Archive for Global Trade

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. 

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.

#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.