Friday, April 29, 2016


Top 7 Supply Chain Risks That Could Affect Your Exports

April 12, 2016
Suhail Karim Beg, Business Development Specialist, Small Business Group
Supply Chain Risk Concerns Aren’t Just for Large Corporates
The global supply chain is a marvel of logistics reflecting the interconnected nature of commerce. Today’s small business exporter can leverage advanced communications technologies to efficiently expand its market reach on the back of this global supply chain. However, while expanding opportunities allowing importers and exporters to do business with distant counter parties, it also opens up new operational risks requiring active management.


Union warns of danger to bigger boxships carriers plan to send into new Panama Canal locks

Tug on the Panama Canal
© Mircea Dobre
Despite the impending break-up of both the G6 and CKHYE alliances, both have announced plans to launch Asia-US east coast services, deploying neo-panamax vessels.
In preparation of the forthcoming opening of the Panama Canal’s new locks, said to be able to handle vessels of up to 13,000 teu, the G6 has announced the NYX service, linking China with Savannah, Norfolk and New York, employing ships of 9,000-10,000 teu.
And yesterday the CKYHE announced that its five Asia-US east coast services would also transit the canal, and include calls at Evergreen’s hub at Colon, on the Atlantic mouth of the waterway. The services will all employ vessels of 6,500-8,500 teu.
However, the International Transport Workers Federation (ITF) yesterday warned carriers there were increasing concerns about the safety of manoeuvring larger vessels in the new locks.
An ITF-commissioned study, by Brazil’s Fundação Homem de Mar (FHM), concluded that the locks’ dimensions are too small for safe operation (with both gates closed); that there are no refuge areas for tugboats inside the locks, leaving no room for failure (human error, miscommunication, broken lines or engine failure); that the bollard pull is insufficient and, as a result, manoeuvrability of the vessel was compromised in the locks under the average environmental conditions in Panama. In milder conditions the exercise was concluded safely, it added.
ITF said it had commissioned the study due to the “Panama Canal Administration’s (PCA’s) refusal to engage in dialogue on matters such as training, as well as the technical and construction issues that have led to delays in the operation of the new infrastructure”.
Speaking at the launch of the study in Panama City, ITF general secretary Steve Cotton said: “I wish I could report that the study gave the new locks the all clear. Sadly, I can’t.
“Instead we face a situation where those working on the canal, and those passing through it, are potentially at risk.
“The study was based on the PCA’s original plan to use one forward tug and one aft tug. We understand that compensatory alternatives are being examined, which we welcome.”
FHM employed Manoeuvring Simulator Class A to recreate the new locks, and modelled the arrival of a neo-panamax vessel and the tugboats that would assist its manoeuvres. A video of the exercise can be seen here.
“Those who’ll be working these locks have to be brought into the process, while there’s still time to fix the defects,” Mr Cotton continued.
“We believe that this is an issue where there is common ground with shipowners, insurers and others in the maritime industry, so we will seek to engage them in the discussions and strategies for improvement in this crucial area, and may also consider updating the simulation to cover new manoeuvring alternatives in co-operation with the PCA, as well as other shipping industry representatives.”
The G6 is also set to increase vessel size on one of its all-water loops via Panama, the PA2, which will be upgraded to 6,000 teu ships.
As a result of the increased capacity, two of the G6’s all-water loops that use panamax vessels – the NCE and the SCE/NYE – will be closed, and Alphaliner said “overall capacity deployed by the G6 carriers on all-water services will remain roughly the same as last year”.
Although a major shake-up of carrier alliances is expected, the alliance partners added that their existing grouping would remain in effect until April 2017.

Thursday, April 28, 2016


I see a red P&L & I want it painted black--many container lines & the Rolling Stones.


If you think the omnichannel supply chain is demanding and complex, just wait for IoT SCM.


Port of Houston: No VGM documentation, no load

The Port of Houston authority announced its new policy on container weights, as well as container throughput for the the first quarter and developments with ongoing infrastructure improvement projects.

   The Port of Houston will not accept containers at terminal gates that do not have a certified container weight electronically on file prior to arrival, effective July 1, the port authority announced Thursday.
   The new policy is in line with many other ports as the deadline approaches for complying with an amendment to the International Maritime Organization’s Safety of Life at Sea convention.
   The updated rule is designed to address ocean carrier concerns about containers that have incorrect weights listed on their shipping documents, either due to deliberate efforts to avoid paying overweight fees or because the weight of the contents was estimated. Overweight boxes can potentially undermine stowage plans, which are created to help balance vessels for stability and structural support. In addition to potentially compromising safe operations at sea, heavy boxes pose an extra danger for longshoremen at ports because they sometimes can fall from the grip of cargo handling equipment.
   Shippers are supposed to share the weight with their ocean carrier, which in turn will provide the information to the terminal operator. The verified gross mass (VGM) data can be gathered by weighing the entire container and its contents, or by weighing the contents and dunnage, and adding them to the tare weight stenciled on the side of each container.
   The extra administrative work, IT processes and liability issues associated with the change have many exporters, particularly in the agricultural community, up in arms. Their preference is to provide the weight of the contents and let the carriers plug in the weight of their own boxes.
   So far, the Seagirt Terminal at the Port of Baltimore, operated by Ports America, is the only known U.S. facility that has said it will accept boxes without a VGM. Ports America is offering to weigh the boxes on its own scales or let shippers pick up the box, take it to a third-party scale and return it to the yard.
   Port of Charleston has scales that it uses to routinely weigh export loads, and officials say they are willing to provide the info to shippers if requested.
   Meanwhile, container volumes at the Port of Houston dipped 2.4 percent in March to 182,204 TEUs and were down 3 percent for the first quarter to 510,639 TEUs, the port authority said.
   The growth figures, however, are in comparison to the first quarter of 2015, which represented the strongest quarter in Houston’s history. The port authority said it has retained a substantial portion of the business that was diverted from the West Coast last year when ports were overcrowded due to a union labor dispute and work slowdown.
   Bulk cargo increased by 379,000 tons, or 19 percent, due to a rise in grains and pet coke exports. Automobile tonnage also increased.
   The port authority said overall first quarter revenues declined about 5 percent to $71 million due to a drop in steel imports.
   Houston’s diversified lines of business have helped it weather the downturn in the oil sector, Executive Director Roger Guenther said during Wednesday’s Port Commission meeting.
   The container business is expected to benefit with the May 2 start of a new 2M Alliance service between Asia and the U.S. Gulf operated by Maersk Line and Mediterranean Shipping Co. that will stop in Houston, as well as Mobile, Ala., and Miami.
   The port authority is moving ahead with several infrastructure initiatives (detailed in the April American Shipper magazine feature “The Gulf Option”), including deepening the approach channels to the 45-foot Houston Ship Channel.
   Guenther said that the port authority this month began its support of the U.S. Army Corps of Engineers’ initial work on the deepening feasibility study. It is sharing in the estimated $10 million study cost and will host two public meetings to inform the public and receive comments about the project.
   Landside improvements in the near future include a 47-acre expansion of a container yard at the Bayport Terminal and that construction of a rail spur at Bayport is scheduled to begin in the fourth quarter.
   The Port Commission also awarded a $35 million contract to build another wharf at Bayport and a $10 million contract to upgrade electric power to all dock cranes at the Barbours Cut Terminal.


What happens when virtual reality becomes virtual retailing and what that requires for supply chain management for e-commerce / omnichannel order sizes and product mixes? 


What do retailers do at this stage?

Study: Omnichannel, Amazon impact retail supply chain

Increased customer expectations for a seamless front-end experience, as well as the “Amazon effect,” are having a significant influence on retailers’ back-end systems and operations.
According to a new study of 24 senior retail supply chain executives from Auburn University’s Center for Supply Chain Innovation, the Retail Industry Leaders Association (RILA) and Checkpoint Systems, “The State of the Retail Supply Chain,” 81% of respondents are either using, developing or investigating integrated demand planning.
Reasons for this strong interest in integrated demand planning systems include a desire to better expose store and distribution center inventory to customers, as well as acquire richer analytics about demand for goods and services.
In addition, 67% of executives surveyed offer store pickup by customers as an omnichannel fulfillment method. Perhaps it is no surprise that 61% agree that e-commerce “greatly complicates” company demand planning activities.
Looking ahead, 56% of respondents work for companies that will increase spending on supply chain process improvement this year. Forty-nine percent work for companies that are increasing their investments in omnichannel fulfillment to support faster, more efficient “click-to-delivery” capabilities.
Other notable findings include:
  • 45% of executives highlight the need to develop more effective omnichannel returns strategies
  • 26% of executives say their companies are prioritizing “enhanced customer service” as their primary supply chain strategy. This is more than double the 11% who said so in 2015.
Brian Gibson, executive director of the Center for Supply Chain Innovation, said the convenience and effectiveness of purchasing and receiving goods from is pressuring retailers across all verticals and channels to operate an advanced omnichannel supply chain.
“Amazon is at the epicenter of this,” said Gibson. “They’re really forcing everyone to up their game, and everybody is feeling pressure. How do I get my product delivered quickly and, at the same time, efficiently?”


Once Bustling Trade Ports in Asia and Europe Lose Steam

From Shanghai to Hamburg, container-shipping industry is gripped by economic undertow

Empty storage racks at a Shanghai warehouse last year. Once bustling trade routes and ports are falling quiet as the flow of goods slows between Asia and Europe. ENLARGE
Empty storage racks at a Shanghai warehouse last year. Once bustling trade routes and ports are falling quiet as the flow of goods slows between Asia and Europe. Photo: JOHANNES EISELE/AGENCE FRANCE-PRESSE/GETTY IMAGES
At a logistics park bordering Shanghai’s port last month, the only goods stored in a three-story warehouse were high-end jeans, T-shirts and jackets imported from the U.K. and Hong Kong, most of which had sat there for nearly two years.
Business at the 108,000-square-foot floor warehouse dwindled at the end of 2015 after several Chinese wine importers pulled out, said Yang Ying, the warehouse keeper, leaving lots of empty space. The final blow came after a merchant turned away a shipment in December at the dock.
“The client told the ship hands, just take the wine back to France,” Ms. Yang said. “Nobody wants it.”
Pain is increasing among the world’s biggest ports—from Shanghai to Hamburg—amid weaker growth in global trade and a calamitous end to a global commodities boom. Overall trade rose just 2.8% in 2015, according to the World Trade Organization, the fourth consecutive year below 3% growth and historically weak compared with global economic expansion.
The ancient business of ship-borne trade has been whipsawed, first by a boom that demanded more and bigger vessels, and more recently by an abrupt slowing. That turnabout has roiled the container-shipping industry, which transports more than 95% of the world’s goods, from clothes and shoes to car parts, electronic and handbags. It has set off a frenzy of consolidation and costs cutting across the world’s fleets.


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Ashore, it is also slamming ports and port operators, the linchpin to global commerce. Nowhere is the carnage more painful than along the Europe-Asia trade route, measuring roughly 28,000 miles round trip. A cooling Chinese economy and a high-profile crackdown by Beijing on corruption has damped demand for everything from commodities like iron ore to designer scarves and shoes. Meanwhile, Europe’s still sputtering recovery from the global economic crisis is hitting the flow of goods in the other direction.
On Friday, the Hong Kong Marine Department reported throughput for its port in the first quarter was off 11% from the first three months of last year. Throughput for all of 2015 also dropped 11%.
“It is the first time you see people in shipping being really scared,” said Basil Karatzas, of New York-based Karatzas Marine Advisors and Co.
Chinese imports from the European Union fell nearly 14% in 2015. Chinese exports to Europe were down 3%. This year isn’t starting any better. In the first quarter, Chinese imports from the EU fell 7% from a year earlier, a decline matched by exports to Europe.
Jonathan Roach, a container-shipping analyst at London-based Braemar-ACM Shipbroking, said some 100 Asia-to-Europe sailings were canceled last year, or 10% of regularly scheduled voyages on the route.
“Drastic fleet management strategies have been implemented by liner operators to reduce their exposure on oversupplied Asia-Europe trades,” Mr. Roach said.
Last November, Maersk Line, the world’s biggest container operator, said it would lay off 4,000 employees and pushed back new ship orders to weather collapsing freight rates. In Asia, South Korean shippers Hyundai Merchant Marine 011200 5.54 % and Hanjin Shipping Co. 117930 -3.42 % are in talks with creditor Korea Development Bank to restructure debts.
There are many reasons for the global slowdown, including a yearslong commodities-price rout, generally slower growth in Asia and an anemic recovery in much of Europe. Economic and political crises have roiled big markets, including Russia, Ukraine and Brazil. And policy makers blame a dearth of big trade deals, like Nafta, which have spurred big global trade gains in the past.
Not everyone is suffering. U.S. ports from Los Angeles to New York are pursuing expansions in anticipation of higher volumes, thanks to a relatively robust American economy. But even in those ports, retailers are sitting on large amounts of unsold goods, and could cut back on ordering more from overseas if inventories don’t come down.
At the biggest ports in Asia and Europe, there are few signs of a near-term rebound. Last year, Shanghai International Port (Group) Co., China’s top port, handled more containers, but total cargo fell to 513 million tons, down 5% from 2014. Through March this year, volumes were down 4% from the year-earlier period.
Willy Lin, chairman of the Hong Kong Shippers’ Council, said car parts imported from Europe and assembled in China fell by at least 13% by volume in 2015. Shipments of luxury goods, including high-end clothes, shoes and apparel, from Europe were down around 15% last year.
“It is 30% fewer boxes coming in and around 10% [fewer] going out” of Chinese ports, Mr. Lin said.
The pain is just as bad in Europe. A recent study by the European Shippers’ Council, which represents around 25,000 exporters and importers, found a 12% decrease in Northern European port calls by all shipping lines between the second half of 2014 and the second half of last year. The study showed a doubling of skipped port calls between Europe and Asia over the same period.
You can see it at the docks, which at times are empty.
Fernanda Van Opstal, APM Terminals
At the Belgian port of Zeebrugge, a major European transshipment hub for container ships and dry-bulk vessels, cargo volumes have dropped to less than half over the past 15 months.
“You can see it at the docks, which at times are empty,” said Fernanda Van Opstal, a sales manager in Zeebrugge for port operator APM Terminals, owned by Danish shipping giant A.P. Moeller-Maersk AMKBY -3.33 % A/S.
Ms. Van Opstal said exports to China, including timber, fertilizers, metal and plastic scrap, and heavy machinery, continue, but volumes over the past year are down by up to 30% in most categories. So-called “Triple E” vessels, the world’s largest container-carrying ships, are coming and going less frequently, and often less than full.
In Hamburg, Europe’s third-busiest port behind Rotterdam and Antwerp, container traffic with China fell last year to its lowest since 2009. Klaus-Dieter Peters, chief executive of Hamburger Hafen und Logistik AG HHULY -0.86 % , which runs three out of the four container terminals in Hamburg, blames China’s slowing economy and the crises in Russia and Ukraine.
Cranes at the Yangshan Port Container Terminal in Shanghai late last year. ENLARGE
Cranes at the Yangshan Port Container Terminal in Shanghai late last year. Photo: DING TING/XINHUA/ZUMA PRESS
“The challenging environment…was felt particularly in seaborne container handling,” he said. HHLA’s container throughput fell 13% in 2015.
At the Zhanghuabang Terminal in Shanghai, near the mouth of the Yangtze River, roads are lined with idle trucks, with chain-smoking drivers waiting for loads. Inside the terminal on a recent afternoon, 45-year-old driver Sun Shihong was helping other workers unload half-ton, U-shaped coil units made by Shanghai Electric Group for use at power plants
In 2010, Mr. Sun said the company was using more than 40 trucks, each of which made the run between the factory and the port three times a day.
“I earned 12,000 yuan (about $1,850) a month three years ago,” he said. “And now, 6,000 yuan to 7,000 yuan.”


Could an e-commerce boom and 'the Amazon effect' be the saving of smaller cargo airports?

Frankfurt Hahn
© Andrey Shevchenko
For aspiring air cargo gateways, the “Amazon effect” may be the new “Aerotropolis”.
The concept of an airport integrated with production facilities on its doorstep fuelled the development ambitions of many smaller airports over the past three decades.
While, the decline in air freight seriously dented those dreams, rumours that Amazon may buy Hahn Airport to use as its European hub – coupled with gung-ho predictions of e-commerce growth – is opening a new debate about the viability of cargo airports.
Neither the internet retail giant nor the German airport has commented on the deal, but for Hahn the scenario of Amazon acquiring it is very tempting.
In China, Shenzhen-based SF Express, the country’s largest express operator, this week confirmed plans to build a bespoke cargo airport at Yanji, around 75km from Hebei’s capital Wuhan.
Almost the entire country is just a 90-minute flight from there, and the new hub’s creation is a key part of SF Express’ growth strategy, which also includes expanding its fleet from 40 aircraft to 100 by 2020.
Hahn, meanwhile, remains for sale after a rollercoaster ride that saw carriers come and go.
It is a former military airbase, about 120km from Frankfurt, which marketed itself as an alternative to the German gateway – a strategy that attracted low-cost passenger airline Ryanair and a string of cargo carriers, such as Aeroflot, Nippon Cargo and Air Cargo Germany.
However, Hahn struggled with years of losses, and its majority owner, the state government of Rhineland-Palatinate, wants a buyer. Even a flight curfew between 11 pm and 5 am at Frankfurt could not cement Hahn’s position as a cargo gateway. Last year it handled just under 80,000 tonnes, a 40% decrease on the previous year and way off its peak in 2011, of 286,000 tonnes.
The idea of Amazon replicating in Europe its approach in the US market, where it uses a dedicated fleet of B767 freighters from ATSG operating a network based on the erstwhile Airborne Express hub at Wilmington, would likely have ramifications beyond Hahn.
Mike Webber, a former airport cargo executive turned industry consultant, notes that Amazon also uses a string of regional hubs, similar to integrator networks.
He said Amazon’s foray into a dedicated freighter network operation had certainly lifted the fortunes of Wilmington, which saw most of its activity and jobs disappear after DHL left. The airport’s set-up meant that Amazon could, essentially, take over an infrastructure that met its needs and resulted in huge cost savings.
“If you had to do a cost analysis to build a cargo airport to accommodate Amazon, you wouldn’t do it,” he said. He argued that the growth of e-commerce may open opportunities for some airports with existing infrastructure, but would not usher in a renaissance for cargo airports, because the industry was unlikely to see a proliferation of e-tailers with dedicated airfreight operations.
“How many Amazons are there going to be?” he asked. To cover the United States, an operator would need a central hub plus six or seven regional hubs.
Whether an operation would translate into profits for airports which landed a chunk of this business is another question. Few cargo airports have managed to produce black figures, Mr Webber said.
“Rickenbacker has been relatively successful,” he said, pointing to the cargo airport of Columbus, Ohio, which has attracted regular freighter flights from the likes of Cathay Pacific and Cargolux on the strength of garment distribution for the US north-east. For years, Rickenbacker’s international volumes were flown in on cargo charters.
“It only managed to break even in the last few years,” Mr Webber explained, once scheduled international freighter runs were established.
According to Airport Council International, 69% of the world’s airports are loss-making, and cargo is an unlikely avenue to profitability, Mr Webber added.
However,  for many profitability was not the only yardstick, he said, as there are public policy issues around job losses and economic repercussions from the decline or outright closure of a regional airport.
He said the integrators seemed a more reliable engine for growth. UPS recently announced plans to upgrade its west coast hub at Ontario Airport in California, boosting the building’s size by over 15%, which will create some 500 new jobs over the next five years.
And DHL is looking to quadruple the size of its sorting facility at Paris Charles de Gaulle Airport to absorb growth in parcel traffic, which it says has hit 14-15% annual increases in the past three years.


Brands Voice Doubts After Alibaba Joins Group Fighting Fake Goods

Michael Kors said Alibaba’s admission to the U.S. anticounterfeiting group provides ‘cover to our most dangerous and damaging adversary’

Alibaba founder Jack Ma has said earlier this year that the company will spare no expense in ridding its platforms of counterfeit goods. ENLARGE
Alibaba founder Jack Ma has said earlier this year that the company will spare no expense in ridding its platforms of counterfeit goods. Photo: Associated Press
When Alibaba Group Holding Ltd. BABA -0.26 % joined one of the world’s largest anticounterfeiting groups this month, the Chinese e-commerce giant hailed the move as a signal of its commitment to removing fake goods from its shopping platforms.
But the admission of Alibaba to the Washington-based International AntiCounterfeiting Coalition—a nonprofit group of around 250 members dedicated to combating counterfeiting and piracy—has sparked a backlash from some brands skeptical of Alibaba’s sincerity in weeding out the large volume of counterfeits on its platforms.
Last week, U.S. fashion brand Michael Kors canceled its membership in the group, citing the organization’s decision to welcome Alibaba into the fold. French luxury brand Longchamp and an anticounterfeiting coalition of French and global brands known as Unifab also criticized IACC’s decision.
In a letter to the IACC, Michael Kors Holdings Ltd. KORS -1.05 % said Alibaba’s admission to the U.S. anticounterfeiting group provides “cover to our most dangerous and damaging adversary” at a time when many brands are considering filing lawsuits to force Alibaba to remove counterfeits from its sites.
“Alibaba’s strategy has consistently been to provide lip service to supporting brand enforcement efforts, while doing as little as possible to impede the massive flow of counterfeit merchandise on its platforms,” Lee Sporn, general counsel for Michael Kors, wrote in the letter, which was reviewed by The Wall Street Journal. Mr. Sporn declined to be interviewed.

Alibaba said it is committed to doing whatever it takes to fight counterfeit goods on its platform. The e-commerce company sees IACC membership as “another great step” toward working with brands in tackling fake goods online, Matthew Bassiur, Alibaba’s head of global intellectual-property enforcement, said in a statement.
Roughly two dozen brands and other IACC members have privately expressed support in emails and phone calls for Michael Kors’s position but are reluctant to be named because they are working with Alibaba on removing counterfeits, according to Barbara Kolsun, a former IACC chair and a professor at the Cardozo School of Law in New York. The Journal has reviewed some of these emails.
Unifab, which has roughly 400 members, told the Journal that brands are considering taking a variety of actions against Alibaba if the e-commerce company doesn’t quickly adopt stronger measures to remove counterfeits.
IACC President Bob Barchiesi said its 21-member board’s unanimous vote to admit Alibaba gives members a way to work more directly and collaboratively with the e-commerce company to address counterfeit and pirated goods. Some brands that belong to Unifab are also part of the board, he said.
Earlier this month, IACC called Alibaba “one of our strongest partners” in combating counterfeits and piracy in announcing the company’s membership. The coalition has invited Alibaba founder Jack Ma to give the keynote address at its annual conference for global brands in May.
The Recording Industry Association of America, whose representative sits on IACC’s board, said it understands brand owners’ concerns regarding Alibaba. “But I don’t understand why having them as a member is a terrible thing,” said Brad Buckles, the group’s executive vice president of antipiracy. “It brings them into the room. They have to look across the table at us.”
The controversy comes four months after U.S. trade officials warned Alibaba that it needs to step up its efforts to fight counterfeits on both Taobao, the company’s massive online bazaar, and Tmall, a sales venue largely for brand owners.
Alibaba said it is working to make it easier to get counterfeiters off its sites. The company said its partnership with IACC two years ago on a program that speeds up the process of removing infringing listings from Alibaba’s sites has led to nearly 5,000 virtual storefronts being closed and sellers permanently banned from its marketplaces.
The e-commerce company also said it has created a program last year to allow brand owners with a reliable track record of submitting claims to get fake product listings taken off its sites quickly and simply.
Some brands say they have difficulty joining this program, and note that counterfeits of their brands on Alibaba’s platforms haven’t lessened significantly.
Brands also want Alibaba to adopt proactive measures to screen out counterfeit items so they don’t get sold on the platforms in the first place, according to interviews with brands and their lawyers.
Alibaba’s efforts thus far to take counterfeit listings off its sites are a “drop in the bucket compared to the grand scale of the problem,” said Kristina Montanaro Schrader, a Nashville-based lawyer representing more than a dozen brands.
Luxury brands owned by Paris-based Kering SA, KER 0.57 % which include Gucci and Balenciaga, among others, have already sued Alibaba, claiming in legal filings that the company encourages and profits from the sale of counterfeits on its platforms. That case is pending.
Alibaba has said the lawsuit has no basis and cited its “strong track record” of helping brands.
Brands that are members of Unifab are still waiting for “convincing results” following Alibaba’s promises over the past few years to fight counterfeits, according to Delphine Sarfati-Sobreira, director general of the group.
Alibaba said that it is “part of the solution, not the problem,” adding that it has shown IACC it is serious about brand protection.
IACC’s Mr. Barchiesi said the trade group must do what’s best for the majority of its members, and Alibaba has shown that it can do a “pretty good job” in working with brands to fight fake goods on its sites.
Write to Kathy Chu at


Interesting after all the comments on East Coast ports during and after the West Coast ports slowdown last year.

East Coast Ports to See Muted Boost From Panama Canal Expansion -CBRE

Ports shouldn’t expect a wave of new containers to pass through the Panama Canal’s wider locks, the real-estate broker says in a report.

The expansion of the Panama Canal, a $5.3 billion project, is supposed to serve container shipping and dry bulk shipping in trade and will open on June 26. ENLARGE                 
The expansion of the Panama Canal, a $5.3 billion project, is supposed to serve container shipping and dry bulk shipping in trade and will open on June 26. Photo: Bloomberg News
The opening of the Panama Canal’s new wider, deeper locks, isn’t likely to to send a wave of new cargo to the East Coast, industrial real estate brokerage CBRE Inc. said in a report.
The expansion, which is set to open in June, would allow for larger ships, potentially reducing the cost of transporting goods from Asia to ports from Houston to New York. But carriers have been shifting their routes to eastern ports for years, and the widened canal is unlikely to entice many more to take the plunge, CBRE said.
West Coast ports claimed 52% of U.S. container volume last year, down from 54% in 2014 and 57% in 2010, according to CBRE. The shift accelerated last year as shippers had to reroute their cargo amid labor strife at West Coast ports, helping East and Gulf Coast ports, including those in Savannah, New York, New Jersey and Charleston, to capture most of the 4.6% increase in U.S. container traffic in 2015, the report said.
The change in volumes “is going to be pretty minor,” said David Egan, head of industrial research in the Americas for CBRE. “Most of what we thought was going to happen has already happened.”
Rather, East Coast and Gulf Coast ports are likely to see a gradual increase in container volumes from Asia over many years, Mr. Egan said.
“Shipping freight to most U.S. regions is both quicker and more cost-effective through the West Coast ports than it is through the [Panama] Canal,” the report said. Though post-Panamax ships are expected to narrow the cost gap between coasts, the decision to shift cargo from one side of the country to the other involves a complex calculation of everything from proximity to population centers, fuel costs, and time.
Gerry Wang, chief executive of Seaspan Corp., which charters large container ships to shipping lines, said carriers are looking at sending bigger ships through the canal to the East Coast but remain wary about the ability of the ports to handle the vessels.
“The infrastructure, the port facilities will have a challenging time to deal with those new arrivals,” Mr. Wang said in an earnings call with analysts. He said some carrier executives have told him they plan to send smaller vessels of 7,000 to 8,000 twenty-foot-equivalent, or TEU, containers at first, “just to see how things work.”
“So, it is a question mark literally raised by every operator to me when I speak to them and we’re just as curious as anybody else,” Mr. Wang said.
Still, other long term factors will slowly make the East Coast more compelling, Mr. Egan said. East Coast ports are investing to catch up to their West Coast counterparts in terms of infrastructure, and manufacturing is moving west as costs in China rise. “Low-cost manufacturing is going to seek the cheapest place possible…[and] China is not necessarily the low-cost choice anymore,” he said.
When the point of production moves toward India and Africa, “going through the Pacific may not be the best choice,” he said. But that, too, is a shift that will take “quite some time.”
Write to Loretta Chao at


Free’ Shipping Crowds Out Small Retailers

Businesses scramble to keep up with e-commerce merchants that enjoy big discounts from carriers

Saratoga Olive Oil shipped about 5,000 packages last year, at an average cost of $12 to $19 an order. ENLARGE
Saratoga Olive Oil shipped about 5,000 packages last year, at an average cost of $12 to $19 an order. Photo: Caleb Kenna for The Wall Street Journal
Ginger Greer, a Medford, Ore., attorney who does nearly all her shopping from work without leaving her desk, has drawn a line in the sand: “I absolutely refuse to pay for shipping,” she says.
“You can find anything, anywhere at this point” that ships free, she adds. That includes a step stool for her 5-year-old daughter and a barn-door slider Ms. Greer recently bought for her closet from Inc. AMZN 2.56 %
Of course, shipping isn’t really free. But building it into a product’s price tag, or offering unlimited deliveries for a flat fee, can make consumers blind to it. Ms. Greer pays $99 annually for “no cost” two-day shipping through Amazon Prime but, she says, “in my mind, that’s free.”
The number of consumers who agree with her is rising quickly. More than half the past year’s orders from 30 of the biggest e-commerce merchants were shipped free of charge, compared with 33% two years ago, according to mystery shopper StellaService.
For online retailers who can afford it, free shipping is becoming a loss leader—the e-tailing equivalent of selling milk below cost to increase grocery-store traffic.
Amazon Prime’s free shipping is turning the retailer into the first stop for many consumers. In a survey commissioned by BloomReach Inc. last year, 34% of 2,000 consumers polled said they started their online shopping on a search engine like Google. But 44% began at Amazon. That’s up from 30% in 2012, according to Forrester.

In the free-shipping game, big shippers, who get more favorable rates from package carriers like FedEx Corp. FDX 0.22 % and United Parcel Service Inc. UPS -0.48 % because of guaranteed and predictable volume, have a big competitive advantage. That helps to make the Internet a tougher marketplace for startups and small businesses.
The Web’s biggest retailers—including Target Corp. TGT -0.94 % , Wal-Mart Stores Inc. WMT 0.14 % and Amazon—often get volume-driven discounts of 70% or more on certain shipments, while boutiques like Saratoga Olive Oil Co., in Saratoga Springs, N.Y., get breaks closer to 5%.
“The barriers to entry are tough,” says Trevor Outman, principal partner at consulting firm Shipware LLC. He estimates that, after discounts, a megaretailer might pay about $14 to express-ship a 3-pound, 10-inch-square box from New York to a suburban Atlanta home. That same delivery could cost a small retailer about $74.
Saratoga Olive Oil, which sells gourmet oils and vinegars, knows that all too well. “We’re not having Saratoga Oil Prime anytime soon,” says Peter Koch, its operations analyst. “We’ll never be large enough.”
Saratoga shipped about 5,000 packages last year, at an average cost of $12 to $19 per order, including packaging. It offers free shipping on orders over $100, but that eats into its margins. “It’s a cost of our business and getting our name out there,” says Mr. Koch.
More-established retailers have struggled to adjust. About seven years ago, Amazon moved aggressively into home and garden products, squeezing specialty e-tailer Comfort House, which launched its website in 1994.
“When we started, there was no such thing as free shipping. And actually, today there’s no such thing as free shipping,” says Jeff Gornstein, president of the Newark, N.J., company, which he estimates generally spends about $15 to $20 per shipment, or about 12% of revenues.
“We are absorbing more and more of it because we can’t pass along the costs to consumers, because of Amazon,” he says.
Indeed, shipping costs are a new front in price wars. Last week, Amazon and both offered a 1.7-ounce jar of Neutrogena Hydro Boost Gel Cream for $17.99. Amazon offers free shipping to Prime members, as does Target to its REDcard members, who sign up for a Target debit or credit card. For nonmembers, the slowest shipping option cost $5.48 or $4, respectively.
                   Though financial terms of its deal aren’t public, Amazon is among the handful of top customers who pay the Postal Service an average of $1.87 a package to make the last leg of a residential delivery. Other retailers must pay for a package’s full journey.
Though it can be costly for other merchants to sell through Amazon, many do so in part to take advantage of shipping discounts. Through UPS, outside vendors spending over $1,000 weekly to ship from Amazon receive a 37% next-day air discount.
Selling through Amazon eats into margins at Quady Winery in Madera, Calif., but gives the wine maker access to millions more customers. Quady recovers at least 40% of the retail price of its wine on orders placed through Amazon.
“Shipping wine is expensive. It’s heavy, and you usually need to do it in two or three days,” says Herb Quady, one of the family owners. “Certainly we pay a lot more for shipping than Amazon does.”
Write to Laura Stevens at ENLARGE 

Both retailers can fatten their margins by saving even a few pennies off what it would cost to ship such a small item. Without discounts, prices are about $13 by ground and $24 for two-day air from New York to Atlanta.
Amazon’s scale typically gives it an edge. A Shipware survey of about 560 shippers showed some who spent in the range of $100 million annually on shipping could qualify for discounts of more than 80% on overnight shipments, and up to 60% on residential delivery by ground.
Amazon shipped more than a billion North American packages in 2015, roughly seven times as many as its closest rival, Wal-Mart, according to estimates by software developer ShipMatrix Inc. Amazon says it spent $11.54 billion globally on shipping costs last year.
Barclays analysts estimate Amazon spends $4 to $5 on average per package, compared with the average $7 to $8 for ground delivery paid by an average business.
An Amazon spokeswoman said in an e-mail that the company has invested in infrastructure to support package delivery since the company’s founding. “We’ll continue to invest in innovations that support great delivery speeds for Amazon customers,” she added.
‘We’re not having Saratoga Oil Prime anytime soon,’ says Peter Koch, operations analyst at Saratoga Olive Oil, alluding to the popular Amazon Prime program. ‘We’ll never be large enough.’  ENLARGE
‘We’re not having Saratoga Oil Prime anytime soon,’ says Peter Koch, operations analyst at Saratoga Olive Oil, alluding to the popular Amazon Prime program. ‘We’ll never be large enough.’ Photo: Caleb Kenna for the Wall Street Journal

Wednesday, April 27, 2016


Shyp added another fee to its online return shipments

Shyp is now charging a $5 handling fee for its online returns in addition to its regular pickup fee and postage costs.
Shyp’s big play has been that it’ll charge a simple $5 fee, plus postage, for a quick pickup and delivery. It expanded into online returns in March last year after noticing an increasing percentage of its user base began returning items through the service. That service extended to retailers like Amazon, and at the time constituted around 15 percent of the company’s business.
All this isn’t too surprising. Shyp has recently said that it is tweaking its business model to make it more modular and make more sense as it faces the challenge of being an on-demand shipping company. A Shyp representative said the company said earlier this year it would be making operational changes to its pricing model as it guns for profitability.
Many returns come with a prepaid label so there is no shipping cost, which is likely the point of the handling fee. Of course — especially in the on-demand space — pricing and business models are a constant work in progress.
There’s a note on it in its support page, but we didn’t see a formal announcement in a blog post or anything like that. The fee appears to have been instituted in the past month or so, as Wayback machine archive for March 16 does not show the handling fee on its pricing site. The note on the site says that it clearly notifies users about the handling fee in the app.
Like other on-demand companies, Shyp’s business model has proven to be a tough one to master. Recently, the company decided to pull out of Miami as it shifted its focus to more appetizing markets. The company now operates in four cities: Chicago, New York, Los Angeles and San Francisco. Shyp previously told Fast Company that it’s growing at around 20 percent month-over-month.
Shyp has also established a number of large-scale business-to-business deals, like one with eBay that helps sellers ship their products through Shyp. All this, taken together, shows that Shyp has found itself becoming more and more flexible as it continues to work on its business model and experiment with new ways to generate volume and revenue.
And so, the company continues its search for profitability with tweaks like this. That’s a common trend we’re seeing in startups in 2016 as venture capital money begins to dry up a bit. Shyp last raised $50 million in a financing round that valued the company at $250 million from Kleiner Perkins — and they’re likely feeling the pressure to burn less of that big pile of money.
Update: A Shyp representative said that all customers received an email to about the change. This story has been updated to reflect that new information.