Archive for Global Trade

2014-2015-calendar-heroIt’s hard to believe another year is coming to an end. There have been many highs and many lows this year, and an awful lot of newsworthy items to keep you abreast of. We wrote about numerous mergers and acquisitions, new technologies and innovations, customer success stories, drones, overnight delivery, port congestion, drones, 3PL’s, robots, shale oil, drones, omni-channel, warehouse management, transportation management, and, of course, drones (did I mention drones?). As much fun as I’ve had writing some of these stories, I’ve also enjoyed reading the articles of my colleagues and customers. I truly feel that this has been a year of learning. And for that, I am thankful.

With the holiday season upon us, there are vacations to be had, family and friends to be enjoyed, and hopefully, some well deserved rest. For these reasons, this will be the final Logistics Viewpoints column of the year. We are going to spend the next two weeks re-energizing ourselves to make sure we continue to bring you the most insightful supply chain and logistics news and stories. Happy holidays from all of us here at Logistics Viewpoints.

And with that, on to this week’s news.

FedEx GencoFedEx has agreed to buy third party logistics provider Genco for an undisclosed sale price. According to FedEx, the impetus behind the deal is to expand their retail and e-commerce markets. The biggest (and most obvious) opportunity area for FedEx in the deal is the robust reverse logistics capabilities of Genco; the company processes more than 600 million returns annually from the world’s leading retailers and consumers good companies. A secondary opportunity is the addition of millions of square feet of managed warehouse space, which is not dedicated to reverse logistics. This aspect helps to broaden FedEx’s reach, and will certainly be an advantage during the 2015 holiday season.

What started out as discussions about a prisoner swap has escalated between the United States and Cuba. Thankfully, it has escalated in a positive way. On Wednesday, President Obama announced plans to normalize the relationship between the two countries, re-establishing diplomatic relations for the first time in over 50 years. Cuban president Raúl Castro tempered expectations, saying, “This in no way means that the heart of the matter has been solved.” The “heart of the matter” being the trade embargo. But a historic shift in overall relations between the two countries can be a step in the right direction toward an eventual larger commercial relationship.

ikeaIkea is opening a string of stores across Canada. However, unlike its normal store set-up, with dozens of showrooms and seemingly miles of warehouse space to walk through, the new stores will be approximately 1/10th the size of a normal store. The Swedish company plans to open these stores as e-commerce pick-up location. Unlike the normal stores, Ikea workers would retrieve items for customers who ordered online. This is quite the difference for those Ikea fans who are used to walking the warehouse looking for the tag to retrieve their merchandise. And with the influx of customers who have grown tired of a standard store experience, Ikea is making what looks like the right move at the right time.

Amazon primeWhile my Christmas shopping is done, there are scores of people who are waiting until the absolute last minute to order gifts. And this year, the last minute is even later. Amazon has extended its free shipping deadline for Christmas Eve delivery. Customers who order online by 11:59 pm EST today, will have their items delivered by Christmas Eve. For those customers who are Prime members, the deadline for free two day shipping is December 22. While many procrastinators will rejoice at this news, let’s not forget about last year’s late-delivery debacle. A huge influx of online orders could backlog Amazon and delivery partners, leading to another disastrous season. Hopefully Amazon has learned its lesson and will be ready for the shopping onslaught.

portsTo make things more difficult for retailers, holiday shipments are said to be at risk due to the West Coast port labor disagreement. Protracted labor talks at the busiest U.S. container ports are leading to delayed deliveries to some retailers. The backlog has already caused FedEx to shift resources and limit shipments from some customers to avoid a last-minute pre-Christmas surge, the company said. The National Retail Federation (NRF) estimates that a strike or lock-out could cost the US economy more than $2 billion a day. The current dispute affects 29 ports including Los Angeles and Long Beach. Many retailers are reporting up to a week’s lag time getting merchandise on the shelves. With so many companies at the make or break part of their year, the port slowdown could be disastrous. It also means there could be a lot of gift cards under the tree.

That’s all for this week and for the year. We hope everyone has a happy and prosperous new year and we look forward to bringing you more logistics news in January. Enjoy the weekend and the song of the week Pharrell’s Happy.

Black-Friday-ShoppersAccording to the National Retail Federation (NRF), Black Friday fizzled compared to last year, as sales tumbled 11%. An estimated 6 million+ shoppers that were expected to hit the stores on Black Friday never showed up. There are a few reasons why sales tumbled. First, more consumers appear to not be in a rush to hit stores and deal with massive crowds. With Cyber Monday right around the corner, many consumers are more comfortable with waiting a few days and shopping from the comforts of their homes (I certainly received an amazing number of promotional emails throughout the day on Monday). Secondly, retailer were targeted by protesters who called on consumers to boycott Black Friday. The plan was to make a statement about recent police violence. The third reason is that consumers simply were not moved enough by the discounts retailers were offering. The big draw for Black Friday is the massive discounts. Consumers apparently did not find the discounts enticing enough to venture out to the malls. Whatever the reason, NRF is still confident that this will be a busy holiday season. According to NRF Chief Executive Officer Matthew Shay (via a conference call), “the holiday season and the weekend are a marathon, not a sprint. This is going to continue to be a very competitive season.”

And with that, on to this week’s news.

C.H Robinson, a logistics service provider, announced that it has reached a deal to acquire for $365 million in cash. Freightquote is a privately-held freight broker providing services throughout North America. The acquisition plays well for C.H. Robinson’s freight services. C.H. Robinson is focused on mid-size and large customers, where Freightquote has a focus on the SMB. This will allow C.H. Robinson to expand its target market. The acquisition also aids the company’s advances in the e-commerce market. According to John Wiehoff, C.H. Robinson chairman and chief executive officer:

“E-commerce is going to be a bigger part of future supply chain services and Freightquote brings us a leading solution in our industry. Along with their track record of success, Freightquote has an established brand, a talented management team, excellent people, and a performance-based company culture.”

Speaking of acquisitions, Trucking Unlimited has acquired for $800,000. This acquisition is partly aimed at helping to relieve the ongoing shortage of truck driver in the United States. Trucking Unlimited was established in 2012 as a specialty job site for recruiting truck drivers to available vacancies in every state. By acquiring a niche site focused on more specialized and higher paying opportunities, the new Trucking Unlimited can reach a larger pool of applicants, as it is significantly more targeted than general job boards. It also helps to reach the newer demographic of truck drivers which are more tech and web savvy.

death ringCyber criminals have been attacking retailers and banking establishments, stealing credit card numbers, account information, and pin numbers. Now there is a new area of attack: the smartphone supply chain. A new mobile Trojan dubbed “DeathRing” is being pre-loaded on to smartphones somewhere in the supply chain, warn researchers at mobile security firm Lookout. DeathRing is a Trojan believed to be of Chinese origin that masquerades as a ringtone app, but can download SMS and browser content from its command and control server to the victim’s phone. DeathRing could use SMS content to phish a victim’s personal information, for example, using fake text messages requesting the data. Lookout researchers say the malicious app is impossible to remove because it is pre-installed in the system directory. Researchers said this signals a potential shift in cyber-criminal strategy towards distributing mobile malware through the supply chain.

The US West Coast port congestion has caused lots of headaches for shippers and retailers alike. And we have certainly followed the coverage here quite a bit. With fears of a complete shutdown looming, and accusations of a work slowdowns, the congestion has continued to get worse. Just how much worse? Recently it drove Asian shippers to abandon ocean shipping and resort to air freight. This ensured that shippers would have their goods on store shelves for the holiday season. The only problem: it was the worst possible time to ship via air freight. Air freight rates rose 17% during the month of October. Just another reason the shipping world as a whole would like to see a deal reached in the West Coast ports.

Pizza-DeliveryAmazon has quietly entered the food delivery game. While this may not sound like something new, we’re not talking about Amazon Fresh and grocery delivery. Instead, Amazon has launched a takeout and delivery feature to rival GrubHub. The still-unnamed service rolled out in Seattle with around 20 restaurants for delivery and around 110 for takeout orders that you pick up yourself. As with other Amazon services, the takeout and delivery service lets you charge everything to your existing Amazon account.

That’s all for this week. Enjoy the weekend and the song of the week (in honor of my son’s newfound obsession with the song), Get Lucky by Daft Punk.

Logistics in Africa is tough.  Africa just does not have the infrastructure, has an education gap, and does not widely deploy technologies like GPS tracking that are common in the West.  But add to that the Ebola plague, insurgent groups like Boku Haram, corruption, and instable government regimes, and you have what appears to be a risk management nightmare.

But if you are consumer goods multinational, you can’t ignore the rewards.  Growth in Western nations for your products will be limited.  The populations are aging, the economies are growing slowly, and the markets are mature.

In contrast, billionaire Investor George Soros has described Africa as “one of the few bright spots on the gloomy global economic horizon” with one the fastest growing middle class in the world.

So, consumer goods companies would be foolish to not push aggressively into Africa.  Africa and Asia are their future.  But how does a CPG company navigate the supply chain risks?

The simple answer is that it comes down to risk versus reward.  The safe way, particularly in the initial stages of market penetration, is to outsource logistics or even distribution to local companies.

And there are some big distributors and 3PLs that you can work with. I talked to Cobus Rossouw, the Chief Business Development Officer at Imperial Logistics, about this. Despite its name, the South African headquartered Imperial Logistics generates a large portion of its $9 billion in annual revenues from acting as a distributor rather than as a third party logistics (3PL) company.

One point Cobus made is that working with a knowledgeable local expert can get you the domain expertise you need in an extremely heterogeneous operating environment.  Africa has 55 nations, 2,500 languages, and over one billion consumers.  The cultural practices differ from nation to another, and often from town to town. And the risks of working in southern Nigeria, are not the same as you would see in Northern Nigeria where Boku Haram is active.

While Imperial Logistics fully understands the operational intricacies of operating in South Africa, South Africa is not Ghana, it is not Mozambique, and it is not Nigeria.  Imperial Logistics itself partners with local champions in the African nations in which it operates.  The partnerships often take the form of an equity stake in the partner companies.

Cobus also made the point that it may make more sense to work with a distributor than a 3PL.  A distributor takes ownership of the goods.  In a continent with poor logistics, this means that as a distributor they can offset the delivery uncertainties by storing appropriate inventory. And because Imperial Logistics as a distributor has a stake in the success of the brand, Imperial wants to place its bets in the cities and regions that offer the best ROI opportunities.

Further, working with a distributor has one more advantage.  In the West, the retailers have mature supply chain capabilities and much of the inventory that ends up on store shelves flows through their distribution centers.

In Africa, distribution expertise needs to encompass Western style stores, as well as Africa’s complex, but increasingly important, informal markets.  These stores can be in open air markets or they might be tiny store fronts on crowded streets. In the West, direct store deliveries make up a small portion of what is delivered to most retailers.  In Africa, the distributor business model, which includes sales and deliveries to these small stores, are much more important.

Informal Markets

In Africa, Consumer Goods Companies Can’t Ignore Informal Markets

But large consumer goods companies that want to grow market share rapidly often choose to grow their local logistics infrastructure.  While partnering is a good way to get started, these companies have decided that to truly ramp up market share or improve margins, they need control.

Procter & Gamble has two facilities in Ibadan‚ Nigeria‚ and is building a manufacturing plant in Lagos, as well as multi-category manufacturing plant in South Africa which they will use as a base to export from to other Southern and Eastern African nations.

Unilever has a multiyear, 75 million pound investment plan across South Africa, Nigeria, Ghana, Côte D’Ivoire, Kenya and Zimbabwe.

Diageo has revamped their supply chain organization.  They went from a global organization with African supply chain managers reporting into a global supply and global procurement organization, to an organization where Africa takes responsibility for their indigenous supply chains.

But trade barriers between African countries remain one of the biggest challenges in creating a sustainable brand on the continent.  In a report examining the barriers that stifle cross-border trade within the continent‚ the World Bank revealed that Africa’s largest retailer, Shoprite, spends a hefty $20‚000 a week on import permits to transport goods to its stores in Zambia alone.

“For all countries it operates in‚ approximately 100 single-entry import permits are applied for every week; this can rise up to 300 per week in peak periods. As a result of these and other requirements‚ there can be up to 1‚600 documents accompanying each truck Shoprite sends with a load that crosses a border in the region‚” the World Bank stated. Other risks in the rest of Africa include the lack of suitable real estate and currency volatility.

In conclusion, when you read about the challenges of operating in Africa, it is easy to focus on containing risks, but too heavy a focus on risk mitigation reduces potential rewards. Africa is not an easy place to operate in, and there are few easy answers, but it is the future.

Black-Friday-LineThanksgiving is just a week away, which means the countdown is on for Black Friday (and pre-Black Friday deals). Just how big will this year’s turnout be? The National Retail Federation (NRF) expects 140 million holiday shoppers to take advantage of Thanksgiving weekend deals in stores and online. To put that in perspective, that represents about 44% of the population of the United States. That means that for every 20 people you know, 9 of them will be partaking in the madness of Black Friday and / or Cyber Monday.

NRF will release the results of its Thanksgiving weekend survey by 1:30 p.m. ET on Sunday, November 30 and will hold a special media briefing with President and CEO Matthew Shay the same day at 2 p.m. ET. Information will include what time people started shopping on Thanksgiving Day and Black Friday, how much they spent, how many people say they shopped for Small Business Saturday and the percentage spent online in total over the weekend. NRF will also release information about the number of people who plan to shop online on Cyber Monday.

And with that, on to this week’s news.

On November 20, Descartes Systems Group, global provider of federated network and global logistics technology solutions, announced its acquisition of Airclic, a web-based software and mobile information services company. In today’s increasingly mobile-driven world, Airclic’s Perform platform is a nice addition for Descartes considering its configurable, feature-rich mobile technology and advanced electronic proof of delivery (POD) solutions that operate on a hand-held device carried by the driver. The acquisition should work nicely considering the two companies have common customers, and it will bring about robust mobile resource management (MRM) capabilities to strengthen Descartes’ fleet management platform.

Kiva RobotWe’ve written about Amazon’s acquisition of Kiva Systems many times before. But now, Amazon CEO Jeff Bezos is ramping things up. In May, Amazon had 1,400 robots working at various fulfillment centers. Bezos has set a goal of having 10,000 robots working by the end of the year. This could have a big impact on the holiday season. The robots bring shelving units to human pickers, who identify the specific item stored in the unit needing to be packed and shipped to a customer. This means Amazon’s pickers need only stand in place as robots line up to bring them the appropriate items. As of now, it generally costs Amazon between $3.50 and $3.75 to fulfill an order. Estimates put the savings of these additional robots in the 20% – 40% of fulfillment costs. For a company expecting to ship millions of holiday packages, the savings could be more than significant.

More than 100 independent clothing boutiques from New York to Stockholm are teaming up to offer click-and-collect services for the first time. is an internet portal which is introducing a service that allows shoppers to place an order for apparel and accessories with one of its retailers and collect it from another potentially thousands of miles away. Farfetch gives shoppers access to apparel and accessories from in excess of 2,500 brands in more than 300 stores in 26 countries.

trucker strikeAs if the situation at the Los Angeles and Long Beach ports couldn’t get worse, we can now add trucker’s pickets to the list. The Los Angeles and Long Beach port truck drivers’ fight over fair wages and better working conditions has expanded to five more trucking firms, officials said Monday. Drivers and their supporters, who began their fourth day of strikes at port terminals Monday, said they began striking trucks that belong from QTS Inc., LACA Express and WinWin Logistics Inc. They also plan to strike trucks that belong to Pacer and Harbor Rail Transport today. At the heart of the issue is the drivers’ belief that they are being misclassified as independent contractors, which allows trucking companies to skirt labor laws and avoid paying fair wages. Many drivers have reported receiving small or in some cases negative paychecks after fuel, maintenance and other deductions are taken, despite working long hours delivering goods from the ports of Los Angeles and Long Beach. If the potential dock workers strike doesn’t cripple the flow of inventory into the ports, the ongoing trucker strike might do it instead.

Earlier this week, my colleague Clint Resier wrote a guide to logistics industry economic indicators. One of the indicators he mentioned was the Cass Truckload Linehaul Index. The latest index has been released. In October, the Cass Truckload Linehaul Index rose 7.3% year over year as rates continue on their upward trajectory. The combination of increasing demand and capacity shortages will continue to push the index higher as effects from this year’s new contract pricing are filtering into the market.

In a bit of sad news, Mike Nichols, director of the award-winning move The Graduate, has passed away at the age of 83. In honor of the late director, please enjoy this week’s song of the week, Mrs. Robinson by Simon and Garfunkel.

EARNS EXXON MOBILEFor many years, “fall back” was a good thing. I could go to the bed at my normal time on Saturday night and enjoy an extra hour of sleep. Sure, it meant that the cold of winter was coming and that it would be dark by 4:30, but for one glorious day, I got to indulge in an extra hour of sleep. Unfortunately, that all changes once you have kids. For some reason, they do not understand the concept of extra sleep. Instead, they are hard wired to get up at the same time they usually do – only it’s now an hour earlier. But they don’t adjust after one day. I’m going on nearly a week of 5 am wake-ups now. At least the time change makes it feel like the winter and holiday seasons are coming, making the influx of Christmas-themed commercials at least a little more palatable.

And now, on to the news.

transplace-logoTransplace, which is owned by Greenbriar Equity Group, has bought Logistics Management Solutions (LMS), which is a third party logistics (3PL) provider. LMS has strong ties to the chemical and industrial manufacturing industries, which will help boost these areas for Transplace. While no financial terms were disclosed, LMS earned a spot on Inc. magazine’s ranking of the 500 fastest-growing private companies in the country.

“Acquiring LMS further supports our commitment and strategic plan to grow Transplace and build a competitive advantage for our company and our customers,” said Transplace CEO Tom Sanderson. “We are pleased to add LMS’s knowledgeable, experienced employees to our workforce. Bringing the LMS team on board allows Transplace to offer more services to its existing customers and to serve an entirely new set of customers, as well as continue to expand our presence in key verticals, such as the chemical industry.”

Since their contract expired back in June, Pacific Coast dockworkers negotiating a new labor agreement have begun a work slowdown in Seattle and Tacoma. The slowdown by members of the International Longshore & Warehouse Union reduced container movement to 10 to 18 per hour from 25 to 35, the Pacific Maritime Association said yesterday. Most ports in Seattle and Tacoma are now experiencing delays, which does not bode well for the upcoming holiday season. While there has been an influx of imports over fears of a looming strike, if a deal is not settled soon, the holiday season, and the fate of many retailers, could be disastrous.

First there was Amazon Prime, with its free two day delivery. Then Amazon rolled out is private fleet of trucks for same day local delivery. Now, Amazon is testing deliveries via taxis in San Francisco and Los Angeles. Amazon is using the taxi-hailing mobile app, Flywheel, to ship parcels via licensed cabs. In its latest test, Amazon summoned cabs through Flywheel to distribution centers, from where they picked up as many as 10 packages bound for the same location at about $5 a package. With drones still facing a lot of scrutiny, maybe switching to taxis will pay off, especially as the holidays approach.

Washington State saw a record-breaking number of cargo thefts in the third quarter of the year along with a new tactics on the part of thieves, according to new report from the logistics security services provider FreightWatch International. There were a total of six incidents in the last 12 months, with four of these happening July through September. In addition, half of the thefts in Washington State during the quarter were multiple trailer thefts — one taking three trailers, and one getting away with four. This made the full truckload theft total nine in the quarter, 29% higher than the total number from 2010 through the second quarter of this year.

teamstersAnd finally, the Teamsters have scored another victory at FedEx, which is their second victory in the last month. Drivers at FedEx Freight’s New Brunswick, N.J., terminal voted last week to join the Teamsters Local 701 with a 66-42 vote, following drivers from the Croydon, Pa., terminal, who voted to join the union Oct. 14. The drivers are seeking job security and improved benefits, according to the Teamsters. After organizing started, FedEx increased wages by 80 cents an hour and scrapped a driver scorecard, the union added. FedEx is “offering pay raises and other improvements at the same time we are organizing, but the workers know that these things can be taken away just as quickly without a legally binding contract,” said Tyson Johnson, director of the Teamsters’ freight division.

That’s it for the news this week. As a nod to all the news from the Pacific Northwest, enjoy the song of the week, which was probably my first mind-blowing music experience, Nirvana’s Smells like Teen Spirit.