Sunday, May 31, 2015


Manufacturers build and sell their products to other manufacturers, retailers and wholesalers.  They usually do not sell direct to end-user customers.  As a result, they do not know end-customers.  Supply chains are meant to deliver low costs in the movement to factories and from them.
E-commerce is an opportunity for manufacturers.  There are large B2B opportunities with e-commerce sales.  These often involve accepting online orders and shipping from a factory or warehouse.  It is a basic program.
Advancing their position in e-commerce creates conflicts with manufacturers.  One, they do not practice—or understand—e-commerce immediacy with customer orders.  This fails to recognize and address what is happening with e-commerce.
Two, manufacturers often have good brand identity.  Yet, because of whom they sell to—intermediates in the larger view supply and selling chains, they do not sell to end-users.  They battle the large opportunity with online sales against selling directly to customers of their customers. 
As a result, their supply chains do not have the downstream focus and capabilities, especially to deal with the vital e-commerce immediacy. 
Manufacturers have to change.  The sales opportunities are too large to not participate directly in it.  It requires building a supply chain that can deliver e-commerce immediacy—and accepting a new way of looking at supply chains from their tradition low-cost views. E-commerce immediacy requires new supply chains—not relabeling the same-old practices.  If they do not, the supply chains meant for e-commerce will not succeed.  And that will hurt sales and may leave them watching competitors adapt and grow—at their expense.
They need the new supply chain management.

Saturday, May 30, 2015


E-commerce and E-commerce Immediacy are about Supply Chain Management.

Friday, May 29, 2015


Stifel: Global forwarders dividing into haves and have-nots

Investment bank's transportation and logistics group found the six publicly traded forwarders split among those focused on margin and those struggling with IT and cultural issues.

The Stifel Transportation & Logistics Research Group said Thursday it sees a group of haves and have-nots emerging in the global publicly-owned forwarder industry in 2015.
In a recent research note, Stifel said Expeditors International, Kuehne + Nagel, and DSV have outperformed counterparts Panalpina, Deutsche Post DHL, and UTi Worldwide.
Expeditors was the only forwarder among the group to grow air or ocean volumes double-digits year over year - growing 13 percent and 12 percent, respectively - in the first quarter of 2015.
“Expeditors International benefits when supply chains get thrown out of whack,” Stifel said, “due to its uniform, high-quality global IT operating system used by good people who execute on efficient processes and are well-incentivized to not only handle the freight properly but profitably as well.”
Meanwhile, K+N was praised by Stifel for focusing on high margins in its forwarding division, while DSV was also cited for its emphasis on margin and gaining market share.
“It would not surprise us for (DSV) to make a splash with a significant purchase in 2015,” Stifel said.
On the other side of the coin, UTi “is struggling to get traction again after mass disruption as a result of its Transformation (internal program) – simultaneous disruption in systems, personnel, and processes, which led to poor margins and forced the company into a dilutive refinancing a little over a year ago. With former (chief operating officer) Ed Feitzinger, stepping in roughly six months ago for Eric Kirchner as CEO, UTi is attempting to stop the bleeding and focus on regaining stability.”
DHL is less reliant on forwarding revenue that other publicly-traded forwarders, but Stifel said the segment is still serving as a “drag” on overall corporate earnings in the near-term.
Finally, Stifel said Panalpina has been hurt more than the other public forwarders by a decline in energy prices and business in recent times, and that “new leadership has driven significant turnover in personnel and changes to processes and systems, which take time to stabilize/improve. Since the company is not dealing with as many systems and cultural issues as DHL or UTi, we believe its transition period should be less volatile.”
As for the global trade market underlying the forwarding business, Stifel said it continued to expand in the first quarter of 2015 compared to the first quarter of 2014.
“Airfreight led the way in terms of volume gains, and not just in the transpacific eastbound lane due to U.S. West Coast port congestion issues,” the group said. “Ocean freight remains mired in its own predicament, as slow global trade growth is exceeded by vessel capacity growth, pressuring carrier and forwarder profitability.”


Recommendations to not address what to do about present situation with present and pending megas.  Resolution requires statesmanship by stakeholders--lines, ports, and shippers.

OECD questions benefits of mega-ships

The benefits of upsizing are beginning to plateau and require more infrastructure investment, according to a new report by the OECD's International Transport Forum.

OECD analyzes mega-ship impact. A new report by the OECD's International Transport Forum says, “There are cost savings of mega-ships, but these are decreasing and might not even be realized.”
The 108-page paper, titled “The Impact of Mega-Ships,” notes the maximum size of container ships has nearly doubled over the last decade. The largest today, the MSC Oscar, has a capacity of 19,224 TEUs. China Shipping’s CSCL Globe has a capacity of 19,100 TEU.
Even bigger containerships, able to carry 21,000-22,000 TEUs, are said to be on order. Just this week, Lloyd’s List said ocean carrier MSC is rumored “to be finalizing a newbuilding order for up to four 20,000-TEU containerships at Hyundai Heavy Industries.”
That doubling “has reduced total vessel costs per transported container by roughly a third. However, these cost savings are decreasing with size; the cost savings of the newest generation of containerships are four to six times smaller than the savings from the previous round of upsizing,” said the ITF report.
“Approximately 60 percent of the cost savings of the most recent container ships are related to more efficient engines and not to scale," the report added. "In addition, mega-ship development and the related container fleet capacity growth has taken place despite sluggish growth of world containerized seaborne trade.”
The paper contends, “The massive ordering of new mega-ships has resulted in oversupply of container ships, which will most likely dampen some of the cost savings due to larger ships, as low demand results in fewer savings per transported container.”
For example, if a ship is not fully loaded, it will not realize its potential savings. The report points to a 2013 study that contended “the utilization rate that an 18,000-TEU ship would need to have to achieve cost savings relative to a fully-loaded 14,000-TEU ship is approximately 91 percent.”
The report notes larger ships may require substantial improvements to “existing infrastructure, such as bridge height, river width/depth, quay wall strengthening, berth deepening, canals/locks and port equipment (crane height, outreach).
“Mega-ships also require expansion of infrastructure to cater to the higher peaks related to mega-ships; as a result, more physical yard and berth capacity is needed.”
The report estimates additional transport costs related to mega-ships could amount to $400 million per year with about a third going to port equipment, a third to dredging, and a third to port infrastructure and port hinterland costs.
“A substantial share of the dredging, infrastructure and hinterland connection costs are costs to the public sector in many countries,” it noted.
According to the report, "supply chain risks related to bigger containerships are rising” with concerns looming about the insurability of mega-ships and the costs of potential salvage in case of accidents.
“Mega-ships also lead to service and cargo concentration, reduced choice and more limited supply chain resilience, especially since bigger ships have coincided with increased cooperation of the main shipping lines in four alliances,” the report said.
Public policy makers need to take better account of the “how the costs for the public sector imposed by mega-ships could be covered. Many ports and countries have, either accidentally or on purpose, encouraged the development of mega-ships," according to the report. "More balanced decision making would be needed, with clearer alignment of incentives to public interests, policy support to enhance supply chain productivity, more regional collaboration and the creation of an appropriate forum for a discussion between liner companies and all other relevant transport actors.”
ITF raises a red flag about further increasing maximum container ship size and draws attention to the phenomena of cascading, whereby as the largest ships are introduced into the trades between Asia and Europe and Asia and the Mediterranean, ships formerly on those routes are displaced into trades to North America, South America, and Africa.
“Introduction of one hundred 24,000-TEU ships in 2020 would require substantial investments in those places where these ships would be first introduced (Far East, North Europe, Mediterranean), but would also - via cascading effects - result in introduction of 19,000-TEU ships in North America and 14,000-TEU ships in South America and Africa. This would imply additional investment requirements there as well.
“The potential cost savings to carriers appear to be fairly marginal, but infrastructure upsizing costs could be phenomenal,” the report says.
ITF makes a number of policy recommendations in the report:
  • Countries and ports should make more balanced decisions on accommodating mega-ships in comparison to the overall economic benefits, including port income, savings to local shippers, and whether such savings will be sufficient to pay for such costs.
  • Accidental subsidies or misaligned policies that encourage upsizing, or that provide public resources to container shipping without appropriate recovery of costs should be eliminated.
  • Policy support should be provided to ports so they can enhance supply chain productivity and innovation.
  • Ports and regulators should consider collaboration at a regional and cross-port level. As container shipping lines increasingly consolidate and cooperate, so could countries, port authorities and regulators at a strategic planning level.
  • Forums should be held for liner companies to discuss their plans with other transport stakeholders. Container lines have typically not consulted anyone on new mega-ships, before they ordered them.


How many--and which--container lines will go bankrupt?  What is happening is not sustainable.


Container shipping rates fall to another all-time low on Asia-Europe

By Mike Wackett
05.29.2015 · Posted in Loadstar posts, Sea FavoriteLoadingAdd to favorites
120321 APM Terminals Tangier Crane driver
What goes down often stays down and this appears to be the stark reality for beleaguered Asia-Europe container lines after another dismal week of plummeting spot rates with little to suggest a recovery anytime soon.
The all-important Shanghai Containerized Freight Index (SCFI) shed another $102 per teu from Asia to North Europe this week with the index for Mediterranean destinations declining by a further $115 per teu.
It leaves the SCFI at $342 per teu for North European ports and $466 per teu for the Mediterranean – representing an all-time low for North Europe.
Moreover, sources report some carriers are offering rates as low as $275-300 per teu to North Europe and that the planned 1 June general rate increases (GRI) of $800-1,000 per teu have been “laughed out of the door” by shippers.
Current rates appear to be sub-economic, even for 18,000 teu-plus ultra large container vessels (ULCVs), and after a general good first quarter many carriers will now be trading in the red and may feel powerless to turnaround the situation by the end of the half-year reporting period.
For example Hapag-Lloyd reported an average rate per teu in Q1 of $1,086 for its Asia – Europe business, but that will no doubt fall substantially in the second three months reflecting the intensity of the rate war.
According to the UK-based container broker FIS the average year-to-date rate on the Asia – North Europe trade has plunged to just $724 per teu, compared to $1,292 per teu during the same period of 2014, representing a painful 44% decline.
Clearly the current freight rate levels are unsustainable for Asia – Europe carriers who must all be urgently rethinking their strategies.
This even applies to Maersk Line, who although benefitting from deeper pockets than many of its competitors has a duty to shareholders and investors to act responsibly in its quest to regain “lost” market share.
It is perhaps indicative of what the world’s two largest carriers, which together form the 2M alliance, are planning strategy-wise that they remain the only significant part of the market not to have announced blanked sailings for June in support of the GRIs.
In week 24, commencing 8 June, the CKYHE alliance will skip its NE2 and NE8 services, while the following week, commencing 15 June will see the G6 alliance skip Loop 7 and the O3 partners blank the EUR2 service.
In week 26, commencing 22 June, CKYHE will again skip the NE2 service, the O3 will blank the EUR3 service and the G6 has cancelled its Loop 6 sailing.
Elsewhere, SCFI spot rates for Asia to the US west and east coasts improved by $114 per 40ft and $75 per 40ft to reach $1,526 and $3,216 per 40ft respectively, although FIS noted that the rates remain 18% lower than in the corresponding period of 2014.
The increases are in fact a disappointing reaction to the Transpacific Stabilisation Agreement’s (TSA) recommendation to member carriers of a $600 per 40ft increase effective 1 June, however carriers plying these tradelanes are not yet suffering from the rate crisis that is seriously impacting the profitability of Asia-Europe routes.

Thursday, May 28, 2015


With divorce rate like turnover between 3PLs and customers, is there really partnership or smouldering dissatisfaction between parties?

What are the 3 top drivers for poor retention between 3PLs and customers?


How do you see supply chain differences with E-Commerce Immediacy for Specialty Retailers vs Mass Mechandisers?


How do you see Supply Chain Ecommerce Immediacy differences for Retailers as to private label/ store brand vs name brand?


It is interesting to see Alibaba stepping up to the E-Commerce Immediacy requirement.

Alibaba to Bolster Next-Day Delivery Services

Logistics partners are pressed to crack down on fake orders

Alibaba's Jack Ma in Guiyang, China, on May 26. The company said its wants to bolster its capacity for same-day delivery services. ENLARGE
Alibaba's Jack Ma in Guiyang, China, on May 26. The company said its wants to bolster its capacity for same-day delivery services. Photo: Zuma Press
HANGZHOU, China— Alibaba Group Holding Ltd.BABA-1.50% is pushing harder to bring accelerated delivery to more Chinese cities amid rising customer expectations, even as it presses its logistics partners to crack down on practices that hurt its reputation.
The Chinese e-commerce company’s Cainiao logistics affiliate hopes to offer next-day deliveries in 50 cities by the end of this year, up from 34 cities currently, said Judy Tong, president of Cainiao.
In a presentation to Cainiao’s logistics and delivery partners on Thursday, she also urged the logistics companies it works with to avoid a fierce price war that she said has hurt service standards. If it continues, “ultimately we will lose this market,” she told the audience.
If we find that you knowingly were engaged in falsifying credibility just to make profits, sorry, but on our platform this is something that deserves a beheading.
—Cainiao President Judy Tong
Competition is rising among China’s e-commerce players to provide better delivery services. Alibaba’s main e-commerce rival, Inc.,JD-1.02% said last year it provided same-day deliveries in 43 cities and next-day deliveries in another 256 cities in China. It has since expanded such services but said a direct comparison based on cities wasn’t immediately available.
Unlike, which operates its own logistics services, Alibaba relies on third-party providers. Alibaba’s approach is intended to keep costs down but also gives it less control over the services that bring packages to Chinese consumers.
In an interview, Ms. Tong said Cainiao would continue to crack down on delivery companies that help merchants engage in fake transactions.
Some merchants on Alibaba’s platforms engage in a practice known as “brushing,” which involves generating fake orders to artificially inflate their sales volume, which then pushes a seller higher in search-engine results. Delivery companies sometimes work with merchants to help them with the practice, often delivering empty boxes to the “brushers,” but Alibaba executives have said the fake numbers hurt its credibility.
In April, Cainiao terminated the services of 11 courier companies from its platform either on suspicion of being involved in fake transactions or for failing to share data with the network’s platform.
“Our attitude to our partners is very clear. If we find that you knowingly were engaged in falsifying credibility just to make profits, sorry, but on our platform this is something that deserves a beheading. This is our high-voltage line,” Ms. Tong said.
Over the past two years, Alibaba has sought to improve China’s fragmented logistics industry to try to make deliveries of orders from Alibaba’s popular shopping sites quicker and more reliable. It holds a 48% stake in Cainiao, which said in 2013 it would invest $16 billion in logistics over five to eight years.
The bulk of that investment so far has gone into acquiring land and establishing a basic nationwide infrastructure of warehouses in at least eight cities, Ms. Tong said.
The network already has one million square meters of warehouse space and is set to more than double that capacity this year. In addition, Cainiao plans to buy another two million square meters of land this year, Ms. Tong said.
In the U.S., Inc.AMZN-0.81% is also casting its lot with ever-faster deliveries, and even making it free. The online retailer said its same-day delivery option—available in 14 metropolitan areas—will now come at no extra fee to those who pay $99 a year for an Amazon Prime membership. Amazon said Prime members wanting same-day delivery will no longer pay the $5.99 per-order fee for goods purchased by noon, provided their order size is at least $35. In return, the Seattle company pledges to get users their merchandise by 9 p.m. that night.
An even speedier service, Prime Now, is already free in three overlapping cities for customers who need their merchandise in about two hours. The Prime Now same-day service is available in three cities with same-day delivery—New York, Atlanta and Baltimore—and is already free for Prime customers that live within spitting distance of a warehouse. For delivery within an hour it costs $7.99.


A problem with supply chain analytics is lack of Supply Chain Domain Expertise to complement it.


Do stories on supply chain talent shortage reflect more about the talent or the talent evaluators?


The constant push for lower transport costs hinders supply chain performance and total costs. 

Wednesday, May 27, 2015



The one-size-fits-all monolithic approach to supply chain management is dead. E-commerce with its evolution to Immediacy has rendered its death. A new supply chain driving Immediacy reigns. Long live the king.
Many firms are now trying to deal with the two supply chains. One is for their traditional business--be it, retail, manufacturing, or wholesale. The other is for E-commerce Immediacy. It is faster, leaner, and agile. The new supply chain--
  • Focuses on service
  • Delivers the customer experience

  • Compresses time--continuously
  • Takes inventory velocity to inventoryvelocity2
  • Moves the supply chain upstream and into suppliers' supply chains for improved supplier performance
  • Advances integrated process and integrated technology to new levels
  • Segments supply chain to align resources and customer segments
  • Aligns networks to support service
  • Positions inventory to drive results
  • Utilizes a new breed of logistics services providers
  • Outsources to Supply Chain Service Providers to help deliver service
Those leading in the supply chain renaissance--the innovators--understand that what is happening is a business disruptor--and more. It is a new paradigm for selling and for supply chain management.
It will spread beyond e-commerce B2C or B2B--and across channels, markets, industries, and the globe.


China lacks the logistics infrastructure for food protection. Yet they are an exporter of food. This situation creates supply chain risk.  Too many ignore the actual supply chain when they assess supply chain risk.  That is a big risk and creates risk.

China’s Invests in Produce Shipping With FruitDay

The e-commerce retailer is part of a $70 million investment that backers hope will help improve the country’s poor infrastructure for handling fruits and vegetables

Chinese consumers are paying closer attention to quality and safety of  2013 of fruits and vegetables, such as these apples being packed this spring for delivery to China under a new agreement on apple trade between the U.S. and China. ENLARGE
Chinese consumers are paying closer attention to quality and safety of 2013 of fruits and vegetables, such as these apples being packed this spring for delivery to China under a new agreement on apple trade between the U.S. and China. Photo: Associated Press
Chinese online retailer,JD-0.70% which got its start selling consumer electronics, is placing a bet on very different types of products: fresh avocados Mexico and American cherries.
The Beijing-based company, which now sells everything from clothes to household appliances, said it led an investment of $70 million in the latest round of funding by FruitDay, a Shanghai-based importer of fresh produce. FruitDay, which already sells fresh fruit on, will use the funds to build out additional infrastructure to store, ship, and track fresh produce, and to recruit management talent for the six-year-old company.
The investment highlights a race to build out logistics networks in China, where online retailers say highly segmented services and under-developed transportation infrastructure threatens to hinder growth in shipping. “China lags far behind the U.S. and other countries in terms of overall infrastructure,” said FruitDay founder and CEO Wang Wei.
This is especially true for cold-chain logistics, or the highly specialized transport of perishable goods, as consumers increasingly are conscious of quality and safety issues since the country saw a series of high-profile product-safety incidents in food supply chain in recent years.
“The amount of fruit lost due to inadequate storage is astonishing, since fruit can go bad in a very short time,” Mr. Wang said. While meat and seafood can last longer at one specific temperature, preserving fruit can involve a complicated system of combining different types of fruit at varying temperatures.
The amount of fruit lost due to inadequate storage is astonishing.
—FruitDay’s Wang Wei rival Alibaba Group Holding Ltd.BABA0.24% also operates a fresh produce platform on its website, which houses online storefronts for retailers. Sellers on Alibaba’s consumer-to-consumer site, Taobao, also offer fresh food products.

Maggie Chen, senior logistics manager at Cainiao, a platform started by Alibaba and a consortium of logistics companies in 2013, has said as much as 80% of all fruits and vegetables in China are transported at room temperature in outdated trucks, leading to a 40% spoilage rate.

Alibaba has said it plans to invest $16 billion in China logistics, and has taken a minority stake in several logistics companies over the past year, including Shanghai YTO Express Co. Ltd. earlier this month.
Chinese cold-chain logistics is expected to grow an average of 25% a year to 470 billion yuan ($76 billion) in revenue by 2017, according to a 2014 report by Germany-based consulting firm Roland Berger. But companies will operate on thin profit margins and may have trouble convincing Chinese consumers to pay higher prices for cold chain services, the company warned.
Mr. Wang said FruitDay offers free shipping on orders of over 100 yuan ($16) to customers in over 300 cities. But a handful of large cities, including Beijing, Shanghai, Guangzhou and Shenzhen, account for the majority of orders.
He believes that growing health consciousness and more discerning consumers in China are driving demand for imported produce—American cherries are among FruitDay’s most popular products, with sales almost tripling in the last four years. Sales of avocados, once relatively unheard of in China, have grown 127-fold since 2011.
The company works with several U.S. exporters, including Sunkist Growers Inc.
“China covers a huge geographical area, and as such, the cold-chain sector requires extensive investment and expertise,” he said. “The cold-chain system is the key barrier impeding the development of online produce sales nationwide.”


E-commerce Immediacy has created Supply Chain Duality.

Out with the old.  In with the new.


Monday, May 25, 2015


Why don't container lines use the Suez Canal to bring ultra-large vessels from Asia into the US East Coast?



Retailers have a long history of selling products to people who come into their stores to purchase. These customers can be completely unknown, especially for big box retailers. If the customers pay cash or use a gift card, the mass merchandisers have no name to associate with the buys.

E-commerce changes that dynamic. Online sales bring names and addresses for customers. Patterns of buying can be developed.

Even more, selling in stores versus online requires a new supply chain.  Setting aside space in a warehouse to ship these orders is not enough.

E-commerce is a disruptor to the old ways of selling and servicing.  It is a new paradigm for selling and for supply chain management.

Retailers must recognize the new selling and supply chain paradigm on E-Commerce Immediacy.  This means it is about the customer--not the retailer--and is about the customer experience.

New thinking is needed. How does making a customer come into a store to pick up his order make a customer experience?

Supply chains should be segmented for maximum performance to each segment's supply chain needs. One-size-fits-all supply chains will fade away with the new reality.
Consideration should be given to segmenting different retail sales segments. This recognizes--
  • Specialty retailing
  • Mass merchandiser
  • Name brand
  • Private label
How do you design a supply chain where e-commerce orders should be delivered within 48 hours of order placement?

There is the new supply chain that drives e-commerce immediacy and creates a blue ocean strategy using the new supply chain management.

Out with the old.  In with the new.


There could be significant supply chain benefits too.

Will China and Thailand’s Kra Isthmus canal agreement sink Singapore?

By Alex Lennane
Norman Einstein/Jude Chan
Norman Einstein/Jude Chan
Another new canal project appears to be on the cards. At a cost of $28bn, the Kra Isthmus canal, which would cut through the Malay Peninsula in southern Thailand, could pose a grave threat to Singapore’s maritime industry. China and Thailand have reportedly signed an MoU over the 100-km long canal project, which would not only prevent ships from having to sail the pirate-infested waters of the Straits of Malacca, but would also cut 1,200km, or up to five days off routes – saving ships some $350,000 in fuel costs. Up to 40% of the world’s trade currently passes through the Straits of Malacca. Oddly, however, both China and Thailand have denied signing an agreement.

Sunday, May 24, 2015


Immediacy is driving e-commerce. It succeeds with new supply chain management. And it is becoming the paradigm for selling and for supply chains. It is not limited to e-commerce. It is expanding--across channels, markets, industries, and the globe.

Doing all these require a new supply chain methodology. Old ways--the same-old--fail at immediacy. New supply chains are needed. These will focus on service, compress time, create inventoryvelocity2, extend supply chains upstream, take process and technology integration to new levels, have a new outsourcing and new logistics service providers--and more.

Saturday, May 23, 2015


Share-price heat for Li & Fung

Friday, May 22, 2015  Hong Kong Standard

Li & Fung (0494) management struggled to pacify individual investors grumbling about the firm's lifeless share price at a meeting yesterday.
That reveals a quandary facing the sourcing and delivery provider which has been hard-pressed to cut costs as sales in its major markets flag and outlook dims. Apparently as part of its belt- tightening measures, the firm moved its annual general meeting yesterday to its Cheung Sha Wan office from the usual Mandarin Oriental hotel. And shareholders were unusually vocal. "I'm very disappointed," cried a woman, referring to the company's anaemic share price when "all other stocks are surging through the roof."

Li & Fung shares fell 2.85 percent in the past three months versus an 11 percent rise in the Hang Seng Index.
Chairman William Fung Kwok-lun said the company should be viewed as a mid- to long-term investment. "We haven't trimmed our shareholding." The firm spun off its brands and licensing arm Global Brands (0787) to focus on supply chain management in July 2014. Core operating profit slid 18 percent to US$604 million (HK$4.7 billion) last year. Fung confessed the company will likely miss a three-year target of boosting that number to US$870 million. Chief executive Spencer Fung admitted some UK and US customers had cut orders on sluggish sales, but business from core clients keeps growing. William Fung denied plans of widespread redundancy. "We're actually hiring more people in Bangladesh and Cambodia," he said. Such relocations will not affect its Hong Kong base, where the company's staff turnover is steady at 20 percent every year, Spencer Fung said. ADAM XU