Industry Pulse: Ports set records as ocean freight rates rise

Dive Brief:

  • Ocean freight rates between China and ports on both U.S. coasts rebounded in May, increasing 28.04% from April on West Coast routes and 15.45% on East Coast routes, according to data from Freightos.
  • While rates are up compared to the previous month, they are still lower than ocean freight rates in May 2017.
  • Imports on West Coast ports also picked up after a slump in March, rising nearly 21% but still coming in lower than the beginning of 2018.
Rates rebound in May 2018.
Credit: Shefali Kapadia / Supply Chain Dive, data from Freightos

Dive Insight:

The year 2018 has been somewhat of a rollercoaster ride for ocean freight between China and the U.S. Rates initially spiked, largely attributed to the Chinese New Year, then fell sharply following the holiday and now are gaining steam once again.

The upward trend in ocean shipping rates is continuing into June, with rates rising steadily on West Coast and East Coast routes.

So far, political tensions between the U.S. and China haven’t appeared to hamper trade growth. Most West Coast ports are seeing growth, with the Port of Oakland having  “the best April ever for imports in its 91-year history.”

In addition, the Port of Long Beach saw 16% growth in import volumes between April and May and “had the busiest May in its 107-year history,” according to a press release. The port attributed the volume growth to a strong U.S. economy and e-commerce. Long Beach expects volumes to continue rising into the peak summer months, which are typically busy “as retailers stock up for the holidays.”

The ports don’t seem to be adjusting their forecasts to account for tariffs between the U.S. and China. Tariffs on more than 1,000 Chinese goods imported to the U.S. will go into effect July 6, with China promising tariffs of the same value on U.S. imports.

18 June 2018 | Shefali Kapadia | Supply Chain Dive

The Power of Supply Chain Collaboration & Visibility

The key to supply chain visibility is a common system that allows all stakeholders to work collaboratively to plan their moves, be alerted to changes as they occur, and make real-time adjustments to keep the supply chain moving smoothly.

Supply Chain Collaboration & Visibility

Most companies today are struggling to achieve visibility and control over their supply chains to effectively manage their cost of goods and consistently meet customer expectations.

However, there is a way to leverage technology to provide a platform where suppliers, carriers, and their customers are not only sharing information but also dynamically planning and executing their logistics operations collaboratively.

The key to supply chain visibility is a common system that all stakeholders can use to plan their moves, be alerted to changes as they occur, and make real-time adjustments to keep the supply chain moving smoothly.

How Should It All Work?

The backbone of visibility and active cooperation is a cloud-based collaboration portal that can be shared by the customer, the supplier, and carrier partners.

This portal can be accessed on all computers and mobile devices wherever the stakeholders may be.

This single platform will be used as a dynamic record of truth for the changes that need to occur across the supply chain to keep the delivery of goods moving efficiently.

Here are three supply chain benefits of cloud collaboration portals:

Order Visibility
It all begins with the purchase order for goods. In the collaboration portal, suppliers can view the full backlog of orders they need to fill.

This will provide the supplier the information they need to plan production and inventory schedules to meet customer demand.

Here the supplier can commit to promising dates so that the customer can plan their business based on delivery dates and product availability.

As changes occur, the supplier can keep their customer updated so they can plan accordingly.

Carrier Visibility and Collaboration
Once the order has been booked, the carrier needs to participate in the collaboration portal and begin to provide status updates on their delivery.

Many carriers have the ability to provide electronic notifications through various protocols including EDI or web services driven from GPS or ELD based applications on the smartphones of their drivers or in their trucks. Electronic tracking provides visibility to the customer and supplier on the true status of their orders.

The next step in collaboration is using the customer’s online dock scheduling system to reserve a time and door for the delivery.

This approach ensures that trucks are not waiting for hours for a door to become free, resulting in better carrier performance and costs over time.

Customers Gain Control of Warehouse Operations
With suppliers and carriers providing immediate electronic notification of promise dates, delivery statuses, and arrival statuses, the customer can regain control of a previously chaotic operation.

Even when changes are occurring rapidly, the customer will know their shipments are in transit and can rest assured that their distribution centers and warehouses will run smoothly.

Carriers will show up at the right location on time or a notification will be sent so corrective action can be taken.

This allows the warehouse operations team to manage their staff effectively to have the right number of workers available to handle deliveries as they arrive, rather than having groups of people sitting idly because they were not aware of a delivery delay.

All of this results in superior inventory management and having the warehouse operations team meet the expectations of their customers.

Tangible Savings from Supply Chain Collaboration and Visibility

Suppliers and carriers working together on a common technology platform will not only create efficiencies for the customer, they will increase their ability to deliver superior customer service.

A carrier that arrives on time to the right location can unload quickly and get to their next delivery on time.

A supplier with visibility to all of their orders can plan more effectively and maintain their level of customer service.

A customer that has visibility to all the dynamic changes that occur during shipment planning and delivery can have an efficient distribution center that will increase inventory turns and reduce their cost of goods.

11 June 2018 | Dan Clark | Supply Chain 24/7

Inbound supply chains subject to growing disruption

Interruptions to the smooth flow of parts to assembly plants are becoming more commonplace, according to research from global insurance broker JLT Specialty.

Recorded incidents last year – typically factory fires, hurricanes and labour strikes – increased by more than 30% compared with 2016 to reach 1,699 , affecting 5,585 suppliers across 10,809 sites, according to the analysis.

Factory fires and explosions were the greatest cause of interruptions at 318 cases, up from 180. Merger and acquisition activity was next at 247 incidents, followed by hurricanes or typhoons at 116.

Regionally, North America suffered the most, with 777 disruptions – more than Asia and Europe combined.

One of the most dramatic examples last year was Hurricane Harvey, which hit the southern US in August.

More recently, a fire at the Meridian Lightweight Technologies’ plant in Michigan caused a parts shortage last month. The incident led to Ford stopping production of the F-150 at its Kansas City plant, Missouri, for a week, while BMW and FCA adjusted their production schedules.

Elsewhere, a truckers’ strike in Brazil interrupted vehicle production there in late May and early June.

London-based JLT says the research findings provide a clear picture of the risks suppliers are exposed to and should help vehicle manufacturers pinpoint weak links in their supply chains.

Though tier two and tier three suppliers are just as likely to suffer interruptions as those in the tier one category, there is usually least visibility in the lower tiers, according to the report.

Matthew Grimwade, JLT Specialty’s head of automotive, said: “Our research shows that automotive manufacturers face some serious challenges – not just in terms of the growing number of disruptive incidents to the supply chain industry, but in the diversity of these events, too.

“Being able to gain an insight into the key areas of exposure and supplier vulnerabilities is essential if automotive manufacturers are to effectively prioritise risk, prepare a plan and protect their business.”

The research was conducted in partnership with US supply chain resilience solution provider, Resilinc.

12 June 2018 | Steve Garnsey | Automotive Logistics

Trump Tariffs May Cost Carmakers at Least 1 Million Annual Sales

The projection by researcher LMC Automotive assumes automakers would absorb at least half the cost of a tax on imported vehicles.

If President Donald Trump slaps a 25% tariff on imported vehicles, it may cost the U.S. auto industry 1 million annual vehicle sales — and that’s just the low end of the estimated damage.

The projection by researcher LMC Automotive assumes automakers would absorb at least half the cost of a tax on imported vehicles, said Jeff Schuster, senior vice president of forecasting. If companies pass the full 25% cost on to consumers, it could snuff out about 2 million sales, or more than 10% of annual U.S. deliveries, he said.

President Trump’s order last month to investigate auto imports for potential trade penalties on national security grounds came as a surprise and quickly drew criticism from automakers, dealers and Republican lawmakers. While some analysts discounted it as a negotiating tactic to pressure Canada, Mexico and the European Union on trade, Trump has since attacked Canadian Prime Minister Justin Trudeau following the G-7 summit in Quebec.

Trump’s statements may merely be “chest thumping,” Schuster said. But after the U.S. imposed tariffs on imports of steel and aluminum from countries including Canada and Mexico, the threat of new levies must be taken seriously. “The escalation is starting to happen,” he said.

If Trump follows through with the 25% tariff, Schuster said U.S. consumers would likely react in three ways. Some would look to the used car market, especially lightly used cars coming off lease. Others would shift to domestically produced vehicles with cheaper price tags. And a third group might just postpone buying a new car, under the assumption that the tariffs are the result of a temporary political spat.

Trump ordered the investigation into auto imports under Section 232 of the Trade Expansion Act of 1962, the same power he used to impose global tariffs on imported steel and aluminum.

While U.S. metal producers have been ravaged by global overproduction and depressed prices, the car market is much healthier. Sales have been slipping from a record of almost 17.6 million units in 2016, but LMC predicts a still-strong 17.1 million deliveries this year, and vehicles sold at record average prices approaching $33,000 last month.

12 June 2018 | Gabrielle Coppola & Kristine Owram | Bloomberg

SCOTUS refuses to review standardized federal trucking regulations

Dive Brief:

  • The Supreme Court of the United States (SCOTUS) refused to review J.B. Hunt’s appeal to overturn a U.S. Court of Appeals for the Ninth Circuit court ruling, which allows a class action lawsuit filed by truck drivers to go to trial in September, The Wall Street Journal reported.
  • The drivers, formerly employed by J.B. Hunt, sued the company in 2007 for not complying with California’s minimum wage law and mandatory rest and meal breaks law. J.B. Hunt holds to a 1994 federal law preempting states’ ability to regulate how trucking companies set prices.
  • J.B. Hunt, a member of the American Trucking Associations (ATA), protests compliance with California’s laws, instead declaring adherence to federal regulations regarding minimum wage, rest and meal breaks.

Dive Insight:

The trucking industry is in the throes of change, and debating whether trucking companies should comply with federal and state laws — and whether or not they conflict — regarding truck driver treatment is just the latest point of division.

In one sense, the latest news on this class action lawsuit is just a renewed debate over the Denham amendment added to the FAA bill back in April, which passed the House and is under review by the Senate. If the Denham amendment becomes law, it will preempt state laws regarding meal and rest breaks for truckers, effectively standardizing and streamlining the rules for trucking companies.

That could also throw a wrench in the upcoming J.B. Hunt trial, potentially setting federal precedent leading to a ruling in favor of J.B. Hunt. The industry is divided over the Denham amendment, so this trial is likely to divide the industry further.

Ken Evans, CEO of Konexial, an electronic logging device (ELD) provider, told Supply Chain Dive that because the trucking industry conducts interstate commerce, it should be regulated on the federal level alone, so he supports J.B. Hunt’s position.

“We’re trying to make life better for the individual truck drivers,” he said.

The flip side to that is the high driver turnover rate and truck drivers’ growing disenchantment with the industry. Better pay and better meal and rest breaks — which are offered under California state law — could keep more truck drivers in those jobs and help mitigate the driver shortage and the capacity crunch.

Recommended Reading:

12 June 2018 | Kate Patrick | Supply Chain Dive

U.S. ports need $20B of infrastructure, authority says

Dive Brief:

  • In The State of Freight III, the latest report from the American Association of Port Authorities (AAPA) addressing the adequacy of transportation infrastructure in and out of U.S. ports, the association projected a $20 billion investment need for multimodal port and rail access projects during the next 10 years because of growing populations and the increasing volume of goods that need to be moved.
  • According to the association’s survey, improved and expanded rail access is a priority for ports, with more than 30% reporting that they have identified critical $50-million-plus rail projects. In addition, 77% are planning on-dock, near-dock or other rail access projects in the next decade, as rail provides an “efficient and speedy method of moving cargo out of congested areas to distribution centers.”
  • There are obstacles, however, to achieving the necessary level of infrastructure investment, according to the association. One hurdle is that out of $11 billion in FAST Act freight funding, only $1.1 billion was allocated to multimodal projects. In addition, ports and their private-industry partners plan to invest $155 billion into port infrastructure during the next five years, although the relevant government entities, in many cases, have not invested in the necessary connections “outside the gates.” The association called on the federal government to help eliminate funding and access barriers.

Dive Insight:

The ability to accommodate the larger ships that can now pass through the Panama Canal — after crews completed the expansion of a shipping lane back in 2016 — is one of the driving forces behind U.S. port expansion projects. The Port of Miami was the first U.S. port to be able to handle full loads arriving on these “new Panamax” or “post-Panamax” ships after a $1.3 billion overhaul of its facilities, according to the Miami Herald. This included the installation of new cranes, dredging shipping channels to more than 50 feet deep and the completion of rail projects that now connect the port to nearby rail yards.

Similarly, the Port of Long Beach’s $4.5 billion capital plan includes an on-dock rail facility that will allow cargo to be loaded directly onto trains located at marine terminals.

For ports that aren’t yet ready to welcome these new, larger ships, Dick Slater, vice president and project executive at Moss, told Construction Dive in August that there are workarounds. Accepting ships with only partial loads, which make the vessels lighter and better able to navigate shallower channels, is one example. But deeper channels, more berth space and a revamp of other port infrastructure is unavoidable for those ports that want to compete in a post-Panamax world.

11 June 2018 | Kim Slowey | Supply Chain Dive

Chain Reaction: Senate ‘uncorks’ tariffs bill

Editor’s Note: The following is a weekly column covering technology and regulation within the supply chain and logistics industries.

Global supply chains may pose a national security risk

In the wake of the latest Facebook scandal, in which Americans learned that Facebook shared their personal, private data with device-makers — some of which are Chinese companies — the U.S. government is now concerned that tech companies’ global supply chains could potentially pose serious national security risks.

The Reaction: The U.S. government raises valid concerns. Other U.S. tech companies, including Apple and Google, also share sensitive information with foreign companies within their supply chains, and for Chinese suppliers, that’s a particularly difficult issue, especially since the Chinese government recently launched a nationwide initiative to monitor individuals’ movements and personal data through their personal electronic devices.

As Chinese suppliers working for U.S. companies comply with Chinese policies, it may conflict with U.S. interests. There will be no easy solution; U.S. companies have complex supply chains and may find it difficult or untenable to give up supplier relationships with Chinese companies.

Regardless, tech companies should expect tighter regulation from the U.S. down the road.

Wall Street doesn’t care about tariffs, but feds do

According to a Goldman Sachs research note, there’s no good reason to be concerned about President Donald Trump’s tariffs. Bloomberg reported many economists and investors — including big banks like Goldman Sachs — believe the effect of the tariffs on the U.S. economy as a whole will be minimal.

The Reaction: The tariffs are inconvenient, and there are plenty of U.S. companies not happy about them. But its impact on the economy may not be as severe as people think. What’s more dangerous is the uncertainty and Trump’s apparent inability to negotiate trade grievances diplomatically.

Congress is more concerned with the latter, which is why Sen. Bob Corker (R-Tennessee) introduced a bill to the Senate’s Foreign Relations Committee that would amend the Trade Expansion Act of 1952. The amended law would require the president receive congressional approval for tariffs imposed on imports believed to be a threat to national security.

The bill has less to do with mitigating damage to the U.S. economy and more to do with reigning in Trump’s knack for alienating allies as he attempts to revive U.S. jobs in a variety of industries. The text of the bill has not yet been released, but it will have trouble becoming law unless Congress can override a likely veto by the President.

It’s more a political statement than a stab at changing U.S. policy, but it does spark questions regarding how to handle the “trade war.”​

In case you missed it…

Sen. Ron Johnson (R-Wisconsin) introduced a bill to the Senate yesterday authorizing the Department of Homeland Security to “detect, identify, monitor, and track the unmanned aircraft system or unmanned aircraft, without prior consent” to detect potential “emerging threats.” For those exploring the use of drones to deliver packages to consumers’ doors, this adds another layer of complexity to the privacy debate.

In other news, the Commercial Vehicle Safety Alliance’s annual Roadcheck (and the first since implementation of the ELD mandate) began Tuesday, Supply Chain Dive’s Shefali Kapadia reports. Stripe (who partnered with Microsoft to streamline payments in Outlook) will come up with a plan to answer government requests for private data, according to Axios.

Devery launched a B2B blockchain app, shipping line CMA CGM will use artificial intelligence (AI) to improve tracking and Mastercard will use AI to optimize freight payments.

Looking ahead

The G7 Summit being held this week may feel like a bad family reunion, now Trump has imposed tariffs on most the countries in attendance. Still, the leaders will attempt to address five key topics to advance the global economy.

The Blockchain in Transport Alliance (BiTA) will expand to Asia later this year with a new Singapore office, FreightWaves reported.

Chrysler plans to sell partially autonomous vehicles by 2023, but Japan plans to launch a fully autonomous driving system in Tokyo by 2020. Tesla said its cash flow will be positive by the third or fourth quarter of this year.

08 June 2018 | Kate Patrick | Supply Chain Dive

East Coast ports to see 6-year labor peace as ILA, USMX strike deal

Dive Brief:

  • The International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) announced Wednesday the parties struck a tentative deal for a new, six-year master contract.
  • The deal follows two-days of talks at Delray Beach, Florida, where more than 200 members of the ILA met with the East Coast port employer representatives to discuss a contract renewal well before the current pact expired on September 30, 2018.
  • Now, local chapters of the ILA and individual port authorities have been instructed to reach individual deals to supplement the master contract by July 10. At that point, the ILA and USMX will subject the master contract to “full membership ratification votes.”

Dive Insight:

Talks, so far, had been testy at best between East Coast ports and unions. As is typical of negotiations, both sides first reached the table with a long list of demands that seemed untenable to the other party. The ILA, at one point, broke off talks with the port employers’ association over USMX demands the union allow fully automated ports.

But over time, and with pressure from shippers to reach a deal in advance of the present contract’s expiry, “intensive bargaining” led to a deal. The terms of the new master contract have yet to be released.

The deal is still tentative, and labor bargains at the local level have the potential to be even more tenuous.

Just last month, the ILA said its chapter at the ports of Philadelphia and Wilmington may retire from the master contract altogether, to give the union flexibility to recapture jobs on the Delaware River.

The news is a good sign for shippers and port employers, as it shows the union is willing to find solutions at the local level that do not sacrifice the master contract altogether.

But it could also lead to a further divergence among East Coast ports, between those that are union-run but benefiting from labor piece, and others with more tumultuous relationships.

07 June 2018 | Edwin Lopez | Supply Chain Dive

Making sense from the noise for the future of logistics

The Automotive Supply Chain and Logistics 2018 report, from Automotive Logistics and Ti, will help manufacturers and service providers navigate the technological and market requirements reshaping the supply chain

How to make supply chains ethical and sustainable with blockchain

Editor’s Note: The following is a guest post written by Pieter Vandevelde, chief revenue officer of TBSx3.

As companies face increasing pressure from consumers, regulators and stakeholders to commit to social and environmental initiatives, blockchain technology has emerged as a solution to making our supply chains sustainable.

Blockchain’s immutable and transparent attributes are championing ethical business practices by empowering consumers with an understanding of provenance, reducing exploitation of workers and protecting local environments. It is truly a tool for change, bolstering an era of the “conscious consumer.”

Blockchain is the engine behind cryptocurrencies like Bitcoin. We can take the blockchain engine, tweak it and re-connect it with supply chains. Though cryptocurrencies are 100% virtual and intangible, supply chains are not. The power of blockchain technology is even more present in supply chains when combined with the latest IoT technologies to capture supply chain data at the point of origin.

Every single product worldwide can be assigned a cryptographic unique identifier at the start of the chain, wherever it is sourced or created. This unique code is tied to a utility token that is time-stamped as it moves through the supply chain, with the entire life cycle of that item stored on the blockchain archive. Smartphone users can check the unique ID to reveal its history and its origins to ensure it was responsibility sourced or produced.

Beneficiaries of a transparent supply chain extend beyond big business; by valuing provenance and strengthening the supply chain with blockchain, it will serve every link in the process — from pickers in the tea fields to drinkers of the tea cup.

Consumers are in control

Blockchain is shifting the relationship between consumer and business, as the former can now easily hold the latter accountable by interacting with the blockchain. At the point-of-dispensation, any user such as a consumer, retailer or pharmacist can check the provenance of a product, encouraging them to become far more conscious of their purchasing power and its impact on a global level.

While consumers have typically been left at the bottom of the supply chain, this new technology is helping them play an active role in shaping how businesses operate. High consumer engagement is motivating businesses — manufacturers and suppliers in particular — to have a sustainable and ethical focus as informed customers influence them to act responsibly.

Just last month, Starbucks faced criticism and mounting consumer pressure over whether its cups are made from sustainable or biodegradable materials. A petition with more than a million signatures is trying to urge the coffee giant to honor the promise it made 10 years ago to develop recyclable cups.

Blockchain startup Onda Origins is trying to elevate this consumer involvement by creating a system which “reflects the values people think they’re buying into,” co-founder Paul Tupper told GeekWire. In providing a verifiable and fully traceable bean-to-cup experience for coffee drinkers, the co-founders hope to turn customers into active supply chain participants — which ultimately helps coffee bean growers become visible and valued.

Supply chain transparency is no longer a choice

Transparency in our supply chains is no longer a choice but a corporate responsibility as the demand for fair trade, ethically sourced and sustainable materials continues to grow. Blockchain technology can help companies fulfill their duty to their consumers and workers worldwide, while also radically innovating their business models and protecting brand integrity.

In a published paper by the Harvard Business Review, author Steve New says that provenance “will become an essential part of establishing trust and securing reputation.” Businesses need to not only meet regulatory requirements to minimize their social and environmental impact, but must do so in the public eye.

Following accusations of alleged sweatshop labour and lack of an eco-focus, Nike has committed itself to “sustainable innovation” which reaches “deep” into its supply chain.

Nike’s self-developed Materials Sustainability Index, which took six years to complete, lists the roughly 77,000 materials used by the company, scoring each based on its impact on an environmental and energy consumption level.

This database is meant to help with material selection in the design and production process. Consumers can also use an app to sift through this vast catalogue of resources and learn about each, ensuring accountability is perceived as one of Nike’s core values.

But companies don’t need to dedicate years to creating indexes — this kind of visibility is already built into the blockchain architecture, its end-to-end transparency and traceability allowing every business along the supply chain to prove its ongoing commitment to sustainable enterprise.

Blockchain protects workers and the environment

Companies that honor transparency and safeguard sustainable provenance will ultimately protect millions of workers, their communities and their local environments.

The accountability that blockchain technology enforces accelerates another trend in raw materials: de-commoditization. For example, the decommoditized copper market has different prices for products with different certifications. Copper cathodes are raw materials used for copper rod production for the wire and cable industry, for copper tubes for consumer durable goods, and also for making alloys.

These copper cathodes can be certified in different ways, measuring carbon footprint, water footprint, community impact, human rights, occupational safety and health, ethics and traceability of funds.

Earlier this year, the BMW Group and the Chilean copper mining company Codelco signed an agreement to cooperate on a sustainable and transparent supply of copper. Copper cathodes are already itemized per bundle and can potentially be linked to the miners that provide the raw material.

Ignorance is no longer an excuse — workers will remain vulnerable to exploitation if we allow our own inaction to keep them hidden. Proprietors of all supply chains should actively seek out and fight malpractice and systematic neglect, something easily achieved with technologies built on transparency.

Blockchain technology will help forge a relationship between businesses, workers and consumers that is built on trust and transparency. Businesses must take the lead, committing to sustainable supply chains so that we can protect our most vulnerable and our environment.

5 June 2018 | Pieter Vandevelde | Supply Chain Dive