Shipping Just Can’t Catch a Break From Imports
From a $2.6B investment in new containers, to import demand on the rise yet again, to carriers cracking down on trans-Pacific contracts, to a post-Brexit Britain buried under paperwork, to global air cargo demand outperforming pre-COVID levels, we’re back with another round of the latest stories in international shipping. To start this update off, we have a container-leasing company that recently ordered 890,000 TEUs of new containers it expects to see by July of this year.
With a total value of $2.6B, Triton’s lofty purchase is just one of the many investments companies are making to expand their fleets and meet increased consumer demand for goods. Speaking of demand, if you thought import volumes were on the decline, then you may be in for some disappointment.
According to FreightWaves’ SONAR ocean bookings data, “the current index indicates the likely level of U.S. imports later this month and in June, as departing ships arrive at American shores. The forward data for bookings due to depart from all destinations to the U.S. shows a new all-time high will be set next week. The index has continued to climb since mid-May 2020.”
Global air cargo market demand is also on the up and up, marking a 4.4% increase this past March in comparison to pre-COVID levels recorded in March 2019. While airfreight capacity hasn’t managed to reach pre-COVID levels yet, it’s also showing signs of recovery with a 5.6% MoM increase in global capacity between February and March. So, what does this all mean for trans-Pacific contract negotiations?
Given how volatile today’s ocean shipping environment has become, many shippers are shifting the focus from price to capacity in order to secure space, while many carriers are significantly lowering the amount of free time they’re allotting to customers. Across the pond, the DDC FPO’s (a global provider of business process outsourcing solutions for the freight transport and logistics industry) recent report titled, Brand New Britain: What Post-Brexit Really Means for Businesses, revealed that “nearly 70% [of respondents] expect their operations to be negatively affected for more than 12 months.”
To follow up on any of this week’s most important international shipping news, check out the links below:
What’s a ‘Tech-Enabled’ Forwarder, and Why Does It Matter to Shippers?
Many freight forwarders classify themselves as “tech-enabled,” but what does this term actually mean? Even though the term’s connotation is clear, the extent a forwarder is using technology can vary wildly – both in terms of its capabilities and effectiveness.
Also clear is the intent of technology regarding the potential benefits to any forwarder’s shipper customer, which typically means gaining more operating efficiency and improving service. But, having technology does not guarantee either of those outcomes.
In other words, the presence of technology and claiming to be “tech-enabled” does not complete the story. Much like a stool, freight forwarding operations require three areas of support to remain balanced, with the second and third legs being execution and customer service in addition to technology. While technology is a major part of the solution, it’s not the end-all, be-all. Shippers evaluating a forwarder’s claims of being tech-enabled need to consider all three things equally.
First Leg – The Technology
A discussion of freight forwarding technology needs to start with an explanation of what the tech can do. Technology is about driving efficiency and accuracy through automation and other forms of digitization. Here are some examples of what shippers should expect from their forwarder’s technology:
- Document automation and accessibility
- Full supply chain visibility and tracking
- PO management capabilities
- Communication as part of the permanent record
- Actionable analytics and BI
- Easy and agnostic integrations
- Enhanced forecasting
- Increased customer satisfaction and retention
On a fundamental level, digital freight forwarders leverage industry-leading software solutions to eliminate time-consuming manual processes, increasing productivity and improving communication.
As a side note, Jaguar Freight CEO Simon Kaye recently spoke on the topic of shippers and technology. The following clip was taken from his discussion with Eric Johnson from JOC as a panelist on the webcast titled The New Frontier in Global Logistics: Linking Customer Expectations to Customer Promise. Se can see his comments here.
Second Leg – The Execution
Even though it’s important, all of the data and information that are associated with the shipping function are worthless if the shipment is not executed as the company needs it to be.
Global shipping requires forwarders with strong carrier relationships and processes to pick-up and delivery the freight while navigating all the customs, paperwork, and regulations along the way. These types of networks are built over years and decades, and not created overnight by building a new website. While technology helps and we all hope the industry gets there someday, there is no such thing as a no-touch international shipment in any sense these days.
Also, from the JOC webcast, Simon shared his thoughts on Execution.
Third Leg – Customer Service
Because shipping is still largely a boots-on-the-ground business in terms of carrier relationships and experience, it means communication and customer service are as important as they ever were.
Problems still happen that require experience and follow-up to get resolved. Making an extra call to get space on a ship or finding a drayman to cover an urgent order going to your warehouse are examples of how forwarders back up their technology with customer service. Faster resolution to billing and paperwork problems and OS&D issues are other ways forwarders provide value that technology may improve but do not eliminate.
All this is not to say that technology is not vital to the global freight business. It definitely is. The point is that shippers need to look past the label of any given forwarder being “tech-enabled” to understand what their technology really offers and if the right support is there for execution and customer service too.
So, when any forwarder mentions their technology, it’s important to identify the ones that are actually providing real incremental value. To learn more about how Jaguar Freight pairs exceptional customer service with powerful, proven technology and a wide range of logistics expertise, visit www.jaguarfreight.com.
P.S. If you liked to access a recording of the JOC webcast, you can find it here.
Perspectives on the ‘New Frontier in Global Logistics Technology’ with the JOC
Jaguar Freight CEO Simon Kaye was recently a panelist on a webcast hosted by JOC.com’s Senior Editor of Technology, Eric Johnson, titled “The New Frontier in Global Logistics Technology: Linking Customer Expectations to Customer Promise.” Also in the discussion was Jim Blaeser, Director at AlixPartners and Brian Morgan, Director of Engineering and Product, International Supply Chain at Wayfair.
The conversation touched on many of the ways logistics technology has become integrated into the supply chain function of shippers and day-to-day operations of service providers like Jaguar. Eric Johnson set the stage at the outset with his observation that the long-term industry trend toward more technology has accelerated during the pandemic.
Another important observation of the industry is that the already heightened emphasis on the customer experience – the ‘Amazon Effect’ as Mr. Blaeser described it – has increased as well, despite the obvious extra hardships on global supply chains the past 12 months.
What Do Customers Expect?
One explanation for this was provided from the shipper perspective by Mr. Morgan. A current emphasis for Wayfair, he noted, is creating more complete, end-to-end visibility within their supply chain. And one specific goal from doing so is to increase their opportunities for load consolidation as a way to get specific products to where they need to be faster. In other words, leveraging technology and having visibility allows Wayfair to have more flexibility for which products are shipped sooner when there is urgency to do so to better meet its customers’ needs.
Simon Kaye linked the two (technology and customer experience) by adding that while supply chain visibility in the sense of knowing freight’s physical location has been reliably accessible for some time, the need now is for technology to enable better visibility into sourcing and freight readiness. What’s needed now is technology that provides logistics departments with a view of what will be ready, and when, is the way shippers can gain the flexibility companies like Wayfair need. This type of PO management and visibility is the next-level application of logistics technology that can be used to improve the customer experience.
Here is a clip with Simon’s comments on the topics of PO Management and Visibility:
The need for better visibility and functionality like PO management has come about because companies have been pressed to stretch their supply chains to find cheaper sources of goods, added Mr. Blaeser. Yet, at the same time, delivery expectations in terms of time and cost have tightened. This created fragile supply chains, many of which have been exposed over the past year, unfortunately.
Being in the industry, we are all aware that the logistics and supply chain functions are where all problems come to roost and their causes are often out of their control. But better PO management is a way to have an impact, and way that shippers can take control and get away from the fire-fighting mentality with more proactive management. The solution to that Mr. Blaesar suggests is for logistics departments to speak up and demand to get forecasts and the technology to gain this upstream visibility. Integration with other systems, both internal and external, is necessary for this to work.
Speaking from a service provider’s perspective, Mr. Kaye, pointed out that the shipping function and getting things delivered requires a mix of the right technologies. No single technology provider can do it all, so improved technology integration is also an important area for companies to emphasize. While there may be multiple technologies doing the work behind the scenes, in the end, customers want a single source of information when they interface with partners.
Conclusion:
Even though things in the industry feel vastly different than a year ago, the more things change, the more they stay the same. The two most pressing opportunities in supply chain still revolve around technology and the customer experience. This means it is still up to both shippers and service providers to find and employ the best technology to help them meet their own end customers’ needs.
If you liked to access a full recording of the webcast, you can find it here.
Company Announcement: World Trade Week Award
Jaguar Freight is proud of the recognition from receiving the Global Supply Chain award. And, we congratulate the other 2021 recipients! The following letter explains a little more about the event.
Dear Jaguar Freight:
On behalf of the World Trade Week NYC Steering Committee, I am pleased to announce that your company has been selected to receive the Global Supply Chain Award at the World Trade Week NYC Kick-Off Event and Keynote Address. Yvonne Bendinger-Rothschild, Executive Director, European-American Chamber of Commerce New York nominated Jaguar Freight for this award for your leadership in global supply chain management.
The kick-off event for World Trade Week will be held virtually on Tuesday, May 4, 2021, at 2 PM. You and other representatives of your company are invited to attend the World Trade Week NYC Kick-Off Event and Keynote Address. Register for the virtual event at http://nycworldtradeweekkickoff.eventbrite.com.
Congratulations – we look forward to seeing you on May 4th.
Yours truly,
World Trade Week NYC 2021 Steering Committee
Peter Bengston, NY Public Library
Mary Estelle Ryckman, Former U.S. trade negotiator
Barney Lehrer, NY District Export Council
Carmela Mammas, U.S. Department of Commerce
Nancy Ploeger, IWEC Foundation
Nicol Polidoro, The Port Authority of New York and New Jersey
Andrea Ratay, NY District Export Council
Wanda Sample, The New York/New Jersey Foreign Freight Forwarders & Brokers Association
Joe Schoonmaker, NY District Export Council
Lene Skou, Weissman Center for International Business, Baruch College
Kinda Younes, ITAC
Happy Birthday To Container Shipping!
With MSC’s recent launch of a global electronic bill of lading, containers falling overboard everywhere you turn, EU’s approval of the post-Brexit trade treaty, container shipping turning 65, and the mess that is O’Hare airport, we’ve got a lot of ground to cover in this week’s global freight updates.
But first, let us toot our own horn as Jaguar Freight is proud to be receiving the Global Supply Chain Award at the World Trade Week NYC. The World Trade Week NYC is an active network of more than 70 organizations in the New York metro region working together to underscore the importance of international trade, logistics and port operations to the region’s economy and to use their collective expertise to help the region’s businesses grow through international trade.
The new electronic bill of lading, or eBL, MSC introduced follows the success of the pilot programs the carrier has been running since 2019. The digitized solution is designed to allow shippers and other links in the supply chain to more easily receive and send out a bill of lading online. The ultimate goal is the elimination of untimely and costly disruptions, in addition to (hopefully) driving industry-wide standardization.
Rates and congestion aside, ocean vessels seem to be seriously struggling with keeping containers on board because we’re currently experiencing the largest spike in accidents than we’ve seen in seven years. According to Claims Journal, “more than 3,000 boxes dropped into the sea last year, and more than 1,000 have fallen overboard so far in 2021,” and these lost boxes are creating some major bottlenecks for many retailers and manufacturers.
Also trending this week is the official end of the post-Brexit trade deal. Last Tuesday, European lawmakers overwhelmingly agreed to continue free trade between the EU and UK without tariffs and quotas, marking the last step in a lengthy process to provide more stability within the strained relationship and ensure future cooperation. This breakthrough came shortly after the shipping container industry reached its 65th birthday.
From the first sailing of a converted WWII tanker that occurred on April 26, 1956, to the pandemic-driven environment we are in today, container ships have proven to be vital in facilitating global trade — accounting for transporting an estimated 45 percent of total global trade according to the United Nations Conference on Trade and Development. And that number isn’t likely to grow any smaller given how tight air freight capacity has been since COVID-19 first emerged.
The Chicago O’Hare International Airport, for example, is so congested right now that agents are actually having to rent out warehouses to store cargo overflow. Some importers are so exasperated with the situation at this key U.S. hub that they’ve just decided to skip the overcrowded airport altogether in favor of neighboring facilities with significantly less freight traffic.
To learn more about this week’s leading issues, check out the following article highlights:
Cum si, cum sa
True to form, the week’s news includes many of the same challenges we’ve been dealing with the past few months. There were not a lot of new positive developments, but not too many new negatives either.
One notable exception is the labor strive in Montreal which is coming to a head. On Friday, the longshoremen at the Port of Montreal announced an indefinite strike beginning Monday, April 26 at 7am. This is an escalation of a partial strike that began less than two weeks ago. The union, which represents over 1,100 longshoremen, said the full strike comes in response to the MEA changing its regular schedules.
In other global shipping news, there’s been some progress in the Port of L.A.’s intense cargo bottlenecks. Unfortunately, much of that traffic has shifted up north to Oakland where, as of last Friday, “25 container carriers were waiting to enter the Port of Oakland at anchor in San Francisco Bay and in a holding area offshore, up from 21 at the beginning of the week and little changed from a month earlier… Outside the adjacent ports of Los Angeles and Long Beach, the queue was 21 ships long, also about the same as in mid-March.”
A topic that’s still weighing heavy on UK supply chains is Brexit. While there has been some notable growth in Britain’s construction sector, smaller businesses definitely have some concerns regarding Brexit’s role in causing major delays for trading construction materials, which has resulted in a spike in these materials’ prices that only larger companies have been able to afford.
Another key issue that’s been building up for a while is the shipping industry’s goal to reduce maritime carbon emissions. According to JOC.com, BIMCO, the International Chamber of Shipping, and the World Shipping Council (WSC) recently just submitted a proposal to the IMO last week “asking it to start talks for adopting industrywide ‘market-based measures’ (MBMs) to reduce carbon dioxide emissions” as a way to speed up the process.
Lastly Vivo, who ranked fifth globally based on mobile phone shipment volume, is currently under fire — quite literally — for causing a pallet fire at Hong Kong airport last weekend. According to The Loadstar, an increasing number of airlines are starting to ban “all Vivo products containing lithium batteries (ion and metal) for direct or indirect carriage … as a precautionary temporary measure until further notice.”
To learn more about how this congestion could last throughout the entire summer or to read up on any of the other issues we’ve touched on here, check out the following links:
What You Gonna Do When the SCA Comes for You?
In this week’s global freight updates, we’ve got a vessel under arrest, underlying causes for U.S. port congestion, solid increases in import prices, a partial strike at Eastern Canada’s biggest port, and the ongoing, pandemic-induced container crisis. Up first, let’s dive into the latest news in the Ever Given saga which is the Suez Canal Authority’s (SCA) formal arrest of the vessel that can’t seem to stay out of trouble.
After an Egyptian judge officially released a court order allowing the SCA to seize the Ever Given last week, the SCA has announced that it will continue to hold the ship in Egypt until its $916M compensation claim is paid in full, causing quite the stir amongst the ship’s managers and insurers. As a result, the vessel’s charterer, Evergreen, is launching its own investigation against the scope of the claim and court order while also urging all of the parties involved to try and reach a settlement agreement in an attempt to free the trapped freight as soon as possible.
Over in the U.S., severe cargo delays stemming from the current container crunch keep plaguing the LA-LB ports with the blame largely falling on the rise in pandemic-induced demand for physical goods. However, these problems existed well before the COVID-19 breakout. According to JOC.com, “huge cost increases, limited ability to automate terminals, chronic avoidable disruption during contract negotiations, and far lower productivity and working hours compared with ports in Asia and elsewhere around the world are at the core of the issue.”
While industry leaders work to fix these problems, U.S. import prices are rising higher and higher because of the limitations these supply chain constraints are placing on the pent-up demand that’s being financed by fiscal stimulus checks and sustained by increased access to coronavirus vaccines. Based on Reuters’ data, “import prices rose 1.2% last month after advancing 1.3% in February. The fifth straight monthly gain lifted the year-on-year increase to 6.9%, the largest rise since January 2012. Import prices rose 3.1% on a year-on-year basis in February.”
And the cherry on top of all of this is the partial strike at the Port of Montreal that was scheduled to start this past Wednesday. Not only will this strike further escalate the port congestion across North America (given the projected 30% drop in the port’s capacity), but it will also most likely add to the already lengthy waits and soaring shipping costs logistics professionals are encountering worldwide. At one point in time, transporting a standard 40-foot container from China used to average around $1,000, but now that there’s an ongoing container crisis, some shippers and forwarders are having to pay in excess of $10,000 for the same exact space.
To learn more about how these issues are similarly affecting European ports or to get the details of the other top stories for this week, check out the following article highlights:
We’re Nowhere Near Out of the Thick of It Yet
From uncertainty surrounding Ever Given’s impending insurance claim; to the mounting traffic jam of cargo vessels; to the necessity of supply chain fluidity; to dealing with post-Brexit change; to stormy air cargo markets, it seems like the only guarantee in shipping is that the current market volatility is here to stay — at least for now.
And, although an article regarding the Suez Canal situation from Lloyd’s List states, “It’s still too early to assess the size of the likely claim on the International Group pool,” other, more immediate impacts are moving fast through global ocean shipping networks. To see what we mean, check out the update from one of our Asian-based partners:
Please kindly note that the space situation, especially on the USEC/GULF loop, will be significantly limited throughout April and May.
*** Since a total of 5 voyages from SEA to USEC were blanked during March alone, all space on USEC/GULF has been overbooked until the end of April.
*** The Ever Given incident will cause even more blanked sailings during weeks 16 and 17. Two weeks ago some carriers, including MSC, MSK, CMA, ONE, COSCO, etc., were already forced to outright cancel FAK bookings.
*** Considering the impending low water levels of the Panama Canal, some carriers (such as COSCO and YML) have announced new weight limitations too — around 8 tons per TEU including container tare — for shipments traveling through the canal starting last week (week 14).
*** Carriers are also expecting to face heavy equipment shortages, given that the inventory of more than half of the leading ocean liners will be depleted over the next couple of weeks. This will essentially produce a domino effect of more and more carriers limiting or even rejecting bookings to most IPI points in order to ensure most MVs will be phased in and out in time before Day 5.
Like we said, we’re nowhere near out of the thick of it yet.
Meanwhile, the congestion at the Ports of LA/ Long Beach persists and the additional capacity coming online later this year may not be enough.
To read more about this international shipping news, as well the latest on Brexit’s lingering effect on supply chains and what’s happening with air cargo, click the article highlights below.
But first, make sure to read the most recent news detailing our new, innovative trade finance solution.
Jaguar Freight Expands Suite of Services with Innovative Trade Finance Solution
FOR IMMEDIATE RELEASE: April 8, 2021 (Valley Stream, NY, USA):
Jaguar Freight, a leading global freight forwarder and U.S-based NVOCC, together with King Trade Capital, the largest purchase order finance company in the U.S., have announced the addition of a new trade and purchase order finance solution to Jaguar’s portfolio of services.
“By providing access to purchase order and trade finance as a part of Jaguar Freight’s suite of services, including our best-in-class logistics technology, customers can now extend their business reach and maximize their sales opportunities with fewer limits,” said Jaguar Freight’s CEO Simon Kaye.
The inclusion of trade finance means importers now have access to a turnkey supply chain partner in Jaguar Freight. Customers can now take advantage of new purchase order and supply chain financing opportunities and ensure a more seamless delivery to market.
“Jaguar Freight has been a trusted freight forwarder for a number of King Trade’s clients over the years,” said King Trade Capital’s Managing Partner, Edward King. “The expanded relationship with Jaguar will mean that King Trade can introduce Jaguar’s innovative systems and technology to more companies in need of freight forwarding services.”
Through the partnership, customers will benefit from this unique blend of trade and purchase order finance solutions between Jaguar Freight and King Trade Capital by gaining better control over their supply chain operations and improving their bottom line.
About Jaguar Freight
Jaguar Freight is a licensed freight forwarder and NVOCC and an expert in global supply chain logistics. Founded in 1993 in New York and London, Jaguar Freight has set itself apart by developing and serving customers with state-of-the-art technology expertise that transforms logistics and shipping services into world-class supply chain solutions.
Visit: www.jaguarfreight.com
E-mail: trodriguez@jaguarfreight.com
Phone: 516-239-1900
About King Trade Capital
For almost 30 years, King Trade Capital, or “KTC,” has helped good companies grow their sales and profits by providing PO and supply chain finance solutions. KTC is operated by its founder and its entrepreneurial team that understand the financial needs of operating and growing a business. As pioneers in purchase-order financing and non-bank trade finance, King Trade Capital has developed the expertise and unrivaled financial capacity to help companies become more prosperous by providing stable and unique PO and supply chain finance solutions.
Visit: www.kingtradecapital.com
E-mail: bprust@kingtradecapital.com
Phone: (214)-368-5100
And the Suez Canal Hits Just Keep on Coming
This week’s global freight updates have brought us a saturated airfreight market, the Suez Canal continuation, containers holding millions of dollars’ worth of goods idling off the LA coast, a potential for U.S. ports to receive major federal funding, and UK SMEs’ inability to absorb higher post-Brexit shipping costs.
After finally clearing the Suez Canal, shippers hoping to avoid this latest hit to the supply chain sector by turning to air better have a backup plan. Unless you want to “pay a premium for expedited service — on top of rates that typically are eight times greater than those for ocean shipping,” it’s looking like your options are pretty limited with demand outpacing capacity across all markets.
It’s still a little too early to tell how Ever Green’s misfortune will impact ports, especially in Europe, but experts predict that after a short lull in terminal operations, many will be on the receiving end of some intense congestion depending on when the cleared ships arrive at their destinations. Some sailings could get blanked if ships start arriving late given the already strained capacity, which doesn’t exactly help the incredibly low carrier schedule reliability we’ve been dealing with in recent months.
As for the ships holding millions of dollars’ worth of goods waiting for dock space at LA-LB ports, it seems like the situation hasn’t improved much for U.S. importers due to reduced capacity, a lack of labor, and pandemic-induced demand. According to the Pacific Merchant Shipping Association, “more than a quarter of imported containers at those gateways had to wait more than five days for handling once they reached the dock” in the last month alone.
With this congestion clogging most major U.S. ports, it’s become clear that the nation’s existing infrastructure could use a little (if not a lot of) TLC. When you take into account how far behind other trading nations like China the country appears to be in terms of its port and maritime framework, it makes more sense as to why the American Association of Port Authorities feels that “over the next five years, U.S. ports need $5 billion in federal funding toward water navigational projects; $20 billion for landside investments such as piers, wharves, and intermodal connections; and $4 billion for port security.”
Meanwhile over in the UK, SMEs are getting the short end of the stick when it comes to post-Brexit shipping costs and regulations. “January salmon sales, for example, plummeted 98% year on year, with beef exports only marginally less drastic, down 91%, and whisky down 63%,” based on data provided by the Food and Drink Federation. To learn more, check out the following article highlights:
Suez Canal Blockage Shows Extent of Shipping Struggles
Think you had a bad day at the office, well just imagine the week the Captain of The Ever Given has had! But hey, sometimes we just have to laugh otherwise we’ll cry, and this meme .gif we found on Reddit.com definitely does the trick! We promise it’s worth a watch.
But, back to the real news… With the backlog of vessels in one of the world’s busiest waterways, a range of new blocktrain and LCL services between China and Europe, the fresh spike in U.S. retail spending, a potential strike brewing at the Port of Montreal, and the prolonged labor crisis at sea, it’s important shippers are staying up to date on the latest events impacting international shipping.
Cargo ships are at an important decision point regarding the blockage in the Suez Canal, which is costing an estimated $400MM per hour. With no definite resolution to the problem in sight, the decision will need to be made whether or not to circumnavigate all of Africa to the south to avoid the traffic jam.
In direct response to a significant increase in demand for rail services resulting from excessive air freight rates and lengthy ocean transit times, “forwarders are spreading their services across the three China-Europe trade lanes — the northern corridor through Russia, the middle corridor via Kazakhstan and Russia, and the southern corridor via Uzbekistan and Turkey,” according to JOC.com. Even though volumes continue to surge throughout these adjusted routes, cargo flow is definitely improving, with minimal levels of congestion and network bottlenecks.
As for the U.S. import boom, the worst is not yet over given the recent round of stimulus checks. For those who thought the situation would return back to normal after this quarter, extreme rate hikes and sustained consumer demand reveal an entirely different story, placing a lot of pressure on shippers to figure out how they can get their transportation strategies up to speed.
A strike at the Port of Montreal is looming, as the government looks to continue negotiations to prevent a work stoppage. The main issues in dispute are work schedules, work-family-life balance, the right to disconnect, and disciplinary measures.
Last, but not least, roughly 200,000 seafarers remain stranded on vessels well past what’s considered a safe period of time, based on worldwide industry standards. With stringent COVID-19 border regulations and untimely quarantines on the line, many companies are desperately trying to avoid costly, time-consuming crew changes to the detriment of these essential maritime workers.
To learn more, check out the following links and give our latest blog, “How the Pandemic Has Shaped Today’s Supply Chains,” a read. Also, tune in tomorrow at 2 PM to hear our CEO, Simon Kaye, share his thoughts on “The New Frontier in Global Logistics Technology: Linking Customer Expectations to Customer Promise” – a webinar hosted by JOC.com.
It’s Time for EIS Hikes and U.S. Import Spikes
The impact of tough market conditions is continuing. From increasing Equipment Imbalance Surcharges, to warnings of import spikes across the U.S., to warehouses that are too full, to post-Brexit container logjams, to modal shifts, we’re here to deliver this week’s most pressing news in international shipping. At the top of the list is approaching carrier Equipment Imbalance Surcharges (EIS) and General Rate Increases (GRI) scheduled to hit approximately a month from now.
According to AJOT, for example, MSC announced that “effective April 12th, 2021 an EIS will be applicable for all REEFER cargo ex. AUSTRALIA and NEW ZEALAND to USA & CANADA: USD 200 per 20’ Reefer and USD 400 per 40’ Reefer.” And for those hoping to see port congestion ease throughout the ports of Los Angeles and Long Beach, “anticipating record sales in 2021, retailers expect U.S. containerized exports will increase 20 percent or more each month through June,” based on JOC.com’s data.
This means that while conditions aren’t expected to get worse, we definitely won’t see any real improvements until well after this summer given the sheer strength of sustained consumer demand. Supply Chain Dive released information supporting this expectation as well, citing the availability of vaccinations and the recent stimulus checks as two primary contributors.
The anticipated boost in consumer spending is also projected to impact other major ports across the country. According to figures from S&P Global Market Intelligence’s Panjiva, “overall U.S. seaborne imports in February were up more than 29% YoY and up 20% compared to the same month in 2019.”
Supply chain delays are forcing many retailers to rethink their inventory management strategy and the result is warehouse space is becoming very tight. A big reason why is that many companies are building inventory to help smooth the problems further upstream in their supply chains. And, the negative impact of port congestion is starting to show up on companies’ bottom lines.
Over in the UK, ports are facing similar container congestion and trade disruption as leading gateway terminals struggle to handle increased traffic resulting from major pileups of complex post-Brexit cross-Channel shipments. With these freight delays in ocean shipping and the insanely high freight rates in air, shippers and forwarders are having to get more creative in how they source and transport their goods in order to find a reasonable balance between price and transit time.
Whether that involves turning to multimodal consolidation routing solutions or sticking to local manufacturing options and skipping China altogether is ultimately up to what logistics professionals value within their own supply chain processes. To learn more about how these industry updates are potentially affecting your operations, check out the following links:
How the Pandemic Has Shaped Today’s Supply Chains
If you were to describe the way the world has changed over the past year to your pre-pandemic self, it would probably sound like something straight out of a bad sci-fi movie. From the moment COVID-19 entered the scene, it has been one disruption after another — especially for those of us tasked with figuring out how to keep supply chains running smoothly in the midst of all this chaos.
The global economy started to decline almost immediately at the outset, governments began imposing trade restrictions, and demand became volatile. The cracks within many companies’ manufacturing and transportation processes quickly surfaced as well. Now, the pressure is on as companies scramble to readjust their strategies to mitigate risks and maintain the flow of goods while dealing with severely volatile rates, capacity constraints, service failures, and extended manufacturing lead times.
But onward we must go. Here are a few of the ways the industry is adapting to keep itself afloat in the pandemic’s wake:
Work from Anywhere (WFA) Model
Over the years, the evolution of technology made the WFA business model possible well before COVID-19 came into the picture; however, no one really knew how people would perform outside of an office setting. Many businesses were too concerned about all of the unknowns surrounding WFA’s influence on things like communication, efficiency, and data security to make the transition.
That all changed when the pandemic lockdowns made it a necessity rather than a choice. Despite being forced into it, most companies have come to realize how beneficial the WFA model actually is from improving employee engagement, to reducing property costs, to increasing workforce retention. For shippers, the importance of having tech-enabled logistics partners became a must-have overnight.
E-commerce Explosion
Just as the pandemic accelerated the WFA trend, it also accelerated the move from shopping in brick-and-mortar stores to primarily purchasing goods online, permanently altering the retailing landscape. The domino effect of this rapid explosion in e-commerce sales not only triggered a huge jump from intermodal and truckload shipments to parcel and LTL, but it also caused a shift from B2B to B2C deliveries.
Ocean liners, in turn, are having to race to reposition empties across Asia-Pacific trade lanes to overcome severe capacity constraints and meet e-commerce demand, while shippers bear the weight of excessive freight rates.
The New On-Demand Mentality
Given the unprecedented (sorry, we had to) market uncertainty, more and more shippers are also working to preserve their cash flow by shifting away from a traditional high-volume, low-frequency inventory strategy. Instead of trying to predict erratic consumer spending patterns, some manufacturers have decided to stop ordering larger volumes of a product that they then have to store in favor of ordering smaller volumes at a more frequent rate.
As a result, their transportation partners have had to up the agility of their processes, specifically in regard to the last mile, to keep pace with these leaner inventories. At the same time, the inverse is also true for other companies.
Some importers are ordering in larger quantities out of the usual seasonality to stockpile goods in the U.S. as a way to ensure they have sufficient quantities to meet the ever-increasing demand. The result has been high demand and higher costs for warehouse space and drayage services. Again, the technology provided by freight forwarders and other logistics providers is key to making this shift possible.
Long-Term Impact
Competition for shippers of all types was tough before the pandemic, but it’s only going to get more intense from here. Plus the expectation of faster and cheaper deliveries that existed before the pandemic is only going to increase too. This means supply chain professionals are going to have to get imaginative with how they use their resources.
Long-term success requires finding that balance between increasing the efficiency and resiliency of your logistics operations (without breaking the bank) while also maintaining a competitive edge with your customers. In order to step up to the challenge, it’s important for companies to take the time and energy now to identify and understand the weaknesses within their own supply chain operations.
After you’ve thoroughly picked your processes apart, then you can use your new outlook to take further action, whether that involves diversifying your supply base, upgrading your logistics partners, capitalizing on innovative technology trends, or even reevaluating the types of products you offer.
The underlying theme of all your decisions should be focused on nimbleness and agility. If the past year has taught us anything, it’s that things can change quickly. Shippers and their supply chain partners need to be better positioned to respond accordingly.
Resetting your supply chain is not something you have to do all on your own though. Visit Jaguar Freight to learn more about how our proven expertise and industry-leading software can better prepare your supply chain for a post-pandemic world.
Here’s Why Air Cargo Demand Is on the Rise and Some Ocean Exports Aren’t Making the Cut
The goal of The Weekly Roar is to help supply chain professionals like you stay up-to-date because we all work in an industry that’s in constant flux. When ocean shippers are moving to air, 25+% of trucks leaving the UK for EU are empty, senators are calling on the FMC to back exporters, and exporters are taking unusual steps to ease the container shortage, it’s just another average post-pandemic week for us.
Here’s what you need to keep up to speed:
With ocean shipping lead times growing out of control for shippers due to the ongoing capacity crunch, some companies are turning to air in order to avoid the bottlenecks. As a result of this transition, the rise in demand for air cargo is now placing more pressure on limited belly capacity and elevating spot rates as well, causing some carriers to start investing in additional freighters as a way to expand available freight space.
As for Brexit’s impact on shipping over in the UK, “empty lorries leaving the UK accounted for 26% of all truck movements into the EU, with total loaded haulage exports down 47% last month, compared with last year,” according to the Road Haulage Association. If you factor in the steep drop in demand for UK goods, the effects of the new rigid and lengthy import process aren’t looking too good for exporters in the UK.
Back in the U.S., exporters aren’t having much luck either, with many senators reaching out to the FMC to take the necessary actions that will prevent carriers from prioritizing higher-value cargo to maximize their own profits. Meanwhile, government officials in other areas like China and South Korea are taking serious steps to try and prevent their exports from suffering the same fate.
Unsurprisingly, the pandemic has its place in all of this, too. Simon Heaney, senior manager of container research at Drewry Shipping Consultants Ltd., believes “the best thing governments can do is ensure rapid and effective vaccination of their populations so that landside logistics labor capacity and productivity can be restored to pre-pandemic levels.”
To learn more, check out the following article highlights. But first, get an exclusive look at our most recent blog on “How PO Management Software Can Turn the Lights on in Your Supply Chain.”
Where Do Global Supply Chains Go From Here?
From lingering supply chain woes, to the Port of LA’s new vaccination site, to price hikes in air cargo, to moving forward in transportation management, to the UK’s new freeports, there’s a lot to discuss for this week’s global freight update. So, let’s get started.
Unfortunately, solving the container crisis requires more than simply throwing more boxes into the equation, which is why the FMC is cracking down on marine terminal operators and ocean carriers as well as encouraging more collaboration within the industry. If we don’t start focusing on solutions now though, elevated shipping costs are only going to go up from here and possibly even last well into 2022.
In an attempt to boost labor and ease the intense port congestion in Southern California, the International Longshore and Warehouse Union has partnered with local employers to launch a new vaccination site at the Port of Los Angeles. According to Jim McKenna, president of the Pacific Maritime Association, port authorities were aiming to vaccinate 7,000 dockworkers by the end of last week.
As container volumes continue to flood crucial U.S. gateways, the toll COVID-19 is taking on skilled equipment operators is only further escalating the situation at hand. Many are struggling to get their orders in on time while also having to pay high premiums that are eating away at their already slim margins.
Meanwhile, the air freight marketplace is seeing rising fuel prices combined with increasing airline surcharges show how, regardless of the mode, shippers are doing a lot of the heavy lifting when it comes to footing the bill. With ocean shipping maxed out and other sectors not too far behind, it’s becoming more and more apparent how much room for improvement there really is in transportation management.
On a more positive note, UK Chancellor Rishi Sunak has recently revealed the locations of eight new freeports, or free trade zones. Local authorities hope these areas will help simplify the current shipping situation, lower customs costs, and ultimately stimulate the country’s post-Brexit economy.
To learn more about this week’s leading headlines, check out the following international shipping industry highlights:
How PO Management Software Can Turn the Lights on in Your Supply Chain
In our highly connected digital world, supply chain visibility involves more than just your standard track and trace technology. While once considered ‘cutting-edge,’ the ability to know the physical location of freight should be a given for any shipper of any size. Today, when progressive shippers think about terms like visibility and transparency, their expectations include having a view of their entire supply chain, from sourcing to manufacturing to final delivery, irrespective of the number of suppliers or logistic providers.
The importance of visibility to a large extent is about problem avoidance and mitigation. Companies can’t wait for problems to snowball through their supply chain operations, because by the time they’ve been identified, it’s often too late. The extra costs and disruptions have already occurred whether you realize it or not. If you want to avoid delivery challenges before they make their way downstream, you’ll need a way to increase transparency further upstream prior to when the shipping process even begins.
Solving the Supply Chain Puzzle To Prevent Late Deliveries and Extra Logistics Costs
A key step in the supply chain where these types of problems can be addressed relates to how Purchase Orders (PO) are managed. Paper-based PO processes and primarily manual workflows can leave most supply chains vulnerable to problems that only really manifest themselves during shipping.
Identifying when production delays and orders shipping incomplete or late will impact transportation plans is exceptionally difficult, especially when sourcing and manufacturing are happening overseas. To be successful, shippers have to adopt tools that are sophisticated enough to handle the complexity of global supply chains. This is where tech-enabled PO management is a critical piece of the supply chain puzzle.
The best digital PO management solutions will automate and align a company’s manufacturing and shipping operations from end to end by allowing issues to be addressed upstream before they have a chance to become issues downstream. This eliminates the need to manually mine through fields of data to identify problems.
In other words, close alignment between a company’s PO management processes, supplier manufacturing schedules, and the shipping function creates a win-win-win situation.
There are several important and quantifiable benefits of tech-enabled PO management including:
• Expedited shipping expenses lowered by 15-20%
• Extraneous email traffic reduced by more than 80% almost instantly
• Overall freight costs decreased by 20%+
Additional supply chain efficiencies:
• Improved transportation budgeting with better control over costs and accuracy
• More optimized title transfer and inventory management
• Integrated cross-functional collaboration and more accessible data
• Standardized PO processes
• Improved vendor relations
• Data-enabled score carding
Purchasing and procurement professionals have a lot on their plate, from ensuring contractual compliance to overseeing vendor communication. Unfortunately, the chances of experiencing delays with your purchase order requests are a lot higher when you’re forced to wait around for phone calls and email responses, or you’re having to wade through various outlets to pull data on specific assets. And, like it or not, keeping the shipping department ‘in the loop’ can often slip down the priority ladder.
Running a Tighter Ship
With a centralized web-based PO management software system that corrals all communication, companies also lower the risks associated with miscommunication and error-filled POs. Also, by having an intuitive traffic-light filtering system, users will be able to quickly focus on addressing the real issues rather than data-trawling to try and find them. The key to effectively solving these challenges is visibility throughout the entire supply chain.
While some ERPs claim to do PO management, none of them do it very well. It’s important for shippers to find a solution that can help them lower costs, optimize supply chain performance, and gain a competitive edge. And remember: the alignment of PO management, shipping department, and all stakeholders is the key to a synchronized supply chain.
To learn more about a collaborative online PO management platform that provides immediate visibility and opportunities for continuous improvement with an innovative carrier-agnostic approach, visit Jaguar Freight.
Have the Major Supply Chain Events of the Past Year Become Normalized?
It’s cliche, but we have to ask. Is this the new normal?
In this week’s global freight updates, we’ve got hidden post-Brexit costs, shippers on the prowl for boxes, the current state of ocean freight – in pictures, CMA CGM branching out, and plunging air cargo rates.
According to The Loadstar, EU consumers are starting to become “more reluctant to order UK brands due to longer transit times and additional costs linked to duty and VAT.” Despite attempts to avoid disruptions, the uncertainty surrounding these costs and the complexity of the reverse logistics process are causing many problems for the country’s apparel brands.
“Every picture tells a story, don’t it.” – Rod Stewart. The song lyric fits when it comes to ocean shipping, too. Instead of repeating the same old story – in words – we’ll do it in pictures. As pretty as big, colorful pictures of ships and containers can be, this is a situation that is not easing. At last report, there were almost 90 container ships anchored outside of U.S. ports waiting for unloading.
As for the current container crunch, some shippers have had enough of the elevated freight rates and overwhelming bottlenecks and are now looking into outright buying the containers themselves. With FEUs up 500% in some areas, many are left questioning whether or not demand will remain strong if these costs are put on consumers.
Next up on the list is CMA CGM’s new in-house cargo airline. The carrier’s first flight is officially scheduled to depart from its home base at Liege Airpot on March 8, giving the industry giant and its subsidiaries yet another leg up in the game. While companies like CMA CGM are working on ramping up capacity, air cargo rates from Shanghai to North America are down 62 percent from last week, according to the TAC Index.
This drop doesn’t exactly paint the full picture, however, given that rates are still up 90 percent on the trans-Pacific in comparison to this same time last year. And factors like limited capacity will likely keep them that way for the rest of the year at the very least.
To learn more about these issues, check out the following article highlights:
What’s the Latest in Ocean and Air?
Things in the international shipping industry are as hectic as ever, but there are some positive signs with air cargo volume decreasing worldwide, forwarders negotiating rates for UNICEF’s vaccine distribution, video evidence of California’s box-ship traffic jam emerging, and container lines ordering new vessels to keep up with demand.
Over in the ocean shipping sector, the U.S. Coast Guard’s latest video footage showing the pileup of container ships anchored across California’s San Pedro Bay revealed just how intense the congestion has become due to unavailable capacity, labor limitations, and increasing delays. While major carriers have been profiting despite these setbacks, they’ve been using their newfound capital to invest in more than $10 billion of container ship new-build contracts as a way to replace aging ships and potentially raise contract rates. Based on data compiled by Bloomberg, “The number of container ships on order rose by 23 to 201 last week, the biggest weekly gain in two years.”
According to The STAT Trade Times, both air cargo volume and capacity declined by 1 percent worldwide between this week and last. The news source went on to state that “on a regional level, origin Africa did best with a volume increase of 6 percent week-over-week, while business from Europe showed the largest decrease (-4 percent).”
After 16 airlines recently committed to support UNICEF’s COVID-19 vaccination program, many are wondering how other air cargo will fare once the vaccines start receiving scheduling priority. With the pricing power left in the hands of 6 forwarders, there are a lot of remaining unknowns surrounding UNICEF’s efforts to secure more reliable, cost-effective capacity.
And that doesn’t even begin to cover the other important events that made headlines this week, like post-Brexit trade barriers, Maersk’s plan to deploy the first zero-carbon container ship, and the IMO’s World Maritime Theme for 2021.
Check out the following article highlights to learn more:
The Aftermath of Brexit on Supply Chains
Britain’s decision to leave the European Union (EU) back in 2016 set off a series of events that have impacted supply chains ever since, and now seem to be reaching their peak as companies learn to live in the post-Brexit world. Now that the transition period has come and gone, many companies are still struggling to adapt to the absence of the added trade perks that come with being an EU member.
In an attempt to avoid the harsher realities of failing to form a new agreement, the United Kingdom (UK) brokered the Trade and Cooperation Agreement (TCA) with the EU on Dec. 24 at what was effectively the fifty-ninth minute of the last hour. Although any deal was better than no deal, new challenges like longer delivery times and more extensive export documentation have shown how businesses in the transportation industry need to start rethinking what supply chain efficiency means in the aftermath of Brexit.
Here are some of the surprising and not so surprising outcomes of the new border control practices we’ve noticed since the UK’s exit at the end of last year:
- Delivery Delays
Manufacturers were hit hard by the overwhelming and costly customs declarations, health checks, and certifications Brexit introduced. Exporters in the food and beverage sector are particularly struggling to get their perishable products to buyers in time while they’re still fresh because it’s simply taking too long to complete the paperwork process.
Despite the efforts companies are making to find a solution for these delays, “about a fifth of small and medium-sized businesses that export to the EU have temporarily halted sales,” according to Reuters. Some food producers are even avoiding the process altogether and going directly to other markets.
- Higher Logistics Costs
With surges in taxes, tariffs, and additional customs fees, it’s becoming increasingly expensive for logistics service providers to bring goods into the country. Lofty tariffs, for example, are forcing firms to switch up their sourcing strategies. Rising trucking costs are pushing customers to EU competitors, while stricter COVID-19 testing requirements are removing the incentive for drivers to accept shipments coming from the island.
Trade with Ireland is also on the rocks as gaps start to emerge throughout retail supply chains, and they may only get worse once the three-month grace period for supermarkets in Northern Ireland ends. Some “Northern Irish logistics groups have warned that prices are rising as trailers return from Britain empty, without a return load to cover the cost,” based on Reuters’ findings.
- Rules of Origin Complications
A lot of traders were under the impression that trading with the EU post-Brexit simply involved filling out some forms, so the new rules of origin requirements came as a surprise to many companies. Although the government released 60 pages worth of guidance on the subject, some believe that the information failed to help forwarders and shippers in light of the current capacity shortage and marketplace conditions.
The UK has responded to these complaints by defending its Border Operating Model and stressing the other ways it has been offering support for companies — e.g., export helplines, trade advisers, policy exports, and the Brexit Business Taskforce. Many in the industry, however, have expressed frustration over when the publication was released since it went public a mere 6 months before the transition period came to a close and any deal was made.
What’s Next?
If the delays and inconsistent pay continue to keep EU drivers from coming to the UK, the driver shortage could very likely turn into a serious capacity crunch, which would only place more pressure on spot rates and European supply chains. The risk of spoiled produce is also leading shippers to hold on to their goods instead of moving them, which could increase congestion in warehouses. These disruptions will hopefully ease up over time as the industry adjusts to the new changes, but there are still quite a few bumps in the road ahead that need to be addressed before goods start flowing freely again between these two trading partners.
Will Things Get Better in the Spring?
With no letup in sight for the COVID-fueled cargo boom, large ocean container lines are raking in the profits, while shippers struggle to manage the overwhelming demand surge.
It’s interesting to look at the breakdown of revenue and costs for a carrier like Maersk (see chart). And, based on the Maersk Q4 2020 key performance indicators, the carrier has successfully kept operating costs under control through all the market volatility of the past 12 months. According to Freightwaves, “Maersk reported ocean revenues of $8.26 billion for Q4 2020, up 15.5% compared to Q4 2019. Revenue growth was driven by a 3.2% increase in volume, but primarily, by a 17.7% spike in freight rates.”
This marks yet another record quarter for the carrier, and if market conditions continue to follow the current trends, the industry giant expects to end the first quarter of 2021 on an even better note. Despite all of the present uncertainty, Maersk’s CFO Patrick Jany believes spot rates and container volumes should start to ease up in Q2 2021 — hopefully alleviating some of the intense port congestion and container shortages we’ve been experiencing.
But even with that optimism, shipping delays persist and even some Christmas deliveries still have not been made.
As everyone impatiently waits for contract season to arrive, many are working on their strategies for upcoming carrier contract negotiations in an attempt to address the significant supply chain stressors causing chaos at ports everywhere. One crucial move shippers should look out for, especially those involved in Trans-Pacific trade, is the efforts carriers plan on making to reduce contracted free time.
This could mean shippers will have to make some serious adjustments to cut down on the time it takes to return containers, or this could mean that shippers will have to accept higher per diem charges, depending on how negotiations shake out ultimately. As companies prepare to negotiate terms to optimize equipment flow and enforce preventive measures, many industry leaders are also fighting to mitigate the pandemic-driven dockworker shortage by pleading with U.S. regulators for better access to vaccines. Without that critical classification of “front-line worker,” some cargo terminals may have to shut down operations temporarily at the rate that employees are getting sick right now.
To learn more about these issues and other key events going on in the international shipping industry, including electronic BOL’s, an air cargo update, and news about Vietnam’s market-resilience against the pandemic, check out the following highlights:
