It often is also not appropriately aligned with corporate sustainability, resiliency and adherence to company policies, credos and goals. While we are seeing this beginning to gain ground in some larger public companies, we are continuing to witness a huge void in small, medium and larger organizations.

Typically, when an infraction on an import or export transaction or trade compliance issue arises that no one saw coming, it sets off the alarm bells of corporate governance. This leads to scrutiny from all levels of management and legal oversight … causing discomfort, stress and often chaos. 

Read also: Resiliency, Wherever You Can Get It: Uncertainty In Global Supply Chains Is Going To Stay

When I began my supply chain career in the 1980s, “trade compliance” was heard but it was a benign factor in global trade. Only the most serious goods related to the military were scrutinized on exports and importing into the U.S. was a routine process.

Historically, the turning point was the Customs Modernization Act of 1993, which changed the entire landscape of imports into the States. Furthermore, it changed the relationship between U.S. Customs and Border Protection (CBP), brokers and principal importers.

Trade compliance, like any aspect of global supply chain—procurement, manufacturing, operations, distribution, import/export, customer service, sales, finance, and other related silos—became a more important aspect of the global supply chain in 1993, but it took a huge leap forward following the events of 9/11. 

From that point forward, trade compliance took on a whole new meaning and continues to do so in 2024. Trade compliance has become a much more integral and functioning component of larger corporations and made a more serious medium in smaller importers and exporters.

Managing trade compliance responsibilities prevents supply chain disruption, mitigates exposures to fines and penalties, avoids civil and criminal prosecutions. Public companies can gain Sarbanes-Oxley compliance, while for private companies a best practice culture is created. Trade compliance opens the door for better run supply chains, faster movement through the border and potentially less delay.

Trade compliance can be utilized to gain access to reducing “Landed Costs,” including:

• Foreign Trade Zones
• Bonded Warehousing
• Container Freight Stations
• Drawback Opportunities

It can provide access to the Customs Trade Partnership Against Terrorism and the CTPAT Trade Compliance Program, where a host of benefits are gained. And it keeps management out of time-consuming compliance issues, allowing execs to focus on business development and sustainability matters.

Trade compliance management can be viewed as both a Risk Management Silo or a Best Practice Silo in a company, depending upon how the silo is utilized and its role in the corporate structure. In the most likely circumstances, in most global supply chains we would weigh trade compliance as 70% prevention and 30% opportunity. 

Government agencies actively involved in trade compliance include CBP, Alcohol, Tobacco and Firearms, the Food and Drug Administration and the departments of State, Justice, Commerce, Treasury, Agriculture and Homeland Security, to name a few of the more than 20 agencies that interface with the import and export supply chain, from a regulatory perspective.

There are four pillars of trade compliance: due diligence, reasonable care, supervision and control and proactive engagement.

Due diligence and reasonable care are defined by court precedence, common practice and interpretation of CBP and other government agencies in enforcement proceedings. In other words, it is a concerted, responsible and comprehensive effort put forth by a company and the individuals responsible for trade compliance to actively pursue the compliant operations in their global supply chain according to the import and export regulations that apply to their business model.

The concept of supervision and control refers to the typical scenario where importers and exporters outsource much of their supply chain responsibilities to service providers, channel partners, freight forwarders, customshouse brokers, direct carriers, 3PLs and other related parties.

Though the work is outsourced, the government mandates that the principal importer and exporter supervise and control those actions of their engaged third parties. This means that the principal importer and exporter create capabilities followed by controls to responsibly supervise their activities. In fact, that supervision can be outsourced to third party auditing and inspection type companies. This would not usurp responsibility; the principal importer and exporter is simply enlisting professional assistance in the review process.

Proactive engagement may not be specifically written into government regulations, but it is implied in the enforcement practices of the various agencies outlined previously and is something we supply chain consultants with over 35 years of experience have learned. More specifically, there is an implied responsibility that the government expects, which is that the company and the personnel involved in trade compliance will proactively outreach to develop an information flow, resources, skill set development and practical guidance on how to responsibly manage trade compliance in your company’s global supply chain.

Examples of such outreach include:

• Joining trade compliance organizations, such as the International Compliance Professionals Association (ICPA)
• Engaging in trade compliance training
• Working with consultants, attorneys and service providers that have expertise in trade compliance.
• Attending government outreach events sponsored by agencies including CBP, the Census Bureau and the Bureau of Industry and Security
• Studying and developing trade compliance skill sets through various mediums and documenting same

When we consider the four pillars, the natural question that arises is, “How are those standards best achieved?” That question weighs into our experience over 35 years in managing trade compliance matters, being engaged in the global supply chain industry and being involved in all sorts of compliance cases, problem resolutions and in the development of best practices.

This can only be achieved if senior management strongly endorse a trade compliance management culture in their organization. Additionally, proper funding, support and guidance need to be in the senior management team’s credo.

An internal memo and doctrine notating and documenting that support needs to be published publicly and regularly re-endorsed.

A point person, potentially supported by a committee of stakeholders, should be designated to lead trade compliance initiatives in the organization. It may be a full-time position or part of an individual’s job description.

If there is leadership, follow-through and proactive engagement, the structure can vary and succeed.

Standard operating procedures are a significant and important methodology in keeping a company aligned in trade compliance adherence. It also demonstrates to government agencies your organization’s commitment in writing to how trade compliance will be managed in your company.

Training from an oversight perspective should be mandated to all stakeholders in the import and export operation, including procurement, sales, customer service, finance, operations, manufacturing, legal, distribution and senior management. It should be thorough, comprehensive and timely, occurring periodically and with the new hire of personnel in the supply chain.

Technology can be utilized as a major tool to support trade compliance management responsibilities. Classifications, denied parties checking, record keeping and auditing are examples of technology interface in trade compliance management. Artificial intelligence is also developing as an important tech gain helping companies manage trade compliance programs. 

Auditing is a requirement demonstrating due diligence and reasonable care in assuring your company is operating compliantly. It can assign degrees of compliance, provide recommendations for improvements or efficiencies, and can hold personnel and systems accountable for their performance in compliance responsibilities.

Trade compliance management is certainly a risk management policy for corporations to follow. More importantly, it can be utilized in foreign trade zones and drawback programs that can not only minimize risk but reduce landed costs and earn revenue gains in the organization’s bottom-line.

Author Bio

Thomas A. Cook is a seasoned global supply chain professional, author of more than 20 books on global trade and managing director of Blue Tiger International. He can be reached at tomcook@bluetigerintl.com or (516) 359-6232.

The post Managing Risk With Trade Compliance In Global Supply Chains appeared first on Global Trade Magazine.

Read also: BritishAmerican Business Launches New Trade & Investment Guide to the UK for US Companies

Whether interested in fintech in Florida, energy solutions in Texas, electric vehicles in Indiana, or creative industries in California, UK businesses will find this guide indispensable for navigating the diverse American market.

Recognizing the U.S. as 50 distinct markets, each with unique opportunities, the guide offers essential insights into making informed investment decisions. It covers a wide range of considerations, including financial planning, logistics, legal services, and immigration. Additionally, it highlights the support available from governments, economic development agencies, associations, and networks to aid UK companies in their U.S. endeavors.

The guide also delves into the UK’s state-led MoU scheme, showcasing trade agreements with states such as Indiana, North Carolina, South Carolina, Oklahoma, Utah, Washington State, Florida, and Texas.

Duncan Edwards, CEO of BritishAmerican Business, emphasized the guide’s importance, stating, “As the largest transatlantic trade organization, we are pleased to offer the most comprehensive resource for UK businesses looking to operate in the US. The guide comes at a time of great momentum for the UK-US trade relationship, with significant growth and investment opportunities in the U.S. market.”

Laurie Farris, Minister Counsellor for Commercial Affairs at the U.S. Embassy in London, added, “There has never been a better time to start or grow a business in the United States. The U.S. market is thriving, with numerous incentives and a robust consumer base. The opportunities are vast for businesses of all sizes.”

With the U.S. economy leading in global growth and new investment packages enhancing opportunities, BAB’s Trade and Investment Guide stands as a vital tool for UK companies looking to expand their footprint in America.

CLICK HERE TO READ

Finding Your Way – The Trade and Investment Guide to the US includes contributions from the US and UK Governments, private sector partners as well as an extensive network of associations. BAB would like to thank the many stakeholders and partners who have helped produce this comprehensive resource.

The post BritishAmerican Business Unveils Comprehensive Guide to U.S. Expansion for UK Companies appeared first on Global Trade Magazine.

Read also: Canada Freight Market Update

Heading: Get Up to Speed 

Before discussing the potential impact of a strike, here’s a rundown of what’s transpired thus far: 

• Negotiations between the Teamsters Canada Rail Conference (TCRC) and rail operators Canadian National Railway (CN) and the Canadian Pacific Kansas City (CPKC) began after their collective agreement expired on December 31, 2023.
   
• In early May, more than 9,000 union employees voted to strike as soon as possible if the sides could not reach a deal.
   
• The strike was called off when concerns from industry groups prompted Canadian labor minister Seamus O’Regan to ask the Canadian Industrial Relations Board (CIRB) to assess whether the strike would threaten national safety due to the disruption of critical shipments.  

• The CIRB is now reviewing any “maintenance of activities” agreements between the two sides, as these indicate which services must be maintained by both parties in case of a work stoppage; the TCRC has said no such agreements exist.
   
• Though negotiations can continue, the TCRC cannot strike until the CIRB decides on the legality of such an action. 

• The TCRC believes rail operators would prefer to await arbitration rather than continue negotiations, so little progress has been made between the two sides in recent weeks. 

• The TCRC has also implied it will strike as soon as the CIRB concludes its review, but given the typically lengthy nature of the process, the CPKC says that a strike or lockout in the next 60 days is unlikely. 

Heading: The Potential Fallout of a Failed Deal 

Canadian National Railway and Canadian Pacific Kansas City own about 75% of all Canadian rail capacity, so the impact of a strike could be devastating. First and foremost, it would likely limit the flow of certain goods and increase over-the-road truckload transportation demand. Freight from Canadian ports could also land on U.S. soil, leading to capacity crunches stateside.

A single strike day will also create at least another three to four days of disruption. This exponential effect could have a significant downstream impact on U.S. automakers, which rely heavily on inbound shipments from Canada that would almost certainly see significant slowdowns should the railways close. Further, Canadian grain, potash and coal producers have commented anecdotally that the strike could disrupt their export operations.  

Jason Miller of Michigan State University recently completed a carload volume data analysis that revealed general containerized goods, metallic ores, chemicals, coal, grains and other petroleum products are the most heavily transported commodities. CN and CPKV account for 74% of the total carloads of metallic ores shipped, putting this freight type at a significant risk of disruption. 

Ultimately, all of the above could lead to higher prices for consumers and businesses, put jobs at risk, and threaten Canada’s reputation as a reliable trading partner. 

Heading: The Good News 

While stakeholders anxiously await a decision from the CIRB, rail customers are creating contingency plans without any certainty as to when or even if they will need to use them.  

However, the latest OTRI data, which acts as a relative measure of truckload supply in the marketplace, does not indicate any signs of impacts on shipper routing guides out of Canada. This is likely because both the Canadian and U.S. capacity markets are oversupplied to the point that they could more easily absorb the railway volume. Still, rate increases would likely follow if the shutdown lasts long enough to drive sustained long-haul capacity demand. 

Tender rejection rates show no signs of tightening truckload capacity with a pending rail strike.  

Heading: Hope For The Best, Prepare For Anything 

The potential for significant disruption persists as negotiations remain at an impasse and the CIRB continues its assessment. Stakeholders across various industries must stay vigilant and prepared for any developments, with contingency plans in place to mitigate potential operational impacts. Though it is too soon to discern how the situation will play out, we hope the two sides can reach a deal in time to prevent the stoppage of this critical cog in the Canadian economy. 

Author bio

David is the Vice President of Market Intelligence at Arrive Logstics. David joined the team in 2017 after six years at AFN focused on business intelligence. He leads Arrive’s Market Intelligence team focused on providing critical market data and expert analysis to internal teams, while also driving Arrive Insights, Arrive’s external market update for shippers and carriers.  

The post How A Canadian Rail Strike Could Impact Freight Markets  appeared first on Global Trade Magazine.

Read also: 3 Strategies For Importing Goods From The U.S. To Europe

May 2024 U.S. container import volume continued its robust 2024 growth, increasing 6.2% from April and 11.9% when compared to the same month last year.

Imports from China again had a strong month, reaching the second highest monthly volume since January of 2023. Port transit delays continue to improve across the board as there has been little impact on East and Gulf Coast import volumes from either the Panama drought or the Middle East conflict. May’s update of logistics metrics monitored by Descartes reinforces the strength of imports since the beginning of 2024. Despite strong U.S. container imports, the risk of global supply chain disruptions remains high because of ongoing conditions at the Panama and Suez Canals, upcoming labor negotiations at U.S. South Atlantic and Gulf Coast ports, and the Middle East conflict.

Month-over-month and year-over-year, U.S. economy proves to be robust again in May 2024

Versus May 2023, TEU import volume was up 11.9%, continuing to demonstrate exceptional year-over-year performance (see Figure 1). May 2024 U.S. container import volumes moved up from April 2024, increasing 6.2% to 2,346,382 twenty-foot equivalent units (TEUs).

Figure 1. U.S. Container Import Volume Year-over-Year Comparison

“May was yet another strong month and, for the first five months of 2024, U.S. import container volume is up 15.5% over the same period last year,” said Chris Jones, EVP Industry, Descartes. “Significant increases in imports from China (up 17.6%) in May was the big driver of this growth.”

The June report is Descartes’ thirty-fourth installment since beginning its analysis in August 2021. To read past reports, learn more about the key economic and logistics factors driving the global shipping crisis, and review strategies to help address it in the near-, short- and long-term, visit Descartes’ Global Shipping Resource Center.

The post May 2024 U.S. Containerized Imports Break 2.3M TEUs appeared first on Global Trade Magazine.

Read also: Delivering in Style: Logistics Needs for the Fashion Industry

Whatever term you choose, the industry continues to seek ways to be flexible and resilient amidst a wide array of events that can put pressures on their supply chain performance.  Some of the immediate pressures they are facing today, and that they expect to persist looking forward, are focused on production matters, sourcing changes, supply chain uncertainty, and sustainability.

Production – Footwear, apparel, and many accessory products such as handbags are fusions of art, craftsmanship, design, and more.  While advances in fashion design, fabrics, and manufacturing have occurred in recent years, many of the goods are still handmade requiring a human touch to produce the finished product.  Factories around the world employ thousands of workers stitching products together, applying adhesives to bond components together, and possibly utilizing a variety of punches or presses to set and place buttons or snaps for example.

Sourcing – Supply chain resilience and flexibility is needed today for risk mitigation, and many companies are turning towards the diversification of suppliers and countries of origin.

Supply Chain Uncertainty – Shipping disruptions, fluctuating transit times for goods to reach originally intended destinations, unfortunate port disasters or strikes, and monsoons or extreme weather events can wreak havoc on the condition and availability of goods sourced around the world.

Sustainability – Increased interests in sustainability, the impact of new regulations on the horizon, and desires to make improvements in product life circularity are increasingly important to corporate ESG (Environmental, Social, Governance) efforts.

Supply chain resilience depends on key partners

Resilience is a team sport and working with key partners is necessary for successfully handling the latest supply chain curveball.   As the industry examines changes in suppliers or production partners, faces their latest supply chain disruption issue, or addresses new rules around sustainability, these factors can have spin-off impacts that may result in pressures on delivering their inventories to key markets that meets merchandise quality and performance standards.  Sales require inventory availability; any disruption in the process can be critical.  For example:

The production of handmade fashion goods requires skilled technicians.  As companies onboard new factories or their existing factories are increasingly presented with skilled labor availability challenges, this can lead to production mistakes if not caught in a timely manner on the factory floor prior to shipping goods.  When mistakes occur and are discovered post-shipment, companies may need to rework or correct the production mistakes quickly in the U.S. or Europe to have the proper inventory availability levels to meet sales goals.

Monsoon conditions in overseas production markets, shipping/delivery disruptions/rerouting, and other events such as strikes, or natural disasters can also put significant pressure on the condition of goods when they finally arrive at a U.S. or European destination.  Different points in the supply chain may be conducive for creating the environment for moisture damage to occur on imported merchandise.  Damage can include mold, odor, color bleeding, wet products, and more.  Finished goods manufactured and packaged in hot, high-humidity environments and the long distances that goods may travel with wide fluctuations in temperatures and without the benefit of climate controls are just two of the many factors that can result in potential water damage to inventories in route from an overseas manufacturing location to key market destinations.  

To turn high volumes of impacted inventory around, and not turn the ship around, many in the fashion industry turn to a couple of well-established experts in the U.S. and Europe to serve as their product rework partners for scenarios such as those described above and more.  These “product savers” help recover and restore key inventories to first-quality conditions which provides sellable products that can command their intended full retail prices.

Rework leaders in the U.S. and Europe for nearly 40 years

Quality Corrections & Inspections (QCI) in the U.S. and Erren Recondition in Europe have been in operation for nearly 40 years each, providing critical product rework support to fashion industry supply chain teams responsible for bringing quality products to key markets on-time and in-full (“OTIF”) for key selling seasons every year.

When goods reach their destination market with real or perceived product integrity issues, the product rework centers for the two companies are well-equipped to respond and provide a diverse array of services such as the following:

Mold, Mildew and Odor Remediation

Delamination Issues – Soles/Insoles

Product Inspection/Sortation/Grading

Footwear Leather Toning and Refinishing

Blooming Issues

High Volume Laundering and Garment Finishing

Hardware Replacement and Repair (eg. eyelets, buckles, snaps, buttons, zippers)

Relabeling, Ticketing, Tagging, Repacking

Alterations and Stitching Corrections

Spot Cleaning, Cosmetic Issues

Customized Rework Services

Today, product rework services are more important than ever.  Many product integrity issues that arise can be corrected as needed through product rework, helping to extend a product’s life cycle as originally intended and preventing products from being unnecessarily discarded.  In addition, as pressures mount to improve upon corporate ESG efforts, product rework can serve as an important tool in making an impact on these efforts.  More importantly, when product reworks may be required, they can improve the outlook for inventory availability which translates to potential for sales.

The teams at QCI and Erren Recondition are often viewed as an extension of the quality, inventory planning, sourcing and merchandising teams in the fashion industry.  Their expertise, collaborative approach, and responsiveness is instrumental in helping fashion supply chain leaders deliver inventories to market and deliver on their supply chain resilience strategies.

Author Bio

Randy Burk is the executive vice president and “creative problem solver” for Quality Corrections & Inspections.  For nearly 40 years, Randy and the Quality Corrections & Inspections team have provided product inspection, repair, and rework services to companies in the apparel, footwear, accessories and consumer goods sectors from around the world.  Quality Corrections & Inspections has two U.S. production centers located in Henderson, Nevada and Duncansville, Pennsylvania.

The post Resilience and Recovery: How Product Rework Experts Sustain the Fashion Industry appeared first on Global Trade Magazine.

Read also: MV Dali Refloated, Port of Baltimore Set to Resume Full Operations

Salvage efforts have successfully cleared the 50-foot deep, 700-foot wide Fort McHenry Channel, allowing all vessels to access the port. The restoration work is expected to be completed no later than June 10.

“We are not taking our foot off the gas,” said Estee S. Pinchasin, USACE, Baltimore District commander. “We are pushing forward as quickly and safely as possible to reach 700 feet and ensuring we remove all wreckage to prevent any impact to future navigation.”

On March 26, the 948-foot containership Dali struck the Key Bridge, causing its collapse and resulting in the deaths of six construction workers. Debris from the collapse had restricted maritime travel through the key gateway.

Unified Command used explosives last month to break off large portions of the bridge. Cuts and precise incisions were made in the steel for placing explosives, which were then covered with heavy-duty tape. The controlled detonation shattered the truss into pieces, sending them into the Patapsco River.

Enough bridge debris was cleared from the Dali to refloat it a week after the controlled detonation. The Dali returned to the Port of Baltimore two hours after its departure from the bridge, escorted by several tugboats.

Following the removal of the Dali, workers resumed clearing the wreckage from the federal channel. They continued removing debris from the riverbed by digging out the bottom cord of the remaining truss and cutting it into sections for safe removal. At the time of the ship’s removal, only about one-third of the truss was visible above the water, with the rest buried in the mud on the riverbed.

On May 31, CBS News reported that salvage crews successfully lifted a 470-short-tonne steel section of the Key Bridge truss, which had been buried in the river midline and holding the Dali in place for weeks.

“These final lifts are an important next step to re-opening the full 700-foot width of the navigation channel,” Unified Command said.

In May 2024, Carl Bentzel, Commissioner of the US Federal Maritime Commission (FMC), wrote to President Joe Biden seeking financial aid for staff and businesses affected by the recent events at the Port of Baltimore.

The post Port of Baltimore Set to Reopen After Key Bridge Collapse Disruption appeared first on Global Trade Magazine.

Read also: Climate Change: Challenges and Opportunities for Global Shipping

The high water warning center in Baden-Wuerttemberg indicated that water levels are expected to drop with the onset of drier weather. The section around Maxau is anticipated to reopen for shipping early on Friday.

Meanwhile, shipping activities on the northern sections of the Rhine, including key areas like Duisburg, Cologne, and Duesseldorf, continue to operate normally. The high water levels in the south have rendered vessels unable to pass under bridges, disrupting shipments to Switzerland.

The Rhine River is a critical route for transporting commodities such as minerals, coal, heating oil, grains, and animal feed. In recent years, the river has faced repeated challenges from low water levels due to unusually dry summers, but the current situation contrasts sharply with those conditions.

The post Rhine River Shipping Halted in Southern Germany Due to High Water Levels appeared first on Global Trade Magazine.

Read also: Why Now is an Excellent Time to Switch to Sustainable Logistics Practice

A glut of trucks and stubbornly weak freight markets have been crippling third-party logistics (3PLs) companies for the past two years. These conditions are squeezing margins and putting a serious strain on their financial health.

With 2024 looking like a slow-to-steady year for shipping demand, smart investments are what 3PLs need to take back control of their market. Getting closer to customers with strategically located warehouses, customizable solutions, and dynamic pricing techniques are some approaches to consider. 

Looking beyond traditional solutions, your logistics business can regain its unique proposition, navigating periods of excess capacity and emerging stronger.

Micro-Warehousing and Strategic Partnerships

Some 67% of surveyed customers encountered delivery problems already this year. Strategically located facilities offer a handy alternative to large distribution centers and make for agile retail supply chains.

Micro-fulfillment centers or smaller-scale storage facilities are often positioned in urban areas, bringing inventory closer to the end consumer, and reducing the delay and costs that come with heavy traffic congestion and limited parking. This last-mile optimization strategy is particularly useful for fast-moving items, or popular products, ensuring they are readily available for quick dispatch. The trick is to have advanced inventory algorithms that prioritize high-demand items and logistics planning tools to calculate storage recommendations that can maximize smaller spaces.

Popular supermarket chain Walmart, for example, partnered with three technology companies to open micro-fulfillment centers inside select Walmart stores in the US, and we are seeing a similar strategy for Germany’s largest grocery discounter, Netto. The Edeka Group company joined forces with automated solutions provider, Cimcorp, to help optimize Netto’s processes for shorter lead times and more precise order fulfillment.

Teaming up with logistics providers or co-locating with other retailers in shared warehouses can also improve efficiency by reducing costs and streamlining fulfillment processes.

Value-Added Services (VAS) Expansion

How many times have customers bought products and decided they don’t want them anymore? Twenty-three percent of shoppers admit to “wardrobing” — buying items with the intention of returning them.

Reverse logistics is all about getting that product back from customers and figuring out what to do with it in the best way possible. This could mean sending it to a store, a warehouse, a repair center, or even back to the manufacturer. The main goal is to either get some money back from the product by selling it again or get rid of it cheaply and sustainably through recycling.

While it might not be the trucker’s fault a customer received the wrong order or the product didn’t meet the customer’s standards, 3PLs can help businesses dispose of unwanted or defective products responsibly. Providing this additional value is a great way to maximize excessive capacity and take the burden off retailer clients. By streamlining communications between retailers, warehouses, manufacturers, recyclers, and end customers — with transparent information on warranties and service returns accessible — 3PLs can offer reliable reverse logistics.

Estimated at $8.8 trillion in 2024, the e-commerce market size is large and it’s growing; at a CAGR of 15.8% between 2024 and 2029. However, business expansion across multiple independent online stores requires solid inventory management control. Forecasting tools and warehouse management systems (WMS) that integrate with e-commerce platforms can provide real-time visibility into inventory and order fulfillment to manage stock across multiple warehouses. 

Data-Driven Dynamic Pricing

Traditional fixed pricing can leave 3PL warehouses empty during slow seasons and overflowing during peak times. However, by adjusting prices based on real-time factors like demand and capacity, 3PLs can maximize profits and better serve customers.

3PL companies can adjust their strategies to market fluctuations, differentiating rates for services depending on their current demand, warehouse space, level of difficulty, or load-to-truck ratio. You may use the delivery date to determine the final rate, putting a dynamic markup based on timeliness and your current workload.

To implement dynamic pricing successfully, 3PLs need good data. Real-time visibility into an organization’s entire supply chain enables businesses to enhance decision-making and pivot to maintain a competitive edge. Analyzing historical trends alongside real-time data and market conditions allows you to swiftly identify and address upcoming peaks or slows in demand or storage space. Clear communication with clients and investment in flexible technology is also crucial. This way, 3PLs can understand client needs, adapt to market changes, optimize resources, and become more competitive in the logistics industry.

With a surplus of empty trucks and a slow-to-steady year for shipping demand on the horizon, 3PLs need to get creative to regain control. The key lies in getting closer to customers. Strategically located warehouses can mean faster deliveries and happier clients. 3PLs can bring in new customers with customizable logistics solutions making you a more attractive partner while keeping profit margins balanced with flexible rates based on demand. By thinking outside the box and adopting these strategies, 3PLs can not only weather the current market conditions but emerge as stronger competitors in the logistics industry.

Author bio

Asparuh Koev has worked in the transport and logistics sector for more than two decades. Over the years, he has established several companies including Sciant, an engineering services company later acquired by VMWare, and IntelliCo Solutions, which delivers IT digitization for the transport industry. Koev co-founded Transmetrics in 2013 and, as CEO, he combines IT and domain expertise to grow a company that is bringing truly cutting-edge technologies to the sector.

The post Time To Dust The Vault And Revive Those Forgotten Logistics Ideas appeared first on Global Trade Magazine.

Read also: Ocean Freight Container Rates Soar Amid Global Supply Chain Disruptions

Key findings also include insights into the impact of port congestion and carrier network changes on market dynamics, the cautious restocking behavior of US retailers, and the year-to-date growth in inbound TEUs at major US ports.

China’s volatile container prices surge amid early peak season

The container trading market in China has been highly volatile throughout the month of May, with container prices rising beyond expectations. Average container prices for 40 ft high cube cargo-worthy containers across key ports in China rose by 45% in May, from $2240 in April to $3250 in May 2024. These were around $1698 in November 2023 and around $7178 in September 2021 (at the height of the Covid boom). 

Chart 1: Average container price trends across key ports in China for 40 ft High cube cargo-worthy containers

Capacity shortage and unexpected demand increase are main drivers of price surge 

The surge in container prices is driven by a significant lack of capacity (containers and vessels) that coincides with an unexpected increase in demand for capacity.

Firstly, capacity is low because of Red Sea diversions stretching carriers’ networks thin—essentially carriers wanting to maintain weekly sailings have to deploy additional vessels on their Asia-Europe loops. This decreases the margin for error—making the management of unexpected disruptions very challenging. 

Moreover, the diversions and the subsequent “rebalancing” of carrier networks have led to downstream disruptions like port congestion as short-term changes in carrier networks and “vessel bunching” have led to some ports facing spikes in throughput. Similar to what can be expected on a highway, throughput spikes then lead to traffic jams—here of vessels and containers. 

Secondly, we have seen an unexpected increase in demand for capacity—as shippers are pulling shipments forward in order to avoid the uncertainty of future disruptions in the rest of the 2024. 

“Shippers are pulling shipment dates forward, resulting in a temporary demand for shipping capacity. This is reflected in higher throughput volumes, despite underlying consumer demand and factory orders being weak. 

For instance, consumer spending in the US increased by only 2% in the first quarter of 2024, below the advance estimate of 2.5% and the lowest increase in three quarters. Also, retail inventories excluding autos in the US increased by only 0.3% month-over-month in April 2024, following a 0.4% decline in March 2024, indicating only cautious restocking by retailers. Additionally, new orders for manufactured goods in April rose by $4.3 billion, a 0.7% increase to $588.2 billion, while shipments increased by $5.9 billion or 1% to $590.2 billion, signaling robust demand in the shipping and container logistics market.” Roeloffs explained.

But contrary to the weak underlying structural demand side, the year-to-date container TEUs comparison from 2024 to 2023 shows an average 18% increase in inbound TEUs at major US ports.

Table 1: Year-on-Year Growth of Inbound TEUs at Key US Ports (January-April)

Key US ports such as Los Angeles, Long Beach, and Port of Vancouver reported significant year-on-year growth rates, ranging from 28.1% to 22.37%. 

Short-term Price Bubble

As we monitor the market closely, it’s evident that the current spike in container prices is not sustainable in the long term, as it is not backed by strong underlying demand. Concerns over labor markets and high-interest rates imply that consumers are likely to reduce spending, which could lead to a decline in demand for goods and, consequently, a reduction in shipping volumes in the near term, unless the demand revival becomes stronger and the supply capacity soak up intensifies. 

Industry Sentiment remains volatile

Industry participants surveyed during May 2024 overwhelmingly indicated expectations of higher container price hikes. The Container Price Sentiment Index (xCPSI) exhibited significant volatility in its readings, reflecting the challenges arising from the Iran-Israel conflict, evolving geopolitical economic trade relationships, and persistent climatic changes causing droughts, compelling businesses to fortify their supply chains.

Chart 2: xCPSI, Container Price Sentiment Index as on 4 June 2024, by Container xChange

Chart 3: Monthly comparison of xCPSI survey results (Apri-May) 2024, by Container xChange

Market Outlook

“Given these factors, we expect that the elevated container prices we’ve seen in recent months may not be sustainable,” shared Christian Roeloffs, co-founder and CEO of Container xChange. “As the initial rush to restock inventories subsides and the real demand from consumers and businesses remains flat, we anticipate a stabilization or even a decline in container prices in the mid-term. The market is showing signs of volatility driven by short-term factors, rather than a sustained increase in demand.”

The underlying macroeconomic indicators suggest a more tempered outlook for the coming months. Consumer spending growth remains sluggish, and retail inventories are only modestly increasing. Additionally, the subdued consumer sentiment reflects ongoing concerns about labor markets and inflation, which are likely to dampen consumer demand further.

Visit Container xChange Market Intelligence Hub for similar analysis and reports.  

The post Container Price Bubble Expected to Burst in H2 2024 Amid Shaky Consumer Confidence appeared first on Global Trade Magazine.

Read also: More Than Just Trucks: 5 Diverse Career Paths With A Cdl

That trend is changing as more attention falls on fleet operating costs and long-term optimization. However, views still differ. Even as the industry comes around to the importance of this practice, approaches to when semi-truck tires should be balanced vary widely.

The Run-to-Failure Approach

Many fleets operate on the run-to-failure method. This approach isn’t unique to tire balancing but may be more common than other repair concerns because many companies still don’t consider it mission-critical. It takes time to balance tires — especially when there are 18 of them — so many businesses only do it when a tangible issue arises.

The idea that this method saves time and money is a misconception. Tires account for 2% of total average fleet costs and don’t last as long without balancing. Unbalanced tires will also limit trucks’ fuel economy, and fuel accounts for 28% of all expenses. 

Fleets that only balance their tires when an issue is already visible lose more money to inefficiency and frequent tire replacements. However, these higher expenses aren’t immediately noticeable, which leads to widespread misconceptions that regular balancing is less efficient or more costly.

The Mileage Approach

As fleets move away from run-to-failure methods, many embrace a mileage-based approach. This is the most straightforward way to be proactive about tire balancing. Companies simply follow their OEM’s recommendations about balancing tires after so many miles.

Many tire companies recommend balancing every 20,000 miles. Considering the average semi-truck drives over 62,000 miles annually, that means at least three balancing-related maintenance stops each year per truck. Small operations may not have an issue with those figures, but they can add up to significant downtime across a larger fleet.

Of course, this downtime is often less impactful than the long-term productivity losses and costs stemming from improper balancing. However, the mileage approach still has some efficiency problems. 

Consider that the need to balance tires doesn’t always happen along a predictable schedule. Road conditions and truck-specific factors substantially impact tire wear. Consequently, the 20,000-mile benchmark may be too wide a gap for some vehicles and too frequent a schedule for others. 

The Data-Based Approach

Recent digitization trends in the industry have led to the emergence of a newer, more precise method. Up to 82% of logistics companies will adopt predictive analytics over the next few years, and this technology lets fleets take a more proactive, vehicle-specific approach to tire balancing.

It starts with Internet of Things (IoT) sensors, which gather real-time data from a truck, such as its vibrations, tire inflation levels, engine performance factors and more. The system alerts fleet managers when this information suggests the vehicle will need maintenance. In the context of tire balancing, that means getting real-time updates when a tire is having issues.

The biggest advantage of this approach is that, unlike the mileage method, it tailors schedules to specific vehicles. Fleets balance different trucks’ tires as needed, not by a general number that may or may not apply to the situation. This precision removes worries over unnecessary downtime from unneeded balancing. 

At the same time, predictive analytics recognizes tire wear before it’s evident to drivers. Consequently, this approach also reduces downtime and costs compared to the run-to-failure method. Despite these benefits, this tech-centric strategy can be expensive to implement and challenging to get right at first.

Which Tire Balancing Approach Is Best?

Predictive maintenance offers the most potential for time and cost reduction of any tire balancing strategy. However, it’s also the hardest to implement. Upfront costs aside, the AI models analyzing this data are tricky to program correctly and can produce many false positives without careful calibration, leading to more downtime.

Given the costs and complexity, a data-driven approach isn’t ideal for everyone. Smaller fleets or those with less experience with AI or IoT technology may see more improvement from the mileage method.

In some cases, a hybrid approach is the best way forward. Fleets may use predictive maintenance for their most heavily used vehicles while going off mileage for the rest. This mix of solutions makes it easier to balance costs and efficiency. Generally, a run-to-failure approach is not ideal.

How to Get More Out of Tire Balancing

Regardless of which approach a fleet chooses, it takes more than just an optimal schedule to get tire balancing right. Companies must also use the right equipment, which — much like balancing approaches themselves — vary based on circumstances.

A 3D automatic balancer can calculate tire width, diameter and distance between weight locations in a matter of seconds, making them the most efficient option. Still, this speed doesn’t always guarantee accuracy, and 3D balancers can be expensive. Consequently, smaller operations may benefit from a cheaper but more manual 2D balancer.

It’s also important to recognize that even the most sophisticated equipment is only reliable if it’s calibrated correctly and employees know how to use it. At the same time, the industry will need another 101,989 auto technicians by 2026, but entry into the sector is falling. As a result, it can be hard to get enough experience in the garage to ensure a fleet uses these tools correctly.

The solution is often to emphasize training and upskilling in current employees. Any technical skill is teachable, but fleets must educate workers before implementing new balancing technology. That’s even more important when adopting a more advanced, data-based approach. 

Even Advanced Tires Need Balancing

While tires have come a long way, they’re still not invincible. Even the most cutting-edge versions need balancing, and the ideal way to approach this maintenance isn’t always obvious.

Heavily manual, run-to-failure strategies are never ideal, but the best option beyond that depends on a fleet’s budget, size, needs and workforce. Accounting for these factors is the first step to more cost-effective tire balancing.

The post When Should You Prioritize Tire Balancing for Your Semi-Truck? appeared first on Global Trade Magazine.