Saturday, January 31, 2015

UPS, FEDEX, DIM PRICING, E-COMMERCE

How will the Dim pricing move by UPS and FedEx impact the golden goose of e-commerce, especially for small-medium businesses?







Friday, January 30, 2015

SUPPLY CHAIN RISK, DATA ANALYTICS

Supply chain risk identification is about much more than data analytics.



Thursday, January 29, 2015

AMAZON SUPPLY, INDEPENDENT DISTRIBUTORS

From Industrial Supply--

How independent distributors are paving the way for AmazonSupply

Paving the way for AmazonSupply
By Jack Bailey
With any discussion regarding the future of industrial distribution, the impact of AmazonSupply is sure to come up. Distributors seem to have differing views on this impact, ranging from fear of ArmageddonSupply to a shrug indicating “this too, shall pass.” To the latter group, AmazonSupply is not a threat because they don’t see Amazon getting “Line 4” up and running at 3 a.m., nor do they see Amazon designing a more efficient drive system for a manufacturing facility. Of course, the question you have to ask these distributors is, “What part of your business uses that kind of expertise and what part of your business consists of getting a purchase order with a list of part numbers?”
Most independent distributors will tell you that 90% or more of their business comes in the form of purchase orders with part numbers. What they don’t understand is that it is this portion of their business that is in harm’s way when it comes to Amazon. Although those part numbers represent something to them as an industrial distributor, to Amazon, they merely represent data. Amazon is a technology company that masters analytics dictating where data (product) is and where it needs to go. If you think Amazon is coming to the industrial market; you’re wrong. Amazon is already in the industrial market.
To prove this, a few years ago, Amazon joined the Power Transmission Distributors Association (PTDA) and is now a member in good standing as an industrial distributor. Amazon immediately began approaching manufacturers requesting to become authorized distributors of their products. Most manufacturers rejected the request on the grounds that it would disrupt their existing defined distribution network and Amazon did not meet their authorized distributor requirements, i.e. training, experience, expertise, etc. Not one to take “no” for an answer, Amazon also approached (and continues to approach) authorized independent distributors to enter into third-party seller agreements and sell their products on AmazonSupply.com. This is part of Amazon’s Merchant Integration initiative.
Initially, when an industrial distributor is approached by Amazon, the natural reaction is to decline the offer to be a third-party seller. However, after giving thought to having access to the enormous customer base of Amazon, many independent distributors have agreed to market, sell and ship their products on the Amazon ecommerce platform. It is not uncommon to see a product offered with the statement such as, “Ships from and sold by XYZ Industrial Distributor, Inc.”
A West Coast independent distributor recently revealed that he was shipping more products out to Amazon customers than he was to his own traditional customers. What this distributor and others like him don’t realize is they are paving the way for Amazon to take the business away from them. While Amazon’s third-party seller distributors may feel that they have hit a business bonanza, they have forgotten what Amazon does best: collect data.
In time, there will be enough sales and data to permit Amazon to return to those manufacturers that wouldn’t authorize them. Amazon will be holding all of the cards. They will know how much product was sold, how much it was sold for, where it came from, and where it went. In short, they will have all of the data that they collected from the independent distributor’s sales on Amazon. During that visit Amazon will advise the manufacturer of how many millions of dollars of that manufacturer’s product was sold through Amazon. When faced with the possibility that Amazon could choose to no longer offer the product on AmazonSupply.com, they will more than likely immediately authorize them.
At that point, Amazon will no longer need the third-party seller independent distributor to provide products. The independent distributor has helped lure the customer to Amazon with sought-after products and the customer has been conditioned to go to Amazon when those products are needed. Amazon will now have direct access to the products from the manufacturer and can cut out the independent distributor, who will be seen as a “middle man.” If the sales of a particular manufacturer’s product are significant, Amazon will not hesitate to send their own employees to the manufacturing facility to ship products on behalf of Amazon, much like they have done with Proctor & Gamble.
This is a tried and true business plan for Amazon. Jeff Bezos has developed a company culture that continuously reinvents itself to stay ahead of the technology/logistics curve. They are good at what they do. In all probability, the Amazon business model will begin to adopt more of the practices of Alibaba, which never takes possession of products and makes little investment in brick and mortar. In the meantime, Amazon is counting on independent distributors to act as third-party sellers so that data can be collected. When that data is collected, Amazon will drive away on the highway built and paved by the independent distributors.

NEW E-COMMERCE

The new e-commerce is happening. Join the blue ocean and change your supply chain. Or else. It expands into multichannel and across other industries.


CSCO FORUM, E-COMMERCE

CSCO Forum -- check p5 on new e-commerce and supply chain segmentation. LTD Management is pleased to lead the discussion.

http://events.eyefortransport.com/csco/pdf/EFT-CSCO-Forum-US15.pdf?utm_source=SSE%20Broc&utm_medium=email&utm_campaign=3817%20SSE%20Brochure%20Download


 

POOR E-COMMERCE RETAILERS, SUPPLY CHAIN

These e-commerce retailers that need to wake up to the new e-commerce driven by the new supply chain.

The hidden cost of poor deliveries: £5,300 per lost customer

Published: January 28, 2015 by Peter MacLeod

Online parcel delivery company ParcelHero has revealed that failed and poor-quality deliveries could cost internet retailers at least £5,300 for every customer that defects to another site.
Delivery issues captured the headlines over Christmas, as a number of budget delivery companies failed to deliver on time, or left items in bins and hedges.

ParcelHero's Head of Public Relations, David Jinks MILT, says: "IMRG research revealed failed and delayed deliveries cost the UK economy £771m and retailers £473m directly in 2014. But that’s just the tip of the iceberg. What is less appreciated is how much those failed deliveries will cost retailers in lost future earnings.
"It is six to seven times more expensive to acquire a new customer than it is to keep a current one, according to figures released by the White House office of consumer affairs. Yet in 2011 86% of all consumers quit doing business with a company because of a bad customer experience and 59% of online shoppers said they were unlikely to order from a retailer again if they have a bad delivery experience."
Online customers are increasingly savvy about delivery issues. Not only are they very likely to switch to another online retailer following a bad delivery experience, but they increasingly examine not only delivery options, but which delivery companies a retailer uses.
Over 1 million people view tweets about customer service every week. Roughly 80% of those tweets are negative or critical in nature. And that means consumers are becoming very aware of the reputations of some delivery companies.
Says David: "Let’s say customers do overlook the fact a retailer is using a budget carrier, which could have cost retailers the sale before the consumer even placed an item in the basket. The true cost for retailers of using very cheap delivery services is still potentially enormous. The average UK internet order is £59 per transaction. If an online store loses a customer because of an inept or late delivery, it hasn’t just lost that £59, or even their next £59.
"In the UK we make an average of 18 online purchases a year and spend around £749 online, while American shoppers are expected to spend £1,106 online, according to new figures from RetailMeNot.
"Let’s say that the lost customer might have made an average of six purchases from a particular online store this year, if he or she is one of the 59% who wouldn’t return to a site after a bad delivery experience, that’s actually £354 the retailer has lost from that one shopper in a single year.
"How many years might they have remained a loyal online customer? If we assume they remain loyal for at least five years (and some Amazon customers have stayed loyal for 20!) then that’s £1,770 lost. But the real kicker is that customers tell on average at the very least two other people about a bad delivery experience. In which case, you can times that £1,770 by two more lost customers. That’s £3,540 in sales a site might have lost without ever having had a chance.
"Add that initial lost customer and overall that one bad delivery could have cost the retailer £5,310."
And those figures are just for average-size internet retailers. Forrester Research Inc in the US says that customer experience quality could result in a swing of $184m for a large internet retailer.
Professor Richard Wilding OBE of Cranfield University, an expert in e-commerce logistics, told the BBC recently: "Your main point of contact is with the retailer, and they're handing over responsibility for the delivery to another organisation. You've got to make sure they do it well. If they do, it will build loyalty and generate more business. But if you do it badly and use poor couriers it will cost your business an awful lot and customers won't come back."
Professor Wilding has shared his views on how internet deliveries can be an active selling point for retailers with ParcelHero recently.

ParcelHero's David Jinks concludes: "Can retailers really afford to be losing this kind of custom for the sake of a few extra percent on their delivery costs? American Express research has revealed 7 out of 10 consumers are happy to spend a little extra for a good customer experience and delivery, so cheap deliveries are an entirely false economy. Retailers should think long and hard about retaining delivery companies whose names shout trouble."

Wednesday, January 28, 2015

CLICK-AND-COLLECT E-COMMERCE

Is click-and-collect e-commerce about what is good for customers or what is good for retailers?




CONTAINER LINES DAMAGE CUSTOMER SUPPLY CHAINS

Container lines continue to damage customers-- retailers, manufacturers, wholesalers -- supply chains with their service.

http://www.ltdmgmt.com/supply-chain-performance-erosion.php


Monday, January 26, 2015

Maquiladoras

Maquila Matters: Issue 1

Monday, January 26, 2015
Sandler, Travis & Rosenberg Trade Report
Sandler & Travis de México is proud to present Maquila Matters, a new monthly newsletter designed to offer information and practical guidance to help readers better understand the complexities of Maquila operations. If you would like to receive Maquila Matters directly in your inbox, please subscribe here.

Introduction to IMMEX

Conceived in very rough form nearly eight decades ago in an effort to promote the economic and industrial development of the northern region of Mexico, the Maquila sector was formally established in October 1966 with the implementation of the Border Industrialization Program. In a nutshell, a Maquiladora is a manufacturing or service company that is engaged in the temporary importation under the IMMEX program, either duty-free or under a duty deferral scheme, of inputs and machinery to be used in the production of goods to be exported.
While the laws governing Maquiladoras have been reformed on several occasions, including through the issuance in November 2006 of the Decree for the Promotion of the Manufacturing, Maquila and Export Service Industry (commonly known as the IMMEX decree), the purpose of encouraging the establishment of export-oriented companies in Mexico by providing a favorable tax regime has remained the same.
Since its creation the Maquila sector has grown to become a key driving force of the Mexican economy, with manufacturing companies operating under the IMMEX umbrella accounting for approximately 4.4% of total Mexican employment and generating some US$126 billion in total sales to foreign markets during the first ten months of last year. U.S. imports from Mexico have expanded at a significantly faster pace than imports from the rest of the world and at roughly the same pace as imports from China since about 2008. Indeed, as production costs in China have increased a significant number of companies have shifted their manufacturing operations from the Asian giant to Mexico and other Western Hemisphere countries.
For many companies setting up a Maquiladora in Mexico may be the best way to grow their business, increase profit margins, and reach a broader audience for their products by responding quickly to shifting trends in consumer demand. However, effectively navigating the new Maquila tax requirements could be the difference between success and failure.

The New Maquila Import VAT – Obtaining Credits and Refunds

The new tax law that took effect in 2014 eliminated the value-added tax exemption for temporary imports of goods, machinery and equipment, and increased the VAT in Mexico’s border states from 11% to 16%. As a result, imported goods are now subject to VAT payment at the moment of import and will be accredited a set-off only after the Maquila exports the final goods from Mexico. This has the potential to pose a considerable cash-flow challenge to many businesses, significantly impacting their bottom line. Fortunately, the Mexican government will allow for a 100% VAT tax credit at import and return any VAT payments within 10-20 days if the Maquila obtains certification through the Mexican tax authority.
Obtaining the proper certification to take advantage of these credits and refunds can be a challenge. Among other things, Maquila companies are required to (1) show that they, as well as their shareholders and outsourcing parties, are in full compliance with all applicable tax regulations; (2) have an adequate and up-to-date inventory control system and a proper physical control of imported goods; and (3) report on a monthly basis their balances of imported goods.
The certification application must be filed through the single window for foreign trade operations. If an application is incomplete, the applicant will be notified and given 15 days to provide any missing information. Applicants will be notified of a decision to approve the application within 40 days from the day following the date of receipt of a complete application. If approval is not granted within the 40-day timeframe, applicants should assume that their application has been denied. If Mexican authorities determine that the applicant does not have all appropriate controls in place, the applicant will have to wait at least six months to submit another application. It is therefore imperative for companies seeking VAT certification to do things right the first time around.

Introduction to Maquila Terminology


  • Maquiladora. Manufacturing or service company that is engaged in the temporary importation under the IMMEX program, either duty-free or under a duty deferral scheme, of inputs and machinery to be used in the production of goods to be exported.
  • IMMEX. Export promotion program that allows the temporary importation, either duty-free or under a duty deferral scheme, of inputs and machinery to be used in the production of goods to be exported.
  • Inventory Control System (Sistema de Control de Inventarios). Mandatory system used by IMMEX companies to monitor their imports, exports and scrap and show Mexican authorities that goods imported temporarily are being returned overseas or any applicable taxes are being paid.
  • Annex 24 (Anexo 24). Term commonly used when referring to the inventory control system since the regulations for this system are included in Annex 24 of the General Foreign Trade Rules.
  • VAT Certification (Certificación de IVA). Certification that enables IMMEX companies to either defer payment or not pay VAT on temporary importations carried out under IMMEX.
  • Annex 31 (Anexo 31). Term commonly used when referring to the monitoring and reporting system for temporary imports that use a VAT certification to avoid the payment of VAT upon entry into the country.
  • Annual Report (Reporte Anual). Annual operations report that IMMEX companies must submit to the Ministry of Economy to be able to continue using their program.
  • INEGI Report (Reporte INEGI). Monthly operations report that IMMEX companies must submit to the National Institute of Statistics.

E-RETAILERS

The problem may be with the e-tailers.  These e-tailers just do not understand the importance of customers, customer service, supply chain management, and the immediacy of the new e-commerce that is driven by the new supply chain. 

E-retailers struggling with cost of delivery and logistics investment

New Ti report finds online retailers see the strategic advantage of investing in e-commerce logistics, but have their profits weighed down by the costs of those investments.

New Ti report finds online retailers see the strategic advantage of investing in e-commerce logistics, but have their profits weighed down by the costs of those investments. The current business models e-retailers and their shipping partners are using to handle e-commerce are becoming financially unsustainable, according to a new benchmark report from the London-based consultancy Transport Intelligence.
The Global e-Commerce Logistics Report 2015 found that retailers view e-commerce as a strategic advantage, with many investing in delivery and fulfillment networks. But Ti said the financial impact of these investments is weighing heavily on their profit margins.
“The resulting squeeze on carriers, not least due to ‘free shipping’ options, has already led to additional pressure on the industry, leading directly and indirectly to consolidation and business failures,” said Cathy Roberson, senior analyst at Ti and author of the report. “This will mean that although parts of the logistics and express industry will benefit from increased revenues, it will be a huge challenge to translate this growth into profits.”
Roberson said these challenges were evident in the past two holiday seasons when several carriers were overwhelmed by volumes and in some cases stopped accepting new shipments.
“The pressures on carriers will only increase as some retailers take on many logistics functions, including, as in the case of Amazon, last mile delivery,” she said.
Roberson pointed towards alternative delivery networks as being the way forward for the industry.
“What the end-customer wants is choice allied with cost-efficiency,” she said. “New solutions such as ‘click and collect’ and lockers are becoming popular as they can be more convenient than waiting at home and have the added benefit of being free-of-charge. At the same time, these alternatives suit many carriers who struggle to make any money on home delivery, not least because of the costs incurred in re-delivery.”

UK RETAILERS -- POOR AT SUPPLY CHAIN MANAGEMENT

‘Slow death’ warning to low-margin UK big name retailers with too much stock

By Gavin van Marle
01.22.2015 · Posted in Loadstar posts, Supply chain FavoriteLoadingAdd to favorites
Darty
A third of the UK stock market-listed general retailers, including established high street names, may be at risk as continuing poor business performance threatens their business, a leading analyst of companies’ financial health has warned.
UK-based Company Watch, which specialises in the financial risk posed by companies through its H-Watch scheme, conducted a survey of 27 of the country’s general retailers – as opposed to supermarkets and food retailers – listed on the London Stock Exchange.
It found that 30% had fallen into its “warning zone”.
It said: “This is high for stock exchange-listed companies. Typically, it’s between 10% and 20% of quoted companies appearing in the warning area.”
It added: added that firms suffered in terms of both weakening balance sheets and mounting losses, and found problems with their “low profitability, lack of liquidity and too-high levels of stock”.
Company Watch’s H-Score system measures the financial health of a company on a number of ratios and attributes it a value between 0 and 100 – the higher the value, the healthier the company.
“Companies with H‐Scores of 25 or below are in the Company Watch warning area. This means they are approximately 50 times more likely to suffer distress than a typical company outside of it. In other words, they have a significantly enhanced risk of going bust or needing urgent refinancing,” Company Watch said.
The nine retailers that found themselves in the warning area were: mail order firm Flying Brands, with a score of just two; European Home Retail ,which scored three; electrical retailer Darty, which also scored three and was the owner of the infamous Farepak; Halfords, which scored just eight due to balance sheet issues and high expenses; The AA, which scored 12 after proceeds from its stock exchange float last year were trousered by owners looking an exit; department store Beal, which scored 13 and is troubled by ownership issues; Vertu Motors and Asia Ceramics, which both scored 15; and digital music retailer 7Digital Group, which scored 21.
Some 67% of those in danger were loss-making, compared with 37% of all companies surveyed, while four out of the nine have liquidity issues which mean their “profits are needed to cover upcoming expenses”.
But the factor that will most concern their freight and logistics service providers is that the percentage of employed capital tied up in stock is 50%, which means these firms “are dependent on moving stock quickly and a period of poor sales could potentially create piles of rapidly depreciating out-of-date stock”.
This situation that could potentially leave forwarders with little option but to enforce their right of lien, but this would be on goods that are quickly losing their value.
Ewan Mitchell, head of analytics at Company Watch, said: “It’s the internet‐based general retailers that are doing well, with stronger H‐Scores. Of the six which have an H‐Score in the top quartile (rated 75-100), the average profit ratio (PBT/Sales) is 12%.
The notable performers are Sports Direct and N Brown. Bonmarche continues to rise out of the ashes of Peacocks and Kingfisher (parent company to B&Q and Screwfix) is benefiting from the austerity-fuelled boom in DIY.
“In the Warning Area we may be looking at the slow death of mail order (Flying Brands) and regional department stores (Beale).
“It is interesting to see The AA and Halfords in the warning area. Halfords has good sales and profitability but there are still issues in the balance sheet.”
The remainder of the companies fell between the warning area and the top quartile and, in ascending order, were: Caffyns, Findel, Home Retail Group (owner of Argos and Homebase), Inchape, Scholium, Laura Ashley, French Connection, Signet, Mysale, Pets at Home, ASOS and Next.

Friday, January 23, 2015

INDIA E-COMMERCE WAREHOUSING

A quarter of total warehousing space absorbed by e-tailers in 2014

Took up approximately 1.7 million sq. ft. of warehousing space across Mumbai, Chennai, Bangalore and NCR
3PL Warehousing & Storage
Distribution Warehouse Logistics Calgary & Edmonton AB locations www.mtelogistix.com
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About 25 per cent of the total warehousing uptake across the country in 2014 was taken up by e-commerce players, said a new study.

According to a report by global consultant CBRE, the emerging retail segment took up approximately 1.7 million sqft of warehousing space across Mumbai, Chennai, Bengaluru and Delhi-NCR in 2014. It said a major share of fund raising by e-tailers is also expected to get channelised into building warehouses. The year 2014 saw investments worth more than $2.2 billion being raised by majors in India.

Past couple of years also saw the segment becoming a new addition to the mix of major office space demand drivers in India, as online retailers increased footprint for front-end as well as back-end requirements. By 2014-end, about 3.5 million sqft of office space had either been leased or was in various stages of negotiation by e-commerce firms across the country—a growth of about 400 per cent year-on-year, it said.

STEAMSHIP LINES AND RATE STABILITY — CHASING IT THE WRONG WAY?

Container lines struggle with rates in many ways. Part of their efforts includes hedging freight rate volatility in an industry that struggles with pricing stability.

Many levels of carrier management wish to use hedging tools to stabilize and secure revenues, but they cannot always get this up their hierarchies, often with no justification. This is despite the obvious benefits that it can provide in terms of stabilizing future revenue. Moreover many carriers already use hedging tools to protect themselves against foreign currency exchange and fuel risk, so the idea is not completely alien.

Lines are considering the idea of achieving stability through “insurance” or hedging. To achieve this, they would continue to offer prices as per usual, i.e., moving up and down with the market. But they would then buy an insurance contract that offsets the changes in price. For example, if today they buy an insurance contract at $1,100/TEU for next month, they are in effect securing their future income streams regardless of market developments. If next month, the volatility in the market means prices move lower to $950 per TEU the carrier still sells his physical space at $950 as usual. However the insurance contract pays the carrier $150/TEU. The net result is volatility for the carrier is removed and his net income is secured at $1,150/TEU ($950 from shipper + $150 from the hedge or insurance contract). Of course, the reverse of this situation is true, however the end result is the carrier achieves a stable income, but outside of the shipper-carrier relationship.

The problem is that the insurance or hedge is a crutch, not a solution. Hedging is a confirmation that carriers are failing at an important need and speaks volumes. Enough of proving Einstein and insanity. Stop looking at ways to continue to do business as they always do. Nothing changes. So what is the point? It is time for out with old and in with the new for pricing and service.

If you exclude 2009 when the lines laid up many ships to improve rates, what can carriers do? Volatility, almost by definition, shows a lack of control over pricing. And given that ship supply exceeds demand, what are they going to do except the standard practice of cutting rates to fill the ships? What is next—hedging the hedges?

First, it does not look like carriers can offer and protect non-volatile pricing. To a great extent they have lost control over their pricing. And to make it worse, there are other factors. Many shippers are being measured by the rates they pay, so they have interest with rates generally being soft. And carriers have abdicated a lot of market pricing to ocean transport intermediaries/freight forwarders. If we are talking beneficial cargo owners, carriers, with their limited sales forces, pursue a select few, basically the large accounts. The small-medium markets are for the forwarders.

There are two parts to carrier profits. One is cost management. Mega ships offer that with lower expenses. But only a few lines have serious experience with a fleet of ultra large vessels. So how do carriers with one or few megas manage cost enough? What about carriers with no ultra large ships?
That brings the second part for profits. Revenue management. And that may be the biggest weakness with the lines. The challenge of securing containers for mega ships is not giving away the cost benefits in low rates. A few lines have walked away from large shippers and the low rates or closed depots in certain locations where pricing was not attractive. What then happened? Other lines jumped in to get the business that the few deliberately left. What does that say? The question is whether carriers, with their track record, lack the discipline to manage revenue to provide rate stability. If carriers lack credibility to control price volatility--and the market knows it, then they need a new approach.

Part of the problem--aside from a lack of discipline by management--is the use of the monolithic model for pricing. There is a narrow way to deal with business.

All is not lost. Ignore the organization silos. Go the opposite direction. Segment and aggregate the markets in different ways. This is not the standard trade lane, commodities, volumes, etc. approach. Segmentation is a start. From that develop approaches--both pricing and service-- for each segment. This presents targeted alternatives. Create different price and service programs for each segment.
For example, look at the big picture from the supply chain management perspective. What are carriers selling? What are shippers buying? Are carriers providing what shippers really want? Think of carrier service and how it has caused supply chain performance erosion. These ideas are hypothetical without the proper analysis and analytics.

Then, change the whole contract construct. Stop it from being a rate contract with some service points. Make it a supply chain operation and performance contract or whatever works for each segment. Understand what is required for managing a supply chain or whatever—position it for each sector.

There are no quick fixes and easy answers to the problem. Change is needed for all parties. Container line chaos helps no one. Stop thinking of pricing as an absolute. Stop thinking about volatility and hedging it. Start thinking about what is really needed in market as defined by its segments.
With the proper approaches, pricing can stop being the #1 topic. Moving away from the monolithic model may be the only way to achieve market stability---not pricing stability per se.

Thursday, January 22, 2015

EXPORT CONTROLS FOR INDIA

Export Controls on Shipments to India Relaxed

Friday, January 23, 2015
Sandler, Travis & Rosenberg Trade Report
The Bureau of Industry and Security has issued a final rule that, effective Jan. 23, removes license requirements for exports to India of certain items controlled for crime control and regional stability reasons. BIS states that this rule helps to fulfill a November 2010 bilateral commitment to strengthen the global nonproliferation and export control framework and “realize the full potential of the strategic partnership between the two countries.”
According to BIS, this rule removes India from CC columns 1 and 3 and RS column 2 on the Commerce Country Chart in Supplement No. 1 to Part 738 of the Export Administration Regulations because the government of India has taken appropriate steps to ensure that the specific U.S.-origin items controlled for CC and RS reasons are not reexported from India without a license. However, a license requirement remains for items controlled under Export Control Classification Numbers 6A003.b.4.b and 9A515.e for RS column 2 reasons when destined to India.
As a conforming change, this rule adds India to 740.2(a)(4)(i) to identify India as one of the countries or organizations for which the restrictions on license exceptions due to license requirements described in section 742.7 (crime control and detection) do not apply. This status also broadens the availability of license exceptions under the EAR for items exported to India.
In addition, BIS is amending the EAR to establish a filing requirement in the Automated Export System for items exported to India, regardless of value, that fall under an ECCN on the Commerce Control List in Supplement No. 1 to Part 774 for which CC columns 1 and 3 and RS column 2 are listed as reasons for control. BIS is also amending section 758.6 by adding new paragraph (c) requiring a notation on the invoice, bill of lading, air waybill or other export control document that accompanies the shipment from its point of origin in the United States to the ultimate consignee or end-user in India. This notation will indicate the ECCNs of items for which CC columns 1 or 3 or RS column 2 reasons for control are listed, that they are destined to India, and that BIS authorization may be required for reexport of the items.

AMAZON

Will Amazon's anticipatory shipping concept disrupt logistics management?

A white paper by TMS provider GTG Technology delves into how the e-commerce giant's anticipatory shipping patent might affect logistics for small and medium retailers.

Knowing what a customer wants before the customer even knows he or she wants is every retailer’s dream.
North America’s biggest e-tailer, Amazon, has been taking steps toward that goal in recent years, most notably by acquiring a patent for a technology that underlies what it calls anticipatory shipping.
The anticipatory shipping model, according to a white paper released by the transportation management software provider GTG Technology, is essentially an extension of the company’s existing technology designed to generate more packages to be delivered within 24 hours.
“Anticipatory shipping is built on big data and predictive analysis – two aspects that Amazon is exceptionally good at,” GTG said in the white paper, Will Anticipatory Shipping Throw a Wrench in Logistics Management. “The ecommerce giant has long been known for its ability to predict what customers want to purchase in the future based on previous browsing behaviors and buying decisions. Now it wants to use those same insights to predict what consumers will buy before they actually buy it.
“In theory, items would be shipped to an Amazon hub in the geographical area near where the company thinks the items will soon sell. As a result, the standard process of receiving an order, labeling the package at a central warehouse, loading it, sending it via UPS or USPS, and then delivering could be a thing of the past.”
The white paper said inaccuracies inherent in a system that tries to guess what consumers will buy could be the biggest hurdle to overcome for anticipatory shipping.
“When it comes to logistics, the biggest problem Amazon – and eventually other companies that follow – will have is dealing with inaccuracies in the system, costly returns, and the reactions from UPS and FedEx,” the white paper said. “It is impossible for an algorithm or data-driven system to predict what a customer wants with 100 percent accuracy. In reality, it will probably be difficult to get anywhere near 80 or 85 percent accurate. These inaccuracies will likely lead to logistical nightmares and costly returns. While Amazon claims it has a plan in place for when the predictive model fails, it’s unlikely that this plan will solve every issue that may arise.”
GTG also said it’s unclear how FedEx and UPS would react to a system that does not include full shipping addresses or labels when the shipment is generated.
“According to information found in the patent, Amazon would initially only place zip codes and city names on a package – updating it with more descriptive information as it is en route,” the white paper said. “Would rates go up? Would these companies even allow this process? Both answers to these questions are unknown.”
However, GTG said it expects that other online retailers will quickly follow Amazon’s lead if anticipatory shipping proves successful.
“If anticipatory shipping is successful, it will likely take off with all the online giants – Amazon, Alibaba, Walmart,” the white paper said. “As a result, the gap between (small and medium enterprises) and major e-commerce sites will continue to widen. At first it will be alarming, but soon multichannel retailers and pure players will find their opportunities.”
To compete with such a model, multichannel SMEs need to “blend their online and offline businesses – something Amazon and Alibaba cannot do. It will be important for these SMEs to combine the ‘touch and feel’ advantage of their brick and mortar stores with fast, local shipping.”
The white paper also said SMEs might be forced to expand warehouses and focus on convenience when choosing locations, as the need to be closer to consumers will be more important than ever.

Wednesday, January 21, 2015

FUTURE OF CHINA TRADE

Man looks at the Pudong financial district of Shanghai

What is the future of Chinese trade?

By Long Guoqiang


It is essential to study the international and external context of China’s opening up when China entered the new normal, as well as associated opportunities and challenges. As President Xi Jinping pointed out in a speech concerning China’s national economy, China is now confronted with a convergence of economic deceleration, restructuring and the digestion of its previous stimulus package.
First, our external context is characterized by a post-crisis period of recovery and adjustment, which continues and will persist in the foreseeable future. Unlike the past three decades, particularly the prosperous phase before 2007, this period has manifested many new characteristics including shrinking external demand, expanding overcapacity, increasing competition, intensifying trade protectionism and growing trade disputes.
Second, international trade rules are being rewritten. They have been evolving constantly and the world has now entered a period of intesified rule change, with some new developments identified on rule-writing platforms. On one hand, the World Trade Organization (WTO) is still functional as a multilateral mechanism, with some new rules being negotiated. On the other, regional trade organizations may move ahead of their multilateral counterparts. Some new rules may first be negotiated and developed on a regional trade platform such as the Trans-Pacific Partnership (TPP), which aims to create both new regional trade arrangements and a large number of new trade rules. Enforcement of these rules will immediately generate both opportunities and challenges for all countries, including China.
Third, our comparative advantages are now shifting. Low cost has dominated China’s competition worldwide in the past three decades. This low-cost competition was driven by a combination of multiple factors, including, most importantly, our cheap labour. After three decades of development, however, China’s demographics and labour market have changed dramatically in terms of demand and supply.
According to China’s demographic statistics, its labour supply reached its peak in 2012. Since then, labour supply growth has stagnated, despite the fact that China remains a labour-rich country. At the same time, China’s population is ageing, which has fundamentally shifted supply and demand in the labour market. The number of new entrants into the workforce every year is estimated around 15 million. In 2000, colleges and universities enrolled only 1.08 million students, which means the remaining 14 million might have joined the blue-collar workforce. Today, 7 million senior high school students can go to college every year, excluding those who seek degrees through full-time self-education or adult education. Compared with a dozen years ago, only half are now entering the labour market as blue collars.
This explains why we have seen a new phenomenon on the job market: it is harder for a university graduate to find a secure and decent job. This has created new pressure for government. At the same time, employers suffer from difficulty in recruiting skilled workers and providing fast-growing salaries, as evidenced by two-digit growth for consecutive years, in the blue-collar job market. The strained supply-demand relationship has also led to some profound changes: companies are now replacing labour with machines to improve their productivity.
The downside resulting from short labour supply is frequent job-hopping, or high turnover of workers in companies. Joint research with the Chinese Ministry of Commerce reveals a blue collar turnover of up to 100%, and in extreme cases 500%, in some manufacturing and trade companies, which means that all shop floor workers will have been replaced at year end. High turnover also cuts both ways. The upside of frequent job-hopping is the exchange of skills, particularly the transfer of know-how, among different companies, which will make mutual learning more efficient. The downside is that worker exposure to a particular job is too short for them to perfect their skills. Companies in this case will be unwilling to invest in skill training, fearing workers will leave after training.
This will result in stagnation, or invisible improvement, of job-related skills, which coincides with the weakening of China’s low-cost advantage. To become more competitive in global and domestic markets, companies will have to rely more on innovation, quality, management and service. However, this will require a more skilled labour force, but labour improvement alone is not enough to build the competitiveness of a company.
The convergence of these factors will provide more opportunities than threats for China’s economic transition. Despite the challenges mentioned, such as declining external demand, trade disputes and a disconnect between skills and market requirements, there are still favourable opportunities for our transformation. Internally, the labour structure is shifting. Blue collars will face greater challenges from pressure, for example, from cost reduction and skill gaps, while university graduates will enjoy more opportunities.
They can engage in more advanced economic activities, such as in the services sector and R&D. Of the more than 7 million college graduates in China every year, around 1.8 million are trained in science and engineering. This is a great asset for manufacturing and R&D, as most R&D cost arises from labour. Internationally, advanced economies are the dominant force in R&D and only a few developing countries, like China, India and Brazil, can afford R&D. Therefore, China should not compare itself to developing countries, but developed economies, in terms of low-cost R&D, which is its valuable advantage.
Another competitive edge for China is its fast-expanding home market. China has evolved from the originally so-called “potential market” into a big market in reality and continues to grow at a yearly pace of 7%. This is a remarkable accomplishment. China recorded a $10 trillion GDP for 2014. A 7% growth will create $700 billion of wealth. Turkey is the world’s 16th largest economy, with a GDP valued at $800 billion. This means that China’s yearly addition to GDP is equivalent to the size of the world’s 17th or 18th largest economy. At current price, China’s GDP last year is 55% of the US size, which means the US will have to grow 3.5% to offset the newly created output from China’s 7% growth. This is no easy task for the US. As the Japanese Yen has depreciated, China’s GDP is already twice the size of Japanese economy, which will have to expand by 15%, an impossible mission, to catch up with China. New demand from such a large market will actually bring about many new opportunities, attracting global investors to rush to China. If foreign investors wish to be successful here, they need to base their R&D in China.
In the past few years, we have observed that many multinationals have accelerated the transfer of their regional headquarters and R&D centers to China. The shift in China’s comparative advantage has become a magnet for advanced economic activities and talent. There are no accurate statistics in terms of how many foreign R&D engineers and executives are based in China, but one figure is telling – the yearly number of overseas students returning back to China.
In 2004, this number was just above 20,000, but jumped to over 50,000 in 2008 after the breakout of the global financial crisis. Last year, it skyrocketed to 345,000. This trend is a convincing example of the promise and potential of China’s economic prospects as well as the huge opportunities associated with them. They will attract more advanced talent and factors of production, beneficial to China’s economic transition.
China also faces considerable opportunities in the global market. The first opportunity comes from the worldwide craze for infrastructure construction. Advanced economies need to renew their infrastructure, while emerging markets need to build new infrastructure to satisfy growing needs. Whether it is the reindustrialization strategy proposed by the Obama administration, or the Industry 4.0 initiated by Germany in Europe, all such economic revitalization strategies need the support of better infrastructure. High-speed railways and telecommunications infrastructure like 4G are all hotspots in the infrastructure boom.
Developing countries, particularly emerging economies, are in more urgent need of better infrastructure to accelerate their industrialization and urbanization. Chinese companies are strong players in this sector. Their success in securing infrastructure contracts will also drive China’s export of equipment packages. China’s latest power generation, transport and telecommunications equipment are much more technology- and capital-intensive, with greater added value. Driven by global infrastructure development, China’s export mix will be optimized.
There is still another opportunity in overseas investment. From a small investor and a big recipient of capital, China has become a big capital recipient and investor in the global market. China’s investment overseas has jumped from $2.85 billion in 2003 to over $100 billion last year. Diverse reasons motivates Chinese companies to invest globally – some to develop markets, representing the largest share, others to access resources, as demonstrated by the purchase contracts of mines and oilfields abroad.
The most important form of global investment is acquisition, which allows Chinese companies to access technology, R&D capabilities, brands and international channels. Acquisition can also help Chinese companies combine international advanced technology, brands and sales channels with its local manufacturing strength and low-cost resources, thus strengthening their competitiveness across value chains. Chinese companies have made some progress in this respect, such as Sany’s purchase of Putzmeister and Geely’s takeover of Volvo.
Of course, Chinese buyers will have a lot to do in terms of post-acquisition internal integration, but the aftermath of the financial crisis presented Chinese companies with low-cost M&A opportunities, through which they can integrate global resources and climb up the value ladder. Conclusively, new opportunities for China’s opening up should be considered more of a qualitative nature, rather than quantitative. And when developing new open-door strategies, China should consider opportunities from fundamental shifts in external environments.
To understand China’s opening strategies in the new normal, we first have to know what are the new normal requirements for China’s opening up. At the APEC 2014 Summit, President Xi Jinping elaborated on China’s new normal from three perspectives: first, China’s economy has slowed down from super-high growth to medium and high growth. This may be simply perceived by some as economic deceleration. Actually, this speed remains relatively high at the global level, especially for an economy as large as China. To maintain economic growth at around 7% is a big challenge for China, but a great contribution to the world economy. Second, China is undergoing an economic transition, accelerating economic restructuring, as a response to the new normal in terms of demand, supply and industry. Third, China will transform its economic growth drivers, which means that China will reduce its decade-long dependence on investment, factors of production and scale, and increase its reliance on innovation, quality and brand for economic growth. At the 2014 Central Economic Work Conference, President Xi Jinping also introduced nine trends in relation to the new normal.
I think this topic can be explored on two levels: in terms of economic transition, China should, for its transition and change of growth drivers, address the question of how it can fully leverage the international market and resources through strategy adjustments to accomplish its goal. At the second level, China faces new requirements as an emerging big power. China’s economic slowdown in the new normal is a result of the laws of economics and many catch-up economies once experienced similar situations. What lies behind China’s slowdown is an expanded economy. According to the International Monetary Fund (IMF), China’s economy has already caught up with the US if measured at purchasing power parity (PPP), although people practically use current price for this purpose. As the world’s second largest economy and an emerging big power, China’s rise will surely exert a considerable impact on international politics, governance and trade. If China cannot properly address its relationship with the international community, it may find it difficult to capitalize on external markets and resources to support its economic growth.
China needs to answer the next two questions to develop new opening strategies: How can external markets and resources facilitate China’s transition while China faces the challenge of transition in an expanding economy? And how should China deal with its relationship with the outside world through strategy adjustments to create an enabling environment for its development. Compared with the past three decades, when our major goal in opening up was to increase exports and earn foreign exchange to speed up industrialization, there has been a fundamental change in our current aim.
Analysis points to this question: What is the new objective of China’s current opening strategy and what is its strategic priority?
China’s current opening strategy will be adjusted based on changes in internal and external contexts. For one, a growing China needs to create a favourable external environment for peaceful development; and China needs to make full use of external markets and resources to expedite its economic transformation. Moreover, China should also improve its position in increasingly globalized value chains.
To accomplish its strategic goals, China needs to establish new strategic priorities.
First, China should focus its efforts on creating an enabling environment for international trade. A small economy should seize opportunities and avert risks. As a large economy, China is an “independent variable” in the world economy, which can affect the external environment. A large economy needs to first explore how to create opportunities. It needs to respond to the concerns and expectations of the international community. It is justifiable for the global community to expect a responsible role from China, but what role should an emerging great power play in a changing global governance system? Should we repeat the governance approach dominated by a single country like the UK or the US, or should we create a new governance framework in this increasingly multi-polar and democratic world? How can China balance the interest of its own and other countries while it is involved in global economic governance and the writing of new rules? These questions merit China’s close attention in its effort to open itself wider still.
China used to be a passive follower of existing rules. Now China should consider new developments in global governance and play a role in rule-based governance. This requires us to strengthen our ability in this regard. China will have to build up its soft power before it can translate its hard power into contribution to global governance. In future governance, China should never be a selfish country that only cares about its own interest, but a responsible stakeholder that balances its own interest with those of the rest of the world. Such new rules will also be a contribution to all of humanity.
Our current attempts, including the concepts of the Silk Road economic belt and the 21st century maritime Silk Road proposed by President Xi Jinping, are all based on such considerations. In terms of how to deepen economic and trade cooperation with the international community, he proposed “five connections” (policy exchange, road network, trade talks, currency circulation and people-to-people friendship), which encourages cooperation at practical, rule and cultural levels. The point is to enable all countries to share development opportunities in a mutually beneficial and win-win climate. This concept is not completely new, but it needs to be urgently addressed and given greater weight in China’s new strategy.
In addition, China needs to accelerate the implementation of its free trade zone strategy through regional trade arrangements, whose content should be enriched to cover liberalization and facilitation for trade and investment.
Second, China should focus on opening the services sector in improving its business environment. There are significant changes in China’s use of foreign investment. The first is that China has shifted its focus of opening from manufacturing to services. The second change has taken place in the administration of foreign investors. The bilateral investment treaty (BIT) being negotiated between China and the US on the basis of pre-established national treatment and a negative list will not only drive changes in approach in government behaviour and administration, but is indicates a shifting government mindset.
Third, China should treat overseas investment as a new priority. Overseas investment can deepen China’s cooperation with host countries, which can help Chinese companies better use global resources and become competitive multinationals. However, China will face a herculean challenge, at both the macro and micro levels, in the shifting of its focus from licensing and administration typical of its previous foreign-investor management practice, to a service-oriented approach characterized by in-event and after-event supervision. Companies will also face new challenges in such areas as global operations, global strategy development, international talent, internal management, as well as global corporate citizenship and cultures.
The key to the success of China’s new opening strategy is the creation of a supportive institutional arrangement, or an open system for economic development. China’s economic system should not be reformed for the sake of reform, but to implement a new strategy. Institutional innovation is a means, not an end. Therefore, the new economic system must centre itself on the goals and priorities of the opening strategy.
For China, opening up has also played a special role. Over the past three decades, opening has accelerated the connection of domestic and international markets and resources, but it has also driven domestic reforms. The 3rd Plenary Session of the 18th CPC Central Committee clearly points to the direction of driving reform through opening further. Therefore, accelerating reform of international investment and trade will greatly catalyse China’s reform of its whole economy.
Author: Long Guoqiang is a Senior Research Fellow and Director-General at the General Office of the Development Research Center of the State Council of China. He is a participant in this year’s Annual Meeting.
Image: A man looks at the Pudong financial district of Shanghai November 20, 2013. REUTERS/Carlos Barria.

MANUFACTURERS, WHOLESALERS, E-COMMERCE

Manufacturers and wholesalers, do you really think e-commerce is only for B2C retail?  At $1.5 trillion dollars--and growing! Wake up to multichannel and the new e-commerce which are driven by the new supply chain. 



CBP CENTERS OF EXCELLENCE

Post-Release Trade Process Authority to be Delegated to Heads of Three CEEs

Thursday, January 22, 2015
Sandler, Travis & Rosenberg Trade Report
U.S. Customs and Border Protection has announced the next increment in its transition of operational trade functions from ports of entry to the Centers of Excellence and Expertise. Effective Jan. 28, the directors of the three CEEs listed below will assume trade authority for post-release trade processes of entry summaries for the respective industry tariff lines filed in the ports of entry indicated.

Electronics
Pharmaceuticals, Health & ChemicalsPetroleum, Natural Gas & Minerals
Long BeachEl PasoSeattle
Los Angeles/LAXNew YorkBlaine
ChicagoNewarkPembina
ClevelandChicagoGreat Falls
MilwaukeeClevelandSan Francisco
MinneapolisMilwaukeeHonolulu
St. LouisMinneapolisPortland, OR
San FranciscoSt. LouisLong Beach
HonoluluAtlantaLos Angeles/LAX
HoustonCharlestonSan Diego
Dallas/Ft. WorthCharlotteNogales
NorfolkPhoenix
SavannahEl Paso
CBP states that entry summary filing procedures and document submission processes will remain the same for brokers and importers and that it is consolidating post-release processing to provide an increased level of uniformity and certainty. CBP will transition an appropriate level of trade staff at these locations to CEE operations.

U.S. IMPORTS, PORTS, NVOs, COUNTRIES

Zepol's Blog of U.S. Imports and Exports



U.S. Imports in 2014 | Top Ports, NVOs, and Countries


Zepol’s data shows that U.S. ocean imports increased 6 percent in 2014 from 2013. Total TEUs (twenty-foot equivalent units) reached 19.4 million, their highest volume ever. U.S. imports were over 1 million TEUs more than 2013, which reached 18.3 million. The graphs below show just how much growth was seen in 2014.

US imports 2014 vs 2013 graph
(U.S. Monthly Ocean Imports in 2013 vs. 2014 by TEUs)


us imports annual teus 2003 to 2014 graph
(U.S. Ocean Imports from 2003 to 2014 by TEUs)


Top U.S. Ports in 2014
The top U.S. port for 2014 was once again Los Angeles, which increased in import volume by 8 percent from 2013. The port of Savannah, GA was the fourth-largest U.S. port in 2014. The Atlantic port increased in imports by 17 percent from 2013, the largest gain out of the top 10 ports. See the table below for total imports in 2014 vs. 2013 for the top 10 U.S. ports.

U.S. Port2014 TEUs2013 TEUs% Change
Los Angeles, CA4,272,4933,968,2008%
Long Beach, CA3,537,8603,456,4362%
Newark/ New York2,972,4642,788,2467%
Savannah, GA1,355,9281,157,33817%
Norfolk, VA981,518902,2589%
Tacoma, WA821,880724,16313%
Oakland, CA820,979780,6825%
Houston, TX768,865682,10813%
Charleston, SC748,511658,04914%
Seattle, WA457,904572,165-20%
All Others2,693,4402,571,1525%
TOTAL19,431,84418,260,7976%




Top NVOCCs in 2014
The top NVOCCs (non-vessel operating common carrier) for 2014 include Expeditors International of Washington (EXDO), Blue Anchor Line (BANQ), and Christal Lines (CHSL). Christal Lines had the greatest surge in TEU volume from 2013 with a 76 percent increase. The rapid rise in volume coincides with its recent merger with Phoenix International last year. See the below table for the top NVOs in 2014 vs. 2013.

NVOCC Name2014 TEUs2013 TEUs% Change
EXDO - Expeditors International of Washington420,042388,3868%
BANQ - Blue Anchor America Line393,308339,71616%
CHSL - Christal Lines317,092180,45276%
AMAW - Apex Shipping Co250,561228,8989%
OERT - Orient Express Container Co216,250197,34510%
DMAL - Danmar Lines Ltd193,602175,94510%
SHKK - Schenkerocean Limited168,642165,3622%
HNLT - Honour Lane Shipping Ltd144,859119,52521%
TOPO - Topocean Consolidation Service131,645120,5969%
HYSL - Hecny Shipping Limited123,417110,94711%
All Others4,501,1734,176,8228%
TOTAL6,860,5926,203,99311%




Top Countries of Origin in 2014
It’s no surprise that the most U.S. imports come from China, which has continued to grow in 2014. U.S. imports from China rose 6 percent from 2013, nearly half a million TEUs, with a total of over 9 million TEUs last year. Vietnam has also made some large leaps in exports to the United States. Although it’s far behind China's volume, the country increased its TEUs to the U.S. by 15 percent from 2013 to 2014. The table below shows the top 10 countries the United States imports from via ocean shipments.

Country of Origin2014 TEUs2013 TEUs% Change
China9,045,8978,505,9896%
Vietnam734,789639,43615%
South Korea694,100667,7994%
Japan615,921600,0323%
Germany570,051537,3096%
Taiwan546,218510,4237%
India472,661413,14414%
Hong Kong371,374399,845-7%
Italy370,806348,5306%
Thailand350,911336,0644%
All Others5,659,1185,302,2276%
TOTAL19,431,84418,260,7976%


To search Zepol's import and export data free, CLICK HERE.

The Data in this Blog:
The data in the blog derives from Zepol's database of U.S. ocean import documents, TradeIQ Import. The TEU numbers do not include fright labeled as 'freight remaining on board' (shipments that do not stay in the United States but continue on to another destination) and do not include empty containers