more canceled sailings, a provider with a deep network of relationships can be invaluable in accessing affordable spot capacity. A little logistics creativity, such as changing the port of discharge for cargo traveling inland, can also help lessen the impact of disruptions.

As the industry contends with ongoing trade talks, rising fuel costs, carrier consolidation and more, 2019 will be a pivotal year in determining the balance of supply and demand in overseas shipping. With the right combination of supply chain technology, business processes and experienced support, you can sail through the ups and downs of the year ahead.

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Article written by Blake Shumate. Blake Shumate is the COO of American Global Logistics, one of the fastest-growing and most respected international supply chain and logistics solutions companies in the world. AGL’s technology solutions extend beyond the walls of ocean, air and domestic transportation services for customers across the globe. 

Ocean Freight Rates Increased Ahead of Lunar New Year — But Not By Much

Supply Chain Dive —Dive Brief:

• Ocean shipping rates ticked up ahead of the Lunar New Year. Rates from China to the U.S. West Coast rose to $2,061.50 in January 2019 — a 5% increase over the previous month and a 51% increase over January 2018.

• Rates from China to the U.S. East Coast also rose in January to $3,228 representing a 28% year-over-year increase and 2% increase from December 2018.

• Ports on both U.S. coasts saw some of their highest cargo volumes in 2018, with many breaking all-time records.

Dive Insight:

An ocean freight rate uptick is typical ahead of the Lunar New Year, which fell on Feb. 5 this year. Importers often look to bring in goods from China before factory activity slows during the holiday. This creates heightened demand and squeezed supply, leading to higher freight rates.

For the past few years, ocean rates have followed a pattern of dipping in December, then rising again in January. Rates from China to the West Coast rose 33% from December 2016 to January 2017, and by roughly the same percentage from December 2017 to January 2017.

This season doesn’t appear to be an exception to the pattern, although the rate increase between the two months was significantly lower (5%) compared to previous years.

The reason could be a continued rush by importers to bring in goods before tariffs took effect or increased to higher levels. Lori Fox, vice president of customs at American Global Logistics (AGL), predicted “the train keeps going pretty steadily” rather than slowing as shipping typically does around the Lunar New Year.

That rush led ports to have some of their best months and years yet. Loaded imports on the West Coast reached 1.068 million TEUs in December 2018, the highest since Supply Chain Dive began tracking imports in 2016.
So far, rates for shipping to both coasts are starting to level off in February. It remains to be seen how a tariff hike in March — if it happens — will affect rates and volumes in the coming months.

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Feature Image Source:Supply Chain Dive 

Trade Risks Drive Companies to Stockpile Inventory — Is It a Risky Move?

Supply Chain Dive —Stockpiling chocolate and cookies isn’t uncommon before the holiday season, though in Cadbury’s case, it wasn’t just to ensure there would be enough for Christmas sales. Britain’s exit from the European Union is causing uncertainty for manufacturers like Cadbury who rely on open trade for ingredients and finished goods.

Brexit isn’t the only trade issue leading companies to build up inventory. President Trump’s introduction of tariffs on Chinese goods caused some manufacturers and retailers, including American Global Logistics’ clients, to start stockpiling goods.

The Chinese New Year typically brings a shipping slowdown, said Lori Fox, vice president of customs at American Global Logistics (AGL). But “it could be that the train keeps going pretty steadily … to beat tariff increases if they happen,” she told Supply Chain Dive.

The stockpile before the storm

Most of AGL’s clients sell tires, furniture or home décor and mainly import from countries where the U.S. placed tariffs, anti-dumping and countervailing duties. “There’s always an issue with certain commodities. We have a heads-up on those, when there are investigations going on,” Fox said. And it’s easier to plan for those, compared to the recent tariff increases, which have been “pretty much immediate,” she said.

Some of AGL’s clients’ products imported from China had no tariffs before the recent trade war began. Now they are trying to beat the potential increase in tariffs from 10% to 25%.

Fox’s clients importing from China were originally trying to get goods in ahead of the initial Jan. 1 tariff increase. Now that it’s been delayed to March 2, her clients have a new target date. Some are increasing their order size, and some are just trying to beat the deadline for their regular orders. “We’ll probably go through this again if the tariff increase actually happens in March,” said Fox.

Balancing the balance sheet

Profit is on her clients’ minds, especially as furniture was previously duty-free, said Fox. Importers have had to pay 10% on their goods since Sept. 24, 2018. “They go from zero to possibly millions in extra expense that they didn’t account for in their financial plans. Profits are a huge issue,” she said. “Some say they don’t know if they’ll make it through this trade war. It could put customers out of business.”

Some customers of Blue Ridge’s supply chain planning software are also stockpiling goods — also known as making investment buys or forward buys, said Rod Daugherty, vice president of product strategy. Blue Ridge’s customers are typically retailers and wholesale distributors.

“Wholesalers and retailers usually borrow money to pay for inventory. Inventory is the most expensive thing they own,” Daugherty told Supply Chain Dive. The goal is often to sell the inventory before they have to pay for it, which helps protect their profit margins.

This requires buyers to determine the right amount to purchase, especially if borrowing to pay for it. Bad purchasing decisions can lead to diminishing returns or a loss.

Companies should forecast how much extra to buy before a risk like tariffs comes up, leading to a price increase, then balancing that with what they can sell, Daugherty said. “If we’re still carrying a lot of inventory after 30 days, we won’t be making the full profit on that.”

Making sure the additional items will sell is important too. “Everybody needs tires,” she said. “Those commodities won’t have a problem selling. But in home décor and furniture, styles change all the time.” If a company brings in more than normal, and the styles don’t sell, that lowers margins.

Stockpiling is also affecting shipping rates. The carriers have been using the situation to their advantage as much as possible, Fox said, decreasing capacity to charge higher rates. “It’s not an easy market right now,” she said. “It’s difficult to overcome the higher spot rates in order to bring in as much product as possible, before tariff increases go into play.”

The downsides to stockpiling

If buying something with a shelf life, it could expire if not sold within the right time frame. “I doubt that people are buying very much from overseas with a short-lived shelf life,” Daugherty said, as shipping overseas requires long lead times and sometimes enough goods to fill a shipping container. In the U.K., however, Brexit is leading some companies to import perishables like chocolate ingredients and cheese to maintain supply and profit.

With stockpiling, supply chain managers need to be realistic about their storage capacity. A company may need to pay for additional storage and labor to keep and move the items. “You can go to an outside facility and rent space or trailers,” Daugherty said. If you need to move them around the yard for unloading, however, logistics costs increase.

It’s not just a matter of cost, though. Industrial real estate space is at its lowest level since 2000, with demand for warehouse space exceeding supply in 2018 by 29 million square feet.

Some of Fox’s clients are trying to optimize their space instead, using vertical space to be more efficient and avoid renting more. Some ways to optimize vertical space are of course, placing pallets higher. But it also includes building racks over docks and over the aisles, with enough clearance for forklifts.

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Optimizing Your Supply Chain for Omnichannel

Total Retail —Fulfilling both in-store and online orders for custom furniture within 30 days is challenging enough. Factor in a 1,500-product catalog and a worldwide sourcing network, and an agile supply chain becomes indispensable.

For one major furniture retailer, a technology-enabled supply chain has been key for keeping up with today’s retail environment. Customers can shop in-store or on the company’s website, customizing their new couch or table to their exact tastes. Within a month, customers receive their finished pieces — a turnaround that demands flawless supply chain planning and execution.

As e-commerce grows alongside customer expectations, many retailers can relate to these types of supply chain challenges. The rise of omnichannel is forcing businesses to juggle demand across brick-and-mortar and online touchpoints, navigate countless paths from production to final destination, and meet accelerated delivery requirements, all while minimizing costs. As a result, traditional just-in-time inventory methods are giving way to a just-in-time delivery approach, with retailers reshaping supply chains to meet changing customer demands efficiently and cost effectively.

Are All Deliveries Now Last-Mile Deliveries?

Online spending now represents 10 percent of total retail sales, with shoppers spending $122 billion online in the third quarter of 2018. Meanwhile, companies like Amazon.com are leading the way on emerging fulfillment models, like same-day delivery and dedicated customer pickup lockers. Even if they’re not expecting same-day delivery, today’s customers won’t wait around for purchases. A Slice Intelligence study found that retailers slashed average e-commerce delivery times from 6.3 days to 3.4 days between 2014 and 2016 alone as they compete to be first to the customer’s doorstep.

As a result, while retailers once moved their goods from factory to warehouse to store, many orders are now skipping the warehouse as they travel to their final destination. Many retailers are trading warehouses for smaller fulfillment centers closer to final shipping destinations, and last-mile delivery reigns supreme.

With these changes come rising costs, such as increased reliance on air freight to get shipments to the right place at the right time. Demand for air cargo grew 9 percent in 2017, more than twice the 3.6 percent growth in 2016. Shelling out for pricey air cargo adds to retailers’ financial pressures, particularly those impacted by the current tariffs. With hundreds of billions in Chinese goods subject to duties, businesses that import everything from electronics to housewares are facing additional costs.

Keeping Up With Omnichannel

For the furniture retailer mentioned above, combining supply chain technology with dedicated supply chain expertise has been invaluable for meeting the demands of omnichannel consumers. With the right technology, processes and industry relationships, other retailers can follow suit by improving lead time planning, end-to-end visibility and flexibility. When optimizing your supply chain for omnichannel, here’s where to start.

Prioritize lead time accuracy, not speed. Trimming lead times to meet tight customer timelines often means relying on more expensive modes. Instead, focus on forecasting demand to anticipate changing customer demands. A centralized supply chain platform puts historical averages at your fingertips, helping you to understand exactly how long it takes goods to move from production to fulfillment.

Make sure you can count on your vendors. All the planning in the world won’t help if your factory keeps missing production deadlines or doesn’t follow customs requirements. A supply chain system acts as a single source of truth for all vendor activity, allowing you to track performance trends and adjust allocations when needed.

Make exceptions your rule. By building your supply chain platform around your business rules, you can focus on what truly needs attention and react more quickly to issues. For example, the furniture retailer developed a “hot” shipment report of orders in transit, which it reviews daily to determine delivery order based on customer requirements.

Ensure customs compliance. With U.S. Customs and Border Protection paying close attention to shipments these days, customs issues can cause serious slowdowns that compromise delivery milestones and customer relationships. An experienced supply chain partner can help streamline the process by ensuring harmonized tariff classifications are up-to-date, managing filing requirements, and even helping retailers apply for C-TPAT certification.

Be flexible on modes and carriers. The right technology system will allow you to see instantly where items are in transit and reroute as needed. Furthermore, a well-connected supply chain partner can help source capacity or identify creative transportation solutions. For the furniture retailer, receiving multiple transit options from its partner for each shipment, based on cost and transit times, allows the company to balance price with speed and make changes quickly.

As the rise of omnichannel transforms the competitive landscape, retailers across the spectrum must adapt or be left behind. By focusing on an agile, technology-enabled supply chain, retailers can better position themselves to meet customer demand across every channel.

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Article written by Jon Slangerup. Jon Slangerup is the chairman and CEO of American Global Logistics, one of the fastest-growing and most respected international supply chain and logistics solutions companies in the world. AGL’s technology solutions extend beyond the walls of ocean, air and domestic transportation services for customers across the globe. Previously, Jon was CEO of the Port of Long Beach, and prior to that he served as president of FedEx Canada.

Cargo Surge Leads to Congestion at Southern California Ports

Supply Chain Dive —Dive Brief:

• An import surge across the country — led by a rush to bring in product before Chinese New Year and a scheduled tariff increase on March 2 — is leading to congestion at the ports of Los Angeles and Long Beach, according to a customer advisory sent by American Global Logistics (AGL).

• As a result, ports are facing chassis shortages, constrained trucker availability, long dwell times for ships at berth and difficulties in scheduling labor to manage all of these. “It just is like a domino effect,” AGL CEO Jon Slangerup told Supply Chain Dive. “In logistics, we suffer from this a lot.”

• The ports are planning to use the slowdown of cargo during Chinese New Year to “work down imports on terminals,” according to statements emailed to Supply Chain Dive.

Dive Insight:

When imports surge, port congestion is typically caused by a lack of resources available to handle volume shifts.

“Terminals are having different levels of volume spikes. And so the ability to move container loaders around the different terminals is one problem, combined with the fact at the same time the empties that are waiting to be returned back to market in Asia are also backlogged,” said Slangerup.

Empty containers, meanwhile, are all attached to chassis, which means one less piece of equipment is available to move freight through ports. And the labor required to move equipment around causes another resource allocation issue.
It’s the domino effect Slangerup refers to, and one that requires all actors — from marine terminal operators (MTOs) to the International Longshore and Warehouse Union (ILWU) — to collaborate to fix.

“MTOs, ILWU, shipping lines, truckers and other stakeholders are working hard to manage resources,” Port of Long Beach Executive Director Mario Cordero said in a statement. “The Port is working closely with all of our partners to move containers through the harbor and we thank everyone for their patience.”

Resource allocation is always a challenge before Chinese New Year, but this year it was aggravated by the rush of imports coming into ports before tariffs on billions of dollars worth of Chinese goods rise to 25% on March 2. The ports will need the full week of slowdowns caused by a week of holiday celebrations in China to recover efficiency.

In a statement, the Port of Los Angeles said it will use that time to “aggressively pursue empty containers and chassis returns along with liner company box repositioning back to Asia. These actions will prepare us for the short-term cargo arrivals prior to the March 1 deadline set on the tariff negotiations.”

Though increased volumes have affected all ports, not all are suffering from congestion at the scale of the Southern California ports.

“We’re not hearing about congestion in Oakland,” Mike Zampa, communications director at the Port of Oakland, told Supply Chain Dive in an email. “There have been a few extra night gates and a couple of Saturday gates in the past month to handle the cargo surge, but turn times at terminals are normal.”

Slangerup explained the Port of Los Angeles and Port of Long Beach face the dual burden of being the top gateway for Chinese imports and handling large volumes of empty containers.

But he said the problems in Los Angeles and Long Beach are not as bad as “the perfect storm” that hit in 2014 and 2015, when the ports were gridlocked. “Nothing is gridlocked there. Just there [are] delays getting containers out of the terminals.”

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Feature Image Source: Supply Chain Dive

US Deliveries Hit by Delays as Record Imports Spark West Coast Port Congestion

The Loadstar —US importers are bracing themselves for more delays in the coming weeks, as congestion at the major west coast container gateways worsens, exacerbated by shortages of container chassis and rail cars.

“We’re seeing unprecedented levels of cargo,” said Mario Cordero, executive director of Port of Long Beach. And a spokesperson for the port of Los Angeles added: “We have seen particularly heavy volumes in recent months, warehouse space is at a premium and there have been issues with chassis availability.”

Some logistics companies issued warnings to their clients as early as December about the increased congestion and import flows have not abated since, putting increasing strain on infrastructure.

As The Loadstar reported yesterday, as many as 22 vessels were added by lines in recent weeks to meet demand, and the terminals have struggled to unload them.

American Global Logistics reported that in some cases vessels were waiting two or three shifts after arrival before labour could be allocated to them.

In its weekly update, Flexport warned clients of “extreme congestion” at the Los Angeles/Long Beach port complex, as well as at the New York ports.

The company identified a combination of factors: peak season traffic; the run-up to Chinese New Year; and the prospect of further tariffs on imports from China.

“Spring cargo shipments are up compared with this time last year, mostly due to the tariff situation,” said a spokesman for XPO Logistics. “We believe that’s caused some ripple effects, including an increase in the amount of time containers stay at the ports and the time it takes for a truck to visit.”

The congestion at the terminals has impacted chassis availability, which is, in turn, aggravating the situation further, forwarders say. And according to MIQ Logistics, rail cars have also been in short supply.

Burlington Northern Santa Fe reported it had been “moving strong volumes while confronting challenging conditions in some areas of the network”.

Operators are looking to the Chinese New Year holiday, which starts on 5 February, to ease the pressure and allow them to get back on top of things.

“Chinese New Year should provide a breather and allow the supply chain to recover a bit before cargo flows resume in earnest. The port is working closely with all our partners to move containers through the harbour and we thank everyone for their patience,” said Long Beach’s Mr Cordero.

The wild card in this scenario is the question of whether the US and China will make progress towards resolving the trade dispute and avert further tariffs. Flexport and MIQ Logistics have advised customers delays are likely to continue into mid- or late February.

“We see these stronger cargo volumes continuing for the next few weeks due to the uncertainty surrounding tariffs,” the XPO spokesperson said.

Vessel activity looks set to shrink significantly after Chinese New Year. Nerijus Poskus, vice-president and global head of ocean freight of Flexport, noted that the container lines had announced more than 40 blank sailings on the transpacific eastbound sector for February, along with nine or so Far East westbound.

Capacity will likely be tight then, he warned.

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Feature Image Source: The Loadstar