Tuesday, May 31, 2016


China manufacturing gauge signals further economic stabilization

Chinese workers pack steel rolls in a steel factory in Tangshan.
Chinese workers pack steel rolls in a steel factory in Tangshan. PHOTO: AFP
BEIJING (BLOOMBERG) - China's official factory gauge remained above the dividing line that signals improving conditions for a third month, adding to recent evidence of stabilization in the world's second-largest economy.
The manufacturing purchasing managers index stood at 50.1 in May, the nation's statistics agency said on Wednesday (June 1), matching April's level and beating the median estimate of 50 in a Bloomberg News survey of economists. The non-manufacturing PMI was at 53.1 compared with 53.5 in April. Numbers above 50 indicate improving conditions.
Fresh signs of resilience will be welcome for policy makers, after weak April readings raised concerns that a first- quarter stabilization was faltering. Policy makers are striving to keep economic growth above 6.5 per cent this year while keeping a lid on debt and cutting excess capacity in industries like coal and steel.
"The Chinese economy looks steady in May," Larry Hu, Hong Kong-based head of China economics at Macquarie Securities, said in a note before the release. "Economic data is largely in line with the government's growth target for this year. As such, policy stance will likely stay put and the chance of a near-term interest rate cut is very limited."


Merging Hyundai Merchant Marine and Hanjin--merging two container lines that are bleeding financially.  What does it accomplish besides consolidating losses?

HMM may have to merge with Hanjin to join THE Alliance

Meanwhile, the struggling South Korean ocean carrier said in a statement Sunday it expects to reach an agreement with ship owners regarding charter rate renegotiations “soon.”

   The rumors of a merger between troubled South Korean ocean carriers Hyundai Merchant Marine and Hanjin Shipping may be moving closer to reality, according to a report from Business Korea magazine.
   The local media outlet reported a tie-up may now be required in order for HMM to join the newly formed THE Alliance vessel sharing agreement, which currently includes Hanjin; Hapag-Lloyd of Germany; Japan's Mitsui O.S.K. Line (MOL), Nippon Yusen Kaisha (NYK) and Kawasaki Kisen Kaisha ("K" Line); and Taiwan-based Yang Ming.
   The report cited an anonymous South Korean government official, who said there was only enough room in THE Alliance for one Korean line.
   “It is said that the THE Alliance has one spot for South Korean national flag carriers in view of the number of regular lines, the number of vessels in operation, the size of the Port of Busan, etc.,” the official said. “For both Hyundai Merchant Marine and Hanjin Shipping to join the alliance, the six global shipping companies in the alliance have to provide their consent before September this year, which is practically unlikely.”
   When THE Alliance was announced earlier this month, HMM said it would be able to join the new VSA once its business was “normalized” following a voluntary debt restructuring that includes renegotiating charter rates with ship owners.
   “The government has provided the same conditions for both companies, that is, donation by the largest shareholders, charter rate reduction and debt restructuring,” added another official. “If one of the two fails to meet the requirements, there is no way but the other one absorbing it after a court receivership procedure.”
   Meanwhile, HMM said in a statement Sunday it expects to reach an agreement with ship owners regarding those charter rate renegotiations “soon.”
   “HMM has been negotiating charter fees with 22 foreign ship owners, and made significant progress so far,” the company said. “It is expected to see a swift agreement soon.”
   According to HMM, the carrier has achieved “meaningful progress” in negotiations with five containership owners, and has also submitted final proposals to bulk ship owners.
   “There is a series of speculative reports based on incorrect information regarding charter negotiation. Such ill-informed can pose serious threats to not only our on-going discussions about charters but also the company’s business normalization,” HMM added. “We firmly ask media to take extra care when reporting about the matter until the charter negotiation completes successfully.”
   The company plans to provide an update on the progress of its charter rate renegotiation and seek the support of its creditors at bondholder meetings scheduled for May 31 and June 1.


Brexit, VGM and carrier bankruptcy fears give Asia-Europe box trades a boost

© James53145
Fears of currency devaluations after a Brexit vote, supply chain disruption from new container weighing regulations and an aversion to financially troubled carriers are contributing to a demand spike from Asia to North Europe.
The Loadstar has received several reports of vessels operating the Asia-North Europe trade leaving Asian ports full in past few weeks, with containers having to be rolled over to the next sailings.
The current capacity squeeze has also had a noticeable impact on the container spot market, with the Asia-North Europe component of the Shanghai Containerized Freight Index (SCFI) surging by 37% last week.
According to Drewry, some UK importers are bringing in stock earlier, fearing the 23 June referendum results in a vote to leave the European Union, immediately weakening the value of sterling, making imports more expensive.
The analyst added that continental European retailers had also “fast-tracked shipments in anticipation of a Brexit result also taking its toll on the value of the euro”.
Furthermore, Drewry said that the amended SOLAS verified gross mass (VGM) regulations that come into force on 1 July, requiring all export containers to have their weights verified and the information submitted to carriers prior to loading on board a vessel, was also boosting demand.
“Merchants have sought to get cargo on the water ahead of the new container regulations, which some fear will initially cause disruption“, said Drewry.
Notwithstanding that the increased demand for space from Asia-North Europe appears to have more to do with political and regulatory reasons than growth on the route, the reversal in the supply-demand ratio, however temporary it may prove, is good news for ocean carriers that traded in the red in the first quarter of the year.
The demand spike has not only underpinned planned general rate increases (GRIs) by carriers but also given them confidence to bring back peak season surcharges (PSSs), which in strong demand years have provided a significant boost for revenues.
Carriers have also cut capacity. In addition to blanked sailings this month, to coincide with the Golden Week holidays in Asia, two of the alliances have cut complete services, noted Drewry.
The CKYHE alliance removed its CES/NE8 loop, operated with 8,500 teu ships, on 21 March, which followed the G6 mothballing its Loop 6 service a month earlier.
The Loop 6 service, which deployed 13,200 teu units, was initially suspended for 11 weeks but this was extended by eight weeks and is not set to resume until 7 July.
Drewry said that another factor in the current capacity shortage was reports that some merchants have sought to reduce their exposure to financially stricken South Korean carriers Hyundai Merchant Marine and Hanjin, which has had the effect of squeezing supply out of the system.
“Whether the current buoyant cargo movements from Asia proves to be a short-lived phenomenon or not, westbound 40ft spot rates are likely to stay above $1,000 until at least the end of the peak season, in September,” said Drewry.


Is this the future of bricks and clicks retailing?  Do they have the supply chain to do it?

Yes, Gap is thinking about selling on Amazon, but not right now

CEO Art Peck says Gap is shifting more of its focus toward mobile.
Lead Photo

If you can’t beat ‘em, join ‘em. Or in Gap Inc.’s case with Amazon.com Inc., if you can’t beat ‘em, start selling through them.
On Gap’s fiscal Q1 2016 call with analysts last week, CEO Art Peck expanded on comments he made earlier in the week that the retail group, which includes  the Banana Republic and Old Navy brands plus  its flagship brand, is considering selling its clothing via Amazon. “To not be considering Amazon and others would be—in my view—delusional,” Peck said at the company’s annual investor meeting Tuesday in San Francisco. During the earnings call Thursday, Peck said selling online through leading e-retailer Amazon is an option under consideration but far from imminent.
“Amazon's presence in e-commerce is undeniable in this country,” he told analysts on the call, according to a transcript from Seeking Alpha. “In no way was I previewing a partnership; I'm just previewing the fact that we want to make sure that we're very situationally aware of what is going on with our customers and in the world.”
Gap, No. 20 in the Internet Retailer 2016 Top 500 Guide, does not break out online sales in its quarterly earnings reports, and executives did not detail online sales performance during the quarter. However, Peck made it clear to analysts that he sees the greatest opportunity for Gap in selling to shoppers via their mobile devices.
“Our customer today increasingly is on a mobile device, which means (we need to provide) a great mobile shopping brand and e-commerce experience,” he said, though he did not elaborate on Gap’s mobile initiatives.
Gap also said it is closing its 53 Old Navy outlets in Japan this year, ceding ground in the world’s third-largest economy to local-born fashion brands such as Fast Retailing Co.’s Uniqlo, No. 15 in the Internet Retailer 2016 Asia 500, and Ryohin Keikaku Co.’s Muji (No. 327 in the Asia 500). “I’m obviously disappointed that we’re going to be discontinuing operations, but I view it as a sign of a good company when you acknowledge that the business isn’t going to deliver and you make changes and move forward,” Peck said during the call. Gap is No. 104 in the Asia 500.
For the fiscal first quarter ended April 30, Gap reported:
  • Net sales of $3.44 billion, down 6.0% from $3.66 billion last year.
  • Net income of $127 million, down 46.9% from $239 million last year.
  • Year-over-year comparable sales decline of 5%.
Bloomberg News contributed to this report.


Hallmark adds jobs in Liberty as Enfield, Conn., warehouse closes

More than 500 jobs are affected by warehouse closure
Distribution work is consolidated in Liberty, where 345 jobs have been added
About 300 more Liberty jobs are due to be added this summer, Hallmark says


We can use nature to manage climate risks. Here's how

Third party content
This article is published in collaboration with Project Syndicate.
An enormous iceberg (R) breaks off the Knox Coast in the Australian Antarctic Territory, January 11, 2008. Australia's CSIRO's atmospheric research unit has found the world is warming faster than predicted by the United Nations' top climate change body, with harmful emissions exceeding worst-case estimates.
In the face of rising climate and disaster risk, investments in nature-based solutions can save lives and safeguard prosperity in a cost-effective manner.
Image: REUTERS/Torsten Blackwood/Pool
Written by
Maria Damanaki, Global Oceans Director, Nature Conservancy
Monday 30 May 2016
Written by
Maria Damanaki Global Oceans Director, Nature Conservancy
Monday 30 May 2016

31 May 2016
Nearly half the world’s population – some 3.5 billion people – lives near coasts. As climate change exacerbates the effects of storms, flooding, and erosion, the lives and livelihoods of hundreds of millions of those people will be at risk. In fact, the latest edition of the World Economic Forum’s World Risk Assessment Report names failure to adapt to the effects of climate change as the single greatest risk, in terms of impact, to societies and economies around the world.
  The Global Risks Report 2016
Image: World Economic Forum
Beyond endangering lives, more frequent and stronger storms could cost many billions of dollars, owing to infrastructure damage and lost revenues from farming, fisheries, and tourism. And, as the Harvard Business Review recently noted, the projected cost rises with each new study. Yet the international community currently spends on risk mitigation less than one-fifth of what it spends on natural-disaster response.
When it comes to climate risk, an ounce of prevention is worth a pound of cure. As Rebecca Scheurer, Director of the Red Cross Global Disaster Preparedness Center, put it, “We spend millions of dollars on the response side, and were we to invest more of those resources on the front end we’d save more people. It’s as simple as that.”
With the human and the financial costs of climate change attracting more attention than ever, now is the time to shift resources toward risk reduction. Doing so will require national governments, industry, aid organizations, and other NGOs to make the most of their investments. And some of the most effective and cost-effective solutions are already available in nature.
Coastal and marine ecosystems have considerable potential to mitigate the effects of storms and other risks, especially when combined with traditional built infrastructure. A 100-meter belt of mangroves, for example, can reduce wave height by up to 66% and lower peak water levels during floods. A healthy coral reef can reduce wave force by 97%, lessening the impact of storms and preventing erosion. These and other coastal ecosystems are the first line of defense for many cities around the world, from Miami to Manila.
Until recently, such nature-based solutions were too often overlooked. But leaders increasingly recognize their importance, and are beginning to take action, including on the international level. The Paris climate agreement, reached last December and signed last month, not only established a consensus on the importance of addressing climate change, but also explicitly affirmed that ecosystems play a role in capturing greenhouse gases and helping communities adapt to the effects of climate change.
At the national level, some of the most at-risk island countries are taking important steps. For example, last year, the Seychelles announced a first-of-its-kind “debt for nature” swap with its Paris Club creditors and The Nature Conservancy. The swap will allow the country to redirect $21.6 million of its debt toward investment in a comprehensive approach to ocean conservation that will bolster its resilience to climate change.
Private-sector leaders, too, are starting to look toward natural tools. Engineering firms like CH2M are working with coastal communities in the Gulf of Mexico and beyond to find hybrid solutions that combine traditional and nature-based approaches.
Even the insurance industry – comprising what may be the most risk-averse companies in the world – sees the potential in natural solutions. Over the last decade, insurers have paid out some $300 billion for climate-related damage, often to rebuild the same vulnerable structures. It is not surprising, then, that the reinsurer Swiss Re has conducted studies on mitigating the costly risks of hurricanes to coastal communities.
According to one Swiss Re study, Barbados loses the equivalent of 4% of its GDP every year to hurricane-related costs. But every dollar spent to protect mangroves and coral reefs saved $20 in future hurricane losses. Given such findings, it is no longer inconceivable that insurance companies might one day write coverage for wetlands and other natural infrastructure that offers protection for coastal communities and economies.
Nature can also help to protect livelihoods. A Red Cross-led mangrove restoration project in Vietnam not only reduced damage to dykes and other built infrastructure, but also resulted in higher aquaculture yields and thus more income for the local communities. A mangrove and coral restoration project in Grenada – a joint effort of the Red Cross, the Nature Conservancy, and the fishers of Grenada’s Grenville community – has also shown great potential to increase resilience. Just 30 meters of reef and coral have been shown to increase substantially the population of lobster, conch, octopus, and urchins.
Climate and disaster resilience is a challenge that spans across sectors. So too must our solutions. Such collaborative efforts are vital to the development and implementation of more effective preventive strategies. The World Bank, the Nature Conservancy, and partner researchers (including ecologists, economists, and engineers) have recently published a report offering guidelines for such cooperation. Specifically, the report recommends calculating the value of coastal ecosystems in terms of protected capital and infrastructure, based on approaches commonly used by the insurance and engineering industries.
In the face of rising climate and disaster risk, investments in nature-based solutions can protect lives and safeguard prosperity in a cost-effective manner – all while preserving imperiled natural ecosystems around the world. It is time for governments, business, and NGOs alike to recognize that when it comes to fighting the effects of climate change and protecting coastal communities, preserving and restoring nature may be the smartest investment we can make.


Target Increases Penalties Up To 5 Times For Suppliers Starting Today

I cover the art, science and practice of collaborative relationships
I am an author, educator and architect of the Vested business model for highly collaborative relationships. I have been named by World Trade Magazine as one of the “Fabulous 50+1” most influential people impacting global commerce. My research and work has led to 5 books, including Vested: How P&G, McDonald’s and Microsoft Are Redefining Winning in Business Relationships. I am a faculty member at the University of Tennessee. I travel and speak all over the world, inspiring organizations and individuals on the art, science and practice of how to create and sustain highly collaborative relationships. I have appeared on CNN, Bloomberg, NPR and Fox Business News. My work has been featured in hundreds of articles in publications like Forbes, Chief Executive Magazine, CIO Magazine, The Wall Street Journal, Journal of Commerce, World Trade Magazine and Outsource Magazine.
Photographer: Christopher Dilts/Bloomberg
Target, the sixth-largest U.S. retailer by sales, plans to tighten deadlines for deliveries to its warehouses, hike fines for late deliveries, and could institute penalties of up to $10,000 for inaccuracies in product information beginning today – May 30.
A letter to Target’s suppliers stated domestic suppliers will no longer have a “grace period” to ship a few days after the promised date without penalties. This grace period for shipments is currently two to 12 days, depending on product category.
Target will also increase fines on late shipments to 5 percent of the order cost, according to the letter, which adds that the retailer is considering “escalating charges of $5,000-$10,000” for suppliers who fail to provide complete and accurate product information. Currently, late fines range between 1-3 percent depending on the product. This could mean increased penalties of up to 5 times more for some suppliers.
A Reuters report said the retailer is “cracking down on suppliers as part of a multi-billion dollar overhaul to speed up its supply chain and better compete with rivals including Wal-Mart Stores Inc. and Amazon.com.” The Reuters’ article noted these are the first major steps Target has taken since COO John Mulligan was appointed to that position late in 2015 to “fix supply problems that emerged after it expanded product offerings, including fresh food, several years ago.”
Target Not Alone
Target isn’t alone in its hardball approach. Reuters also reported that at an annual vendor conference in February, Wal-Mart informed suppliers that it was raising its standard for on-time delivery to 95 percent from 90 percent, according to another Reuters article. Wal-Mart is also cutting the window for deliveries to within 1 to 2 days of a target date, depending on the product category, from 1 to 4 days previously.
Recommended by Forbes

Logistics expert Adrian Gonzalez calls Target’s new strategy an “all stick approach to supplier relationship management . It’s the same old same old approach to supplier relationship management. In the past you might have called it a ‘carrot and stick’ approach, except today the carrot keeps shrinking or is missing altogether and the stick keeps getting bigger and harder.”
The real question is will Target’s and Wal-Mart’s hardball approach be effective in the long term?
 All Stick – No Carrots Approach Suboptimal
Most research into incentives show that negative incentives (penalties) get great results in the short term, especially for younger individuals. Adrian Gostick and Chester Elton – authors of the best-selling book The Carrot Principle – suggest that a more positive approach gets better longer terms results.
But what about incentives and penalties for companies? Gonzalez believes the all stick, no carrot approach is causing more harm than good with suppliers: “It’s one thing to have robust supplier performance management, but it is another thing when it is enforced with an adversarial, penalty driven mindset. Continually squeezing suppliers is not a viable long-term strategy and only makes company-vendor relationships more adversarial.”