Archive for Global Trade

According to The World Bank, by 2015 manufacturing in China will cost as much as manufacturing in the United States. This leaves many companies uncertain about the future of their operations in China due to the negative impact on profitability. This impending development has brought nearshoring to the limelight for many organizations.

As China’s wages and fuel costs rise, nearshoring surges in popularity. As U.S. shippers look to save on costs, the prospect of nearshoring manufacturing to Mexico and Central America offers both lower operating costs and reduced transit times to U.S. markets. Beyond simply lowering freight costs, manufacturers that include Mexico in their supply chains stand to achieve other operational improvements such as faster time to market, lowered inventory costs, and fewer supply disruptions.

In addition to these factors, manufacturing in Mexico and Central America can be superior in other ways, including a well-educated work force, consistent quality control, and numerous trade agreement benefits.

Despite all of these advantages, nearshoring to Mexico is not without challenges. While the Mexican government continues to make large strides to develop the transportation infrastructure throughout the country, it is still lacking in comparison to many other industrialized nations. Other challenges include the lack of security and complex customs regulations.

When considering nearshoring, it’s essential to evaluate your supply chain’s current state and your future goals. If the challenges of nearshoring seem to outweigh any long-term benefits, there are steps you can take to tip the scales in the other direction.

Adapt. Natural disasters, along with economic, environmental, and social issues affect trade in Mexico. The fluid nature of Mexico requires the flexibility to quickly adapt as conditions change. Build in the flexibility you need to overcome these types of events that can disrupt your supply chain:

  • Work with trusted providers that understand Mexico’s differences.
  • Plan carefully and create multiple contingency plans.
  • Use technology to gather data and improve supply chain visibility.

Consolidate. Minimize risk at the border using consolidation. Often, less than truckload (LTL) shipments in Mexico are regionalized, more expensive, and have longer transit times due to Mexico customs regulations. Consolidation limits touch points, streamlines accountability, and addresses freight location issues for a smoother, more visible border-crossing experience.

Learn. Facilitate the flow of cross-border freight by learning the security implications of government programs such as C-PAT. Whether the expertise to navigate U.S. Customs and Border Protection (CBP) security requirements is available internally or through an outsource solution, this understanding is critical for a seamless customs experience.

As said before, uncertainty is present in today’s global market—both for the future of manufacturing in China and Mexico. Nearshoring is one option for the anticipated changing market conditions. Whatever your decision—to continue manufacturing in China or nearshore to Mexico—be sure to build your strategy with the necessary safeguards to prepare for whatever the future may hold.

 

Mike Burkhart has been the Director of Mexico for C.H. Robinson since 2012 and has served in increasingly responsible roles over his 17-year tenure, beginning with sales in San Diego. As produce manager of the perishable operation in Mexico City, he imported U.S. and South American produce for Mexican retail distribution, and developed key Mexican grower relationships for northbound produce distribution in the U.S. and Canada. He also opened the company’s office in Queretaro, Mexico; helped develop C.H. Robinson’s infrastructure in Laredo, TX; and acted as general manager in Plano, TX, before assuming his current role. 

Be Sociable, Share!

I finished my first ARC Market Study this week, looking at the Transportation Management Systems market. On top of that, my colleague, Clint Reiser, and I are wrapping up our omni-channel fulfillment survey, with an upcoming presentation at the annual CSCMP show in September. So it’s been a pretty busy week (month) here. Let’s get right to the news.

The acquisitions keep on coming. The supply chain and logistics space has been full of mergers and acquisitions over the last few years, and there is no sign of this slowing down. Dassault Systèmes announced the signing of an agreement to acquire Quintiq, a provider of on-premise and on-cloud supply chain and operations planning & optimization software, for approximately €250 million. Quintiq solutions are also used to plan and schedule production supply chains at manufacturers, as well as plan and optimize logistics operations. According to the press release, “Quintiq will expand Dassault Systèmes’ DELMIA brand, adding the new product line of Operations Planning and Optimization to the existing ones of Digital Manufacturing and Manufacturing Operations Management. Quintiq provides a new reach into industries such as metals, mining, oil & gas, rail, delivery and freight.”

The future of truckPeloton-auto-trucksing is here. Two weeks ago I noted that Daimler’s autonomous trucks could be ready for roll-out by 2025. Well, Peloton Technology has released a new piece of technology aimed at driving efficiencies. The company has developed a vehicle-to-vehicle communication system that has the potential to transform the trucking industry. By tethering two trucks together using advanced sensing intercommunications, the Silicon Valley startup says they can improve safety while cutting costs for thousands of trucks on the road.

U.S. freight rail traffic for the week ending July 19, 2014 advanced yet again, the Association of American Railroads reported Thursday, July 24, with Canadian rail traffic and Mexican carload traffic also increasing, and only Mexican intermodal failing gain ground. U.S. freight carload traffic rose a healthy 7.6% for the week, measured against the comparable week in 2013, while U.S. intermodal volume rose 5.6%. Total combined U.S. weekly rail traffic notched a 6.7% improvement over year-ago levels. It’s not surprising that Union Pacific announced its freight rose 8% and earnings per share for Q2 rose 20%.

Keeping on the freight theme, the U.S. government wants to phase out thousands of railroad tank cars that carry crude oil within two years once it adopts proposed rules to upgrade safety for trains carrying flammable liquids. Tens of thousands of these older tank cars, known as DOT-111s, will have to be replaced or retrofitted under the proposed rules, announced Wednesday. This puts the U.S. on roughly the same timetable as Canada, which announced a phase out earlier this year. Crude-carrying tank cars would need to upgraded by 2017. The proposed regulations would also give the ethanol industry until 2018 to improve or replace tank cars that carry that fuel. The deadline for cars used to transport other flammable liquids that typically pose less of a hazard than oil or ethanol would extend to 2020.

husi-sh-nuggetsA tainted food scandal in China has now turned its attention to the supply chain. Shanghai Husi Food Co was suspected of using expired meat and was shut down by local regulators in China. The long-time McDonald’s meat supplier was also cut by other fast food chains it supplied. Due to the size of the fast food market in Asia, attention needs to be turned to the supply chain. Experts indicated that suppliers will need to re-examine their supply chains and invest more resources in the supply process.

According to the Cass Freight Index, the freight logistics sector continued to strengthen in June, with both shipment volumes and expenditures rising once again. Both indexes have increased every month since January. June shipment volumes increased 2.4 percent to the highest level since November 2007, just before the recession. Volumes were 6.0 percent higher than a year ago and are up 15.8 percent since the beginning of 2014. The freight expenditures index rose 4.2 percent in June to 2.76, a record high. June 2014 freight spending was 12.1 percent higher than a year ago and is up 15.6 percent since the beginning of 2014.

That’s it for the news this week. Enjoy the weekend and today’s song of the week, City of New Orleans by Willie Nelson.

Be Sociable, Share!

#BeforeLeBronDecides

Yes, it’s an actual trending hashtag.

And thanks to ESPN’s SportsNation, it has been a top trending topic over the last 24 – 36 hours. And fans got creative with their ideas. But fans are also growing impatient. People want to know where LeBron James will play next year. Personally, I’m not overly concerned, but I’d like him to hurry up with his decision. Four years ago he dominated headlines with his self-serving, over-the-top announcement known as “The Decision.” This year, he is lying low, and expected to make his announcement on his website.
But when? I’d like to get back to my regularly scheduled news coverage and move beyond the Decision 2.0. With that, let’s move on to some real news.

It’s been a while since we talked about Amazon and drones, but they’re back. Amazon has requested permission from the FAA to test drone deliveries just outside of Seattle. On Thursday, the company asked that the unmanned aerial vehicles (UAVs) be permitted to fly outside in order to continue developing the Amazon Prime Air project, which aims to use UAVs to get packages into customer hands “within 30 minutes” of an order. Within the letter, Amazon says that Prime Air drones have been advanced within the last five months, and tests have included flight ranges and the development of sense‐and‐avoid sensors, as well as the creation of UAVs capable of carrying five-pound loads while travelling at 50 miles per hour. The drones are now eighth and ninth-generation models.

drone

 

 

 

 

 

Imports into U.S. ports may hit a five-year high this month as retailers rush in holiday goods to avoid potential disruptions as West Coast longshore workers negotiate a new labor contract. The contract expired on July 1, but the previous 6 year contract was continued until today, July 11. Negotiations will resume at this point, but retailers are not taking any chances when it comes to stocking their stores and pre-planning holiday sales.

“Retailers have been bringing merchandise in early for months now and will do what it takes to make sure shelves are stocked for their customers regardless of what happens during the negotiations,” said Jonathan Gold, NRF vice president for supply chain and customs policy, in the statement.

Sears or Kmart? I guess whichever is closer. Sears and Kmart customers will be able to pick up online orders at either store, regardless of which brand’s website is used. This week, the retailers’ parent, Sears Holdings Corp. (SHLD), unveiled a new feature, available at more than 2,000 locations across the country, where shoppers can choose to pick up a sears.com order at a Kmart location, and vice versa. This is a major step forward for the retailer’s efforts to blend the physical and online channel.

bart and homerWhen I think about autonomous vehicles in the trucking industry, I can’t help think of Homer and Bart Simpson lounging on the hood of their big rig while the “Navitron Autodrive” system does all the work. This week, Daimler unveiled an actual, fully-functioning autonomous truck operating at real-world speeds on a special section of the Autobahn outside of Magdeburg. Daimler said the autonomous truck could be ready for real-world deployment by 2025. Daimler is quick to point out that these new “truck autopilot” systems do not diminish or eliminate the role of the truck driver, but rather turn him or her from a “trucker” to a “transport manager.” Daimler claims its new system, once fully fleshed out and in real-world use, will offer drivers an “attractive mobile workplace offering scope for new professional skills.”

And from the “just for fun” files, this article outlines the parallels between planning a wedding and supply chain planning. The top 4 list of parallels is spot on: disruptions, risk management, collaboration, and talent. Think about it…

That’s all for this week. Enjoy the weekend and the song of the week, The Lumineer’s Ho Hey.

Be Sociable, Share!

June 6, 1944. It’s a date that stands out in history, and one that most people know by heart. It is D-Day. Seventy years ago 160,000 allied troops landed along the beaches of Normandy to fight Nazi Germany. While the casualties were high, it enabled the allied forces to gain a foothold in Europe. This foothold led to the eventual march across Europe and defeat of Adolf Hitler’s troops. Today we remember the soldiers from the allied forces that served for the greater good.

And now, on to this week’s news:

A “milestone” has been reached as the majority of Fortune 100 companies are actively monitoring their supply chains for human rights abuses. According to the American Bar Association, the majority of Fortune 100 companies with publicly available policies have developed policies to address forced labor and human trafficking. These major companies are moving quickly to develop policies that address human rights and labor abuses within their supply chains, and to train their employees accordingly. According to Arizona State University professor Daniel Rothenberg, who led the research, “Some of these changes are driven by legislation, but there also appears to be an emerging norm among businesses that these issues are a key element of corporate social responsibility.”

Costco is continuing to test its home delivery service. As part of this test, the wholesaler is teaming up with Google in Northern California, and expanding the item selection that is available for home delivery. As more people opt for home delivery, it is evident that even the giant wholesale outlets need to change with the times. However, Costco does not see the home delivery business becoming their primary target, as their in-store foot traffic is the main driver for sales.

A trial run from TNT Express in the UK could lead to the rebirth of business-to-business rail delivery for the first time in 20 years. The project aligns with Government policy to encourage greater “mode shift” of freight from road to rail, as evident in Network Rail’s recent ‘Freight Market Study’ which forecasts a potential doubling to 45.2bn tons per year in rail freight traffic over the next 30 years. While the rail system will allow retailers and manufacturers to move more tonnage of goods at one time, the benefits can be seen from an environmental standpoint,

” As well as delivering a much faster service to customers, with trains running at up to 95 mph, moving an element of freight from road to rail will also significantly cut carbon emissions, with every ton moved by rail saving around three-quarters of the emissions per kilometer compared to road haulage.”

In the rolling quarter from February-April, 178 cargo thefts were reported in the U.S., according to a report released this week by FreightWatch International. That’s a 25 percent drop from the previous quarter (November-January), but the average value per load jumped 98 percent to $245,101, FreightWatch’s report says. The big categories of the thefts were food and drink, home and garden, and electronics, while theft of trailer or container made up 150 of the 176 thefts in the quarter (84%).

Cargo Theft 2

And finally, according to the Cass Freight Index, North American freight shipments and expenditures continued to buck the historic trend and increased again in May. The first five months of 2014 were the strongest since the end of the great recession. May shipment volumes and expenditures each climbed around 1%, indicating the overall health of the economy is moving in the right direction.

That’s all for this week. Enjoy the weekend and the song of the week, Fell in Love with a Girl by the White Stripes:

Be Sociable, Share!

This weekend marks a number of big occasions. First and foremost, it is Memorial Day, when we honor and remember the men and women of the United States Armed Forces who have died while serving their country. Second, I turn 35 this weekend, which has me officially feeling on the wrong side of “young.” And third, this weekend marks the 37th anniversary of the release of the original Star Wars movie. With the galaxy in the midst of civil war and disarray, one can only imagine the supply chain complexities they were dealing with.

And now, on to the news:

Wal-Mart has leased 107,000 square feet of space in Sunnyvale, California, where it plans to add about 450 new employees to its Global eCommerce division after moving in later this year. This move will nearly double the number of employees in its eCommerce operations in Sunnyvale. 2013 saw Walmart outpace Amazon’s e-commerce growth for the first time, so it is not surprising to see the retail giant investing heavily in expanding their online presence. However, e-commerce still only accounts for a little over 6% of Walmart’s total retail sales. It will be interesting to see if this investment shifts the revenue breakout between stores and online sales.

Here in the US, there was a lot of talk about supply chain disruptions due to extreme winter weather, driver shortages, and a lack of available trains and trucks to ship goods. In Vietnam, however, there is a different cause of severe supply chain disruptions: geopolitical tensions. Currently, China and Vietnam are engaged in a stand-off in the South China Sea. Anti-China demonstrators in Vietnam protesting against the presence of a Chinese oil rig near the disputed Paracel Islands ransacked scores of factories. But they also caused many others that saw no violence to suspend production, amplifying the effect on the global supply chain. These disruptions have made global companies look to other sources for goods and raw materials, but this leads to further delays in the supply chain.

The Federal Motor Carrier Safety Administration (FMCSA) is reminding all truck and bus drivers that beginning this week, all new USDOT physicals must be performed by a qualified health professional listed on the National Registry of Certified Medical Examiners. Current medical certificates held by CDL holders will remain valid the expiration date on the card.

“Safety is our highest priority and it is vital that every commercial truck and bus driver be qualified, alert, and focused when they are behind the wheel,” said Secretary Anthony Foxx. “Medical examiners equipped with a thorough understanding of DOT fitness standards will be able to ensure that commercial drivers meet the health requirements necessary to operate on our highways and roads, thereby strengthening safety for every traveler.”

While this may seem like explanation, the Owner Operator Independent Drivers Association and the Agricultural Retailers Association, disagree. Of chief concern is the insufficient number of medical examiners available to meet expected driver demand. Drivers who live in rural, underserved areas may experience additional challenges as they look for nearby certified medical examiners.

And finally, New York State Democratic Senator Terry Gipson has written a letter to federal representatives urging the federal government to take action to protect communities, the environment, and the local economy from the ongoing risks of crude oil transportation on railways, specifically along the Hudson River. Senator Gipson joins the ranks of many others voicing their concerns about the safety of the cars that are used to carry the crude oil. While replacing the cars could slow down the movement of crude oil, in the long run, it may be the best for the environment and the economy. According to Gipson:

“We’re not asking that the shipping of oil be halted. What we’re asking is that we make the changes that are necessary to ensure that the communities this oil passes through are protected, that the rails are safe, and that the cars that the oil is being transported in meet safety standards to ensure that should there be a derailment that the oil will not leak out and either cause an explosion or contaminate the environment around it.”

That’s all for this week. Enjoy the long weekend and the song of the week, Buckethead’s Star Wars.

Be Sociable, Share!