Monday, December 30, 2013


A catastrophe waiting to happen.  From American Shipper--
Containership oversupply to continue
Monday, December 30, 2013
The amount of capacity on idle, unemployed containerships reached reached 718,000 TEU in mid-December, according to Alphaliner, and "is expected to continue to rise until the end of March, as the current excess supply is aggravated by accelerating vessel deliveries due in the first half of 2014." Idle capacity averaged 595,000 TEU this year compared to 651,000 TEU in 2012, it said. The information service forecasts that the idle fleet will not be eliminated in 2014 and 2015.
In the most recent edition of its weekly newsletter, Alphaliner said, "Although demand is expected to pick up in April, as several East-West services withdrawn for the winter slack season are reinstated, it will not be sufficient to absorb all of the excess supply."
It forecasts that the world container fleet, with capacity of 17.3 million TEU at the end of this year, will gain 1.62 million TEU of new capacity in 2014 and 1.76 million TEU of in 2015.

Friday, December 27, 2013


Sometimes a two-step #supplychainsegmentation is needed.  One segmenting may not be enough. 


#3PLsegmentation creates tailored, successful value propositions.

Thursday, December 26, 2013


How many #3PLs have a strategy?  A strategy is more than getting more customers.  How many have explained the strategy to their employees?

Monday, December 23, 2013


Segmentation can help 3PLs and other logistics service providers to--

1) Improve your service offering

2) Focus your marketing message for each segment

3) Enable your sales force to pursue better opportunities, increase sales, improve customer retention, and increase revenues

4) Obtain higher quality customers and revenues


The new mega ships / container ships are longer than an aircraft carrier.  How will carriers fill them?

Sunday, December 22, 2013


Supply chain segmentation can be done a needs-based, value-based, or cost-based approach.

Friday, December 20, 2013


Article from Forbes.


China clarifies VAT tax
Friday, December 20, 2013
China has issued a new document to clarify value-added tax measures that went into effect in Aug. 1, exempting shipping transportation from the law. The measures had caused concern in the shipping and logistics industry both here and in China.
Federal Maritime Commissioner William P. Doyle said the VAT was discussed in October in Chicago at a bilateral maritime consultation meeting that the U.S. and China hold each year.
In August, the National Industrial Transportation League, told the FMC, the Department of State and the U.S. Maritime Administration that the VAT “has created much confusion as to its application and resulting impacts, especially on freight moving between the two countries."
Carlton said China was saying the 6-percent VAT is applicable to domestic shipping, logistics and freight forwarding in China and not specifically to international ocean freight; there were reports that “some ocean carriers and non-vessel operating common carriers (NVOCCs) are simply passing on the tax to their customers in the form of surcharges or service charges even when the freight charges have been 'pre-paid.'"
In a presentation in October to the World Congress of FIATA, the International Federation of Freight Forwarders Associations, Yuntao Yang, the general counsel at Sinotrans and CSC Holdings, said the VAT had increased the burden to freight forwarders and that “numbers of freight forwarders are in danger of deficit due to the increased tax payment.”
The FMC said that on Dec. 13, China released a document Circular 106, which supersedes the original document on the VAT effective Jan. 1, 2014.
"Now that the Circular 106 has been issued, I would like to hear from industry stakeholders their thoughts regarding this latest development in response to their concerns," Doyle said.
The FMC posted the following unofficial summary of Circular 106 posted on its website:
The China Ministry of Finance (MOF) and the State Administration of Taxation (SAT) have now jointly agreed to exempt shipping transportation from their recently implemented VAT law. It is understood the exemption will be retroactive to 1 August 2013, when the current arrangements first came into effect. A joint circular (Caishui 2013 No 106) has been issued by the MOF and SAT explaining the exemption.
Circular 106 removes the unequal tax treatment of foreign shipping companies. Chinese law requires foreign shipping companies to use either wholly-owned subsidiaries or third-party agents to collect ocean freight, while Chinese shipping companies can charge shippers directly without engaging a freight forwarder. Under the previous Business Tax regime, freight forwarders were allowed to deduct international freight from their taxable income. However, under Circular 37, this deduction is no longer permitted. Instead, starting from Aug. 1, 2013, they are required to pay a 6-percent VAT charge, as well as local surcharges (including the urban maintenance and construction tax, education levy and local education levy) on gross proceeds collected from clients, which means the foreign shipping companies end up bearing more tax burden than Chinese shipping companies.
In attachment 2 of Circular 106, the deduction of international freight from the taxable income of freight forwarders is allowed, which draws the cost of foreign shipping companies back to the same level as domestic shipping companies.
A press release on the FMC website provides additional information including a link to the Chinese language document. Richard Gluck, an attorney at Garvey Schubert Barer, said his assistant and translator tells him “the Chinese language document does not spell out any specifics about the VAT exemption. So, I think it is safe to say that details are still to be published.”

Thursday, December 19, 2013


Carriers made the overcapacity problem that scares them. 

From American Shippper--
Drewry says carriers 'spooked' by overcapacity
Thursday, December 19, 2013
In a new analysis, Drewry Supply Chain Advisors has found that "carriers continue to be spooked by the specter of imminent big ship deliveries and so are fighting to hold onto market share.
"This market behavior will put further pressure on freight rates through 2014."
It added that the issue really comes down to a lack of demand and an overabundance of supply.
Another container shipping analyst, Alphaliner, noted in the November 26 issue of its weekly newsletter that the three largest container carriers — Maersk, MSC and CMA CGM — have on order capacity equal to 15.6 percent of their current combined fleet; the next 18 largest carriers have orders equal to 19.8 percent of their existing fleet.
"Despite the challenge they face, the second-tier carriers continue to have a strong appetite for new capacity in their bid to lower operating costs to match the scale economies enjoyed by the largest carriers, and they continue to forge new capacity alliances in this respect," Alphaliner wrote.
Drewry said, "At a trade-route level, carriers have been relatively successful in matching supply with traffic growth, helped by some improvement in overall demand levels. However, they have generally failed to turn this advantage into stronger pricing."
As a result, Drewry said, "there is an increasing disconnect between market fundamentals and freight rates. Despite respectable load factors, carriers are struggling to achieve sustainable rate rises on the spot market and this is strengthening cargo owners’ hand in contract rate negotiations."
Drewry's own Global Freight Index, a weighted average across all main trades excluding Intra-Asia, recovered in November, following two consecutive months of decline. It was up 10 percent over October to $1,957 per 40 foot container.
It attributed that increase to enforcement of general rate increases on several Asia-origin trades, but said "how sustainable these increases prove to be remains open to question with peak season now fully concluded."

Wednesday, December 18, 2013


Same Players, Different Rules: FMC examines shipping alliances
Wednesday, December 18, 2013
Members of the U.S. Federal Maritime Commission met with regulators from China and the European Commission on Tuesday as all three review plans by container shipping companies to form new or expanded mega-alliances.
While most of the discussions were held privately by the regulators, FMC Chairman Mario Cordero and members of the delegations from China and Europe spoke briefly about their regulatory summit publicly at the end of the day and in interviews with members of the press.
The summit was early on billed as a global regulatory summit on the P3 Alliance, but was a general discussion of shipping regulation.
Cordero, a self described Los Angeles Dodgers fan, compared the meeting to a group of baseball umpires from different leagues meeting and talking with each other.
“We did not make any calls today; no one was thrown out of the game. Our respective leagues have different rules, but we have the same players,” he noted.
Cordero said he called the summit “given the rapidly changing face of the maritime sector, which demands out of the box thinking.”
Maersk, MSC and CMA CGM, the world’s three largest container liner companies, announced in June plans to form the P3 alliance, a vessel-sharing partnership, which they hope to implement in the second quarter of next year.
Since then, the so-called G6 vessel-sharing alliance has announced plans to expand into the Asia-West Coast and the transatlantic trades in the second quarter of 2014 in addition to the Asia-Europe and Asia-East Coast trades, where the G6 carriers (APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK and OOCL) cooperate today.
“Scope and size of changes taking place require that governments dialogue and share their views on global regulatory challenges and impacts on the industry,” said Cordero.
He also noted an executive order issued by President Obama last year encouraged international regulatory cooperation.
The objective of the meeting was for the different country’s agencies to share expertise and gain insight from each other, and that objective was met, said Cordero.
Li Hongyin, deputy director-general of the Bureau of Water Transport, Ministry of Transport, headed up the Chinese delegation. Alliances such as the P3 are reviewed by both the Ministry of Commerce and Ministry of Transport in China.
Jason Wang, secretary of the Shanghai Shipping Exchange, who also acted as translator for Li, said the Chinese government, like the FMC, has asked the P3 carriers for additional information as part of its review.
Li said that “Chinese shippers are very concerned about this mega alliance” and that the ministry has gotten some feedback from the China Shippers Association.
(Earlier this month, the Asian Shippers Council stated that the one of its members, the China Shippers Association, has raised concerns with Chinese regulators including the State Development and Reform Commission, the Ministry of Transportation and the Ministry of Commerce, "asking them to intervene to block the formation of P3 in accordance with China's antitrust law.")
Li said the Ministry of Transport requests the P3 and other carriers to file their vessel sharing agreements, rate agreements and other agreements with the ministry, and that “no alliance is allowed to damage fair competition. If we get complaints from other market players, we can start an investigation immediately.
“According to Chinese law, if the alliance has a market share exceeding 30 percent for one individual trade lane for one consecutive year, we will also start our investigation.”
Li said that his personal understanding was that there is no quantitative standard for determining “damage,” but that his view was that if an alliance can to some extent control the rates of one trade lane, that would be deemed as damage and harmful to other market competitors.
COSCO, China’s largest shipping company, is a member of the CKYH alliance with with “K” Line, Yang Ming and Hanjin. Asked if the CKYH alliance might expand to be on a more equal footing with the P3 or G6 alliance, Li said such a decision would not be made by the government — “whether to form an alliance or expand an alliance is completely decided by the enterprise itself.”
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Tuesday, December 17, 2013


Segmentation present a better way for #SupplyChainDesign because it is targeted to meet company strategic goals.

Monday, December 16, 2013


FMC will hold regulatory summit Tuesday
Monday, December 16, 2013
The Federal Maritime Commission will hold its Global Regulatory Summit on shipping Dec. 17.
The agency confirmed regulators from the People’s Republic of China (PRC) and the European Union will attend and said commissioners will discuss global regulatory issues including carrier alliances, vessel-sharing agreements, and the impact of operational agreements on international trade.
The London-based consultants Drewry said in the current issue of its Container Insight Weekly, "The current ocean carrier drive for greater economies of scale through bigger alliances has far reaching consequences for the container industry that regulatory authorities will find difficult to agree on during their forthcoming meeting.”
Mario Cordero, chairman of the FMC, originally called for the summit in October to discuss plans by Maersk, MSC and CMA CGM, the world's three largest carriers, to begin operating what they call the P3 Network in the Asia-Europe, transpacific and transatlantic trades in the second quarter of next year.
Since then, the so-called G6 vessel-sharing alliance has announced plans to expand into the Asia-West Coast and the transatlantic trades in the second quarter of 2014 in addition to the Asia-Europe and Asia-East Coast trades where the G6 carriers (APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK and OOCL) cooperate today.
"We welcome the exchange of views with our regulatory counterparts,” said Cordero. "The shipping industry is dynamic as evidenced by the changing nature of agreements. The effects of these trends will have global implications that demand an international understanding of our changing industry."
Ashley Craig, a Washington, D.C.-based partner with the law firm Venable, said he was “inclined to say, at this moment, I don't see the commission seeking an injunction on the P3."
At remarks before the Washington, D.C, chapter of the Propeller Club last week, he said he felt Cordero was "potentially telegraphing to carriers, shippers and other stakeholders that the FMC was not going to try and dismantle this thing (the P3), but will probably try to strike a balance, getting the carriers to agree to more clarity, but letting the agreement take effect."
Drewry said, “The G6 Alliance’s proposed expansion into the Asia/West Coast North America and North Europe/East Coast North America trade lanes in 2Q 2014 is just another step in the current process of ocean carrier schedule rationalization. More is set to come, including the merging of services, should it be approved by regulatory authorities. Greater economies of scale are required to compete against the P3 alliance and/or make a profit, not just improved frequency.”
Drewry continued, “G6’s proposed alliance expansion gives the regulatory authorities much to think about, therefore, and it is far from clear if it will be approved."
It said its view is that "the advantages gained through the creation of bigger alliances will outweigh the disadvantages. Shippers will get a better service, and there will still be room for sufficient service differentiation between ocean carriers.”
For his part, Craig said, "From what I can put together, the PRC is digging in a bit here and likely to insist their carriers' interests are included in some way and, if not, they are going to call for substantive change or some sort of oversight."
While most of the summit will be held in private, the FMC said “the public is invited to attend the closing remarks at 4:00 in the FMC Main Hearing Room."
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#SupplyChainSegmenation can be used for important company issues, including--
  • Differing markets
  • Customer portfolios
  • Product portfolios
  • Inventory yield
  • Omnichannel sales
  • Global operations
  • Supply chain risk

Sunday, December 15, 2013

Segmenting Supply Chains

Supply chain segmentation can create value, counter the monolithic supply chain, and streamline the tactical chaos and noise.

Thursday, December 12, 2013


#Supplychainrisk is created by holes in the flow of products and information, with gaps in processes, and by lack of proper technology.

Wednesday, December 11, 2013


The best #supplychainmetrics reflect what is important to top management. 


Supply chain #duediligence is about more than accounting information or logistics contracts. 

Tuesday, December 10, 2013


Some firms realize that cost-based analyses only do so much—and leave much unanswered, including the shortcomings in being able to truly track costs directly to parts of the business and to customers.  Those approaches do not adequate to address product or customer portfolios, inventory yield, omnichannel, inconsistent performance, and other important issues, The supply chain, no matter how defined, touches every part of their businesses, both external and internal.  Value based supply chain segmentation presents a way to better understand and to assess the business.


Monday, December 9, 2013


Supply chain segmentation is a superior best practice.  It should be done on value, not on cost of service.


Risk / disruption is caused by and increased by internal factors, as well as external ones. Many companies confuse insurance with supply chain risk mitigation.  Also, many companies have no risk mitigation program.

Sunday, December 8, 2013

WTO Global Trade

New global trade deal. What does this mean to global logistics?  What does it mean to those predicting increased onshoring?

Friday, December 6, 2013


How frequently should a company review its network?  With growth, customer changes, supplier changes, product changes, geography changes, service requirements, etc?  Every five years?  Or?

Thursday, December 5, 2013


Supply chain cycle time compression and lean logistic share much in common as to goals and approach.  Agree?

Wednesday, December 4, 2013


This article may be of interest.  While it is targeted for a specific region of the world, it should still be of value for logistics parks, regardless of location.

Tuesday, December 3, 2013


Technology is a process enabler.  If there are process problems, then many benefits of technology go unused.  This is especially true with international and global supply chains with their length, number of participants, and complexity.


Is there one dominant reason that logistics outsourcing arrangements do not succeed as planned by both the buyer and seller?

Monday, December 2, 2013


How large a warehouse and how many SKUs does it take to go from wide-aisle to narrow aisle?


Logistics and traffic people talk rates per hundredweight, cubic meter, metric ton, container, trailer, or some other version.  None of that translates into how C-levels view costs.


For shippers, what is the biggest freight cost issue now?  What do you see as the biggest issue twelve months from now?


Shipper groups worldwide express concern about P3.  Read more at-- 

Sunday, December 1, 2013


Organizations are built from the inside out.  It is all about the organization. If it were really about the customer, as claimed, it would be built outside-in.


An underlying problem to effective supply chain management is organizing by function--traffic, warehousing, etc--and not by process.