Archive for Global Trade

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. Farfetch.com 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.

truckDriverAppreciation2We’ve written a lot about the truck driver shortage here at Logistics Viewpoints and the impact that this could have on the global supply chain moving forward. Often times we forget about, or simply don’t think about, everything and everyone that makes it possible for us to get the goods we desire. The shortage could have a long term impact on how products are sourced and delivered and could disrupt the economy as a whole. Truck drivers are an integral part of keeping the supply chain and economy flowing. I read a note the other day that put the importance of truck drivers into very simple terms: “if you bought it, a trucker brought it.” Let’s remember that as we celebrate National Truck Driver Appreciation Week September 14 – 20.

And now, on to the news.

SmartCentres Inc., an operator of more than 250 unenclosed shopping centers across Canada is embracing drive-through pick-up depots. In the next three to six months, the mall owner will start testing online purchase stations in three of its Toronto-area shopping centers. As online shopping continues to slowly eat into brick and mortar market shares, retailers are looking for new ways to get customers in the door. This an interesting move for a mall owner as it goes beyond a single retailer offering the service. According to Mitchell Goldhar, CEO of SmartCentres:

“We know the writing is on the wall. But it’s also an opportunity. It’s also going to be a good business to be in. And it could very well be a way to make our existing shopping center business busier than it ever was.”

Concern over a lack of a contract for West Coast longshoremen continues to bring merchandise into the country at higher than normal rates. While August was a record breaking month, September’s estimates are also above average as retailers push to get their merchandise ready for the upcoming holiday season. Import volume at U.S. ports covered by the Global Port Tracker report is expected to total 1.47 million containers this month, down from the all-time monthly record of 1.53 million set in August as retailers imported merchandise early in case of any disruption on the docks. September has averaged 1.42 million containers over the past five years.

InstacartWholeFoodsWhole Foods has announced that it will expand its grocery delivery and pick-up options in more than a dozen cities. The company is partnering with Instacart, a crowd-sourced grocery delivery operation. The two companies are also running pilot programs in Austin, TX and Boston, MA this month that allows customers to pick up groceries ordered through Instacart in their local store. These moves are in response to growing competition in the grocery home delivery space.

Economic sanctions imposed by the European Union and the United States is hitting Russia where it hurts. Nearly 25 percent fewer people visited Moscow’s malls in the week leading up the start of the school year than in the same period of 2013. Western sanctions and the economic slowdown in the wake of Russia’s annexation of Crimea are hitting Russian consumer demand. The current state of the economy has convinced British fashion retailer New Look to postpone plans to set up a joint enterprise with a Russia franchise, while Adidas scrapped plans to double the number of stores in the country.

uspsThe US Postal service is slashing prices to attract retailers for the upcoming holiday season. The Postal service said its rates were too high to be competitive with UPS and FedEx, and won approval from its regulators in August to lower prices by as much as 58% on certain Priority Mail packages for customers shipping at least 50,000 parcels a year. This move is another attempt to attract new business. Aside from partnering with Amazon for Sunday delivery in more than 20 markets, the Postal Service is now running a pilot with Amazon for grocery delivery in San Francisco. This is certainly a step in the right direction for the modernization of the Postal Service.

That’s all for this week. Enjoy the weekend and the song of the week, Hate to Say I Told You So, by The Hives.

The WTO: Troubles in Trade

The reaction came thick and fast. Logistics service provider Agility referred to it as a tragic failure, no less, citing big losers in developing countries across Africa, Asia and Latin America. DHL, FedEx, TNT and UPS, in the form of the Express Association of America, bemoaned the loss of potentially large gains in world trade, GDP and jobs. In Washington, the National Association of Manufacturers said an agreement would have stimulated growth in the developing world and helped US companies expand their exports.

So what triggered this chorus of displeasure? Well, it was the failure in Geneva of the World Trade Organisation (WTO) to meet the end-July implementation deadline for the Trade Facilitation Agreement (TFA) that was hammered out at the WTO ministerial conference in Bali last December.

Back then, the fact that the 160 members of the WTO had come to an agreement on something ­– especially something that many observers predicted could boost the world economy by some $1 trillion and reduce trade costs by as much as 15 percent – was hailed as a rare triumph for the now 19-year-old global trade body, which has been criticised for its failure to do much to ease the mechanics of global trade since the collapse of the ambitious Doha Round in 2001.

What the Trade Facilitation Agreement specifically seeks to do is expedite the movement, release and clearance of goods and improve cooperation among WTO Members on customs matters. The details behind these two broad aims are many but include aspects such as member countries making timely, accurate and accessible information on trade laws, fees and tariffs; pre-arrival processing of customs information to reduce delays and bottlenecks at border crossings; and instituting transparency for detained goods (a common supply chain pain) such that traders must be notified their goods are being held for inspection. Sounds good and sensible, doesn’t it?

Indeed, while the TFA maybe a watered down version of what was envisaged in Doha all those years ago, it would still deliver clear and present benefits around improving the flow of the goods and reducing associated costs. So surely by now you must be itching to know why the TFA has (at least for now) ground to a halt. And this is where it gets political.

It was India that vetoed the Trade Facilitation Agreement and prevented it from moving ahead. Not because the world’s biggest democracy which also recently elected a pro-business Prime Minister violently objects to the TFA ideals, but because it could not get assurance from WTO members on an essentially separate matter, that of the level of subsidies the Indian government can provide to the country’s farmers without incurring WTO penalties.

So really more of a negotiating tactic than anti-trade stance. Interestingly, as well as getting blasted by the likes of DHL and UPS, emerging countries like Mexico and Thailand have criticized India’s effective stalling of the TFA.

The disharmony at the WTO sits in rather stark contrast to the increasing number of regional and bilateral trade agreements that are being successfully signed and implemented. In Asia alone, there are currently more than 260 free trade agreements (FTAs) in operation. These do vary in effectiveness, it has to be said, with notably strong ones such as between individual Asian countries and the US contrasting with many weaker intra-Asian deals that have not really done much to tackle protectionist behavior and boost trade.

In the WTO’s case, with 160 members to cajole and satisfy plus the principle that every item of the negotiation is part of a whole, indivisible package and cannot be agreed separately (“Nothing is agreed until everything is agreed”), the difficulties in successfully formulating and implementing a resolution are all too apparent.

While few would debate the merits of improving the efficiency of customs procedures, which remain far too onerous in many parts of the world, the case of the Indian TFA veto in Geneva illustrates how pressing domestic concerns can override a country’s desire to play with the team for the global good.

Still. it is not quite game over for the TFA. WTO director general Roberto Azevêdo has advised WTO members to take time over the summer break to reflect and come back in September. US Secretary of State John Kerry talked about being sensitive to India’s position and striving to work towards a solution. There have also been mutterings about ignoring India and going ahead with a majority vote on the TFA.

This latest incident has put the credibility and relevance of the WTO under the spotlight again. And it will be in the interest of that organization as well as shippers and service providers in both the developing and developed worlds to see the Trade Facilitation Agreement get back on its feet after this stumble and make it over the finishing line before too long.

Bob Gill is the General Manager for Southeast Asia at ARC.  Bob has a background in editing industrial trade publications including those covering Asian logistics and supply chain management.

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.