INVENTORY AND SUPPLY CHAINS

High inventories are both a problem and a symptom of a problem for Supply Chains and companies.

CONTAINER LINES AND PORTS

I understand container line poor schedule reliability in Asia-Europe could be caused by ports handling larger ships. Then wait for the mega ships and see how more it deteriorates.  Ports are not to blame.  Carriers keep building larger and larger ships and assume ports will invest to maintain something they did not ask for.

3PLs & 4PLs

Why do some 3PLs have 4PL divisions? Does that not send a contradictory message to customers and to the market?

SUPPLY CHAIN MANAGEMENT

How many companies and how many executives have the supply chains they deserve?

LOGISTICS / SUPPLY CHAIN OUTSOURCING

Are unreasonable expectations the reason why so much logistics outsourcing does not succeed as planned?

CONTAINER LINES

Is this collusion or the economic impact of collective need?

TSA carriers plan higher rates for Asia-bound meat, poultry

Tuesday, May 06, 2014

By Chris Dupin

The Transpacific Stabilization Agreement (TSA) is recommending a freight rate increase of $700 per 40-foot container on July 1 for “protein shipments” --refrigerated meat such as beef, pork and chicken -- moving to Asia.
The 15 container shipping lines in the TSA say they are looking forward to a stronger 2014 for U.S. beef, pork and poultry exports to Asia, but that “a key concern among carriers as the peak shipping season begins is ensuring an adequate supply of refrigerated and temperature-controlled container equipment.”
“Increased demand from a growing urban middle class in Asia is reopening markets for U.S. exporters, at a time when refrigerated equipment has migrated to other trades and is more costly to purchase and lease, and when freight rates do not fully cover acquisition, maintenance and operating costs. At the same time, most refrigerated rates for so-called ‘protein’ cargoes are at their lowest levels in more than five years,” TSA said.
“We’re seeing a perfect storm develop in the westbound transpacific refrigerated segment,” said TSA-Westbound Executive Administrator Brian Conrad. “On top of expected organic demand growth in Asia and normal competition for equipment from other seasonal cargoes such as summer fruits, a shortage of refrigerated rail cars in the U.S. is driving inland intermodal demand for containers and generator sets. Premature scrapping of specialty refrigerated ships is drawing equipment to north-south trades, particularly Central and South America. Sustainable rates are critical to equipment availability in this environment.”
Conrad said TSA-Westbound is announcing the guideline rate increase early to provide adequate notice for protein shippers who typically book export sales 60 to 90 days in advance.

SUPPLY CHAIN RISK

Why do so many firms do poorly at supply chain risk assessment and mitigation?  Is there a lack of leadership or lack of understanding?

SUPPLY CHAINS & MEGA SHIPS

Carriers made this mess. Yes, shippers/forwarders want cheap rates. But carriers could have said no. Instead they chased--and still chase the game of market share--which means cutting prices. Let us think it through. I have a container that I need to deliver to Chicago. Carriers could have said no on low rates. They held all the cards. What was the shipper to do? Fly it at 10 times the cost of ocean? But carriers did not do that. They collectively--as in collusion--cut capacity in 2009 to drive rates back up. And then put the capacity back and did the same thing that got them in trouble in the first--and maybe the 34th time. We have gone from 1000 TEU ships to 18,000 TEU ships and nothing has changed.

Supply chain executives must take control of their supply chains. The impact to their firms as to unnecessary, additional inventory and customer service/lost sales has to stop. Otherwise a lot of these supply chain execs should be fired. This is line in the sand time. Carriers have to stop playing to the lowest denominator.

RESHORING & SUPPLY CHAIN MANAGEMENT

Supply Chain management is the key to real reshoring. But too many have blinders on to see the obvious.

GLOBAL AIR FREIGHT

Global air freight volume increase--
Global air freight reports 6.7 per cent first-quarter growth Written by SCA Editorial Team

Global air freight volumes grew an impressive 6.7 per cent, year on year, in the first quarter of 2014, thanks to a strong March that saw a significant improvement in traffic from Asia, according to figures released today by WorldACD.
Yields for the first three months declined by 2.6 per cent, year on year, a slower rate of decline than seen in 2013, while total worldwide volumes in the first quarter were 6 per cent higher than two years ago.
Month on month, March showed a particularly strong improvement, with revenue growth of 29 per cent compared with February 2014, thanks to 25 per cent volume growth and a 3.5 per cent yield increase, driven by a strong performance for traffic ex-Asia.

CONTAINER LINE RATE INCREASES

Push for freight rate increases in Asia-Europe trade, per Supply Chain Asia--
Container shippers push increases to freight rates Written by SCA Editorial Team

Leading container shippers are pushing freight-rate increases in the benchmark Asia-to-Europe route, as consumer confidence strengthens in the US and Europe.
But the industry, which moves 95 per cent of the world's manufactured goods, is still haunted by excess capacity, or the amount of containers that can be carried with ships in service. That will take years to be absorbed, likely limiting the ability of shippers to dramatically increase rates.
A.P. Moeller Maersk's Maersk Line of Denmark and France's CMA-CMG, the world's two biggest shipping companies by capacity, said they are increasing their official prices by an average $500 a container over the next eight days. The move came after rising demand pushed up the Shanghai Containerisation Freight Index by $221 a container, to $1,305. The index is a benchmark for prices for a typical Shanghai-Rotterdam sailing.

SUPPLY CHAIN TECHNOLOGY

Supply chain technology is a process enabler; it is not a silver bullet to fix process flaws.

SUPPLY CHAIN RISK

I believe that much Supply Chain risk is internally driven.

CONTAINER LINES, FREIGHT FORWARDERS & 3PLs

What would I do about the service problems created by container lines?  First I would have done segmentation of our supply chain to know where to prioritize and why. I am not going to go fishing for cheap rates. Plus I would do some serious analysis of the carriers and freight forwarders for the trade lanes I am active in and overall. I want to exclude financially marginal carriers and forwarders. This is about creating supply chain service and minimizing risk. I am also analyzing service performance--on time, missed sailings, etc. As for forwarders, it is the inability to get its main customers on ships at mass times, like Chinese New Year or some contrived carrier or other problem. 

Feeding a supply chain needs dependable and consistent service. I will meet with both the identified carriers and forwarders about the company, our supply chain, and exactly what we need. I will not deal with forwarders who use our volume to drive lower rates in the market and then screw us on our service parameters. Same with carriers. I am not going to feed their fill the ship and screw our service parameters. I would then issue a type of RFP driven on performance metrics. How is that for a beginning?

MEGA SHIPS, CONTAINER LINES, & SUPPLY CHAINS

Let us start with some basics. Carriers have built large ships without knowing where and how to use them. Incredible, but true. Maybe 70% of shippers do not know what they are buying; all they know it is "cheap" as told to them by a freight forwarder or ocean carrier. So let us focus on the few who are buying a service and selling a service to meet customer needs--a hint of real customer-centric. If you are buying transport for a supply chain, the first thing you need is dependable service. That is lacking. With skipped schedules, slow-steaming, schedule changes, alliance changes, and add whatever else you want, container line service is undependable in every meaning. 
 

How do you fill a supply chain with such service? The only option is to carry extra and unnecessary inventory through the entire supply chain. So carriers have to start with fundamentals---dependable service. Then carriers have to differentiate their service offerings. Why do they charge the same rate for a 12 day transit as for a 17 day service? That makes no sense and further commoditizes carriers and what they sell. That means only price matters.  I am talking basics here that have gone out the window by both sellers and buyers. That has to be fixed first before we can get into serious supply chain discussions that create value for customers and separation from carriers who only play the price/fill-the-ship games.

I have directed global supply chains and what carriers are doing now are the antithesis of what is needed to run a responsive, pull-driven, supply chain.

The railroad industry is a classic study in myopia. They saw themselves as transportation by rail. They did not understand their customers. They did not see the total transport picture. They took a narrow view and it eventually killed their future so that is now so limited and exists much for something they were lucky to have happen, international and the transport of containers. Container lines exemplify insanity--doing the same things over and over. Their only exercise has been bigger and bigger ships--to the point where they may have finally kicked the can too far down the road with the megas. Ocean carriers have lost basically all focus on customers and their business and their supply chains. It's all about filling ships and freight rates. And now they are bordering on a catastrophe and clinging the the thread of a bigger ship saving their butts. They have taken shippers down the rabbit hole too many times. It is time for both parties to put the bull aside and figure out where we go. If not, you and I will have this same discussion as an annual exercise. 

I have come to believe that container lines may be the biggest driver to reshoring.

MEGA SHIPS AND SUPPLY CHAINS

When container lines build something that creates more supply that exceeds demand, where infrastructure at ports cannot efficiently handle in a game of playing ports against each other, where a further attempt/cut at hub and spoke may be the next operating maxim, in an industry where transport providers have abdicated power to contract negotiations, and where red is the annual color of P&L statements, that all can be construed as a failure to understand the business of customers-- be they MNCs, forwarders/3PLs/OTIs, or just many firms who dabble in import or export because they think they have no choice--, then the seeds have been set for something that has to change what is happening--to recreate transport providers and supply chain management as it was years ago and is now lost or perhaps make something all together new. This may be the dawn for carriers of "hoisted by their own petard".

RETAILERS & POTENTIAL WEST COAST DOCK STRIKE

Retailers are pushing for labor resolution.  Is their strong interest actually positioning parties for extended labor talks and possible strike?

INTERNATIONAL SUPPLY CHAIN RISK

This is not really surprising.  And I wager most of these firms do not do SCM very well.

Companies Receive an 'F' When it Comes to Business-Continuity Plans for Overseas Risks

By Phil Gusman, PropertyCasualty360.com

April 29, 2014 • Reprints

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U.S. and Canadian companies looking to expand globally recognize the risks associated with supply-chain failures, but they need to do more to prepare for those risks, according to a recent survey.
Chubb Corp. released results from its 2014 Chubb Multinational Risk Survey, which questioned 300 U.S. and Canadian companies about their international global exposures. The survey shows 52% of the businesses intend to increase overseas activity in 2014.
The top threats associated with overseas activity mentioned by the companies were supply-chain failure (19%), a data breach/cyber event (15%), government/regulatory investigation and political instability (13% each) and natural catastrophes (12%).
With supply-chain failure topping the list of concerns, it might not be surprising that more companies than not (56%) have a business-continuity plan that addresses overseas risks, but Jay Taylor, vice president, Chubb Loss Control, looks at the flip-side of that statistic: “The bad news is—56% in my world…would be an F,” he says.
Breaking down the universe of companies that do not have an effective plan in place, Taylor says, “Sixteen percent—if they have a plan, it doesn’t address the issue, 9% don’t have a business continuity, and the 12% that says they don’t know, that means they really don’t have anything.”
Taylor states, “Having a plan in place is critical.” He adds, “A business that does have major business-continuity; business-disaster issue—approximately 80% of those don’t come back after a year,” or they come back in a highly weakened state.
Of the companies that have a plan, 22% have never tested it. Of the 78% that test their plan, Taylor says 38% test it just once a year, while 40% test it occasionally.
“If you’re not testing your plan, then you don’t really know how it works,” Taylor says. For those that test it infrequently, Taylor notes they might not be capturing changes that take place within the business in between tests.
And business-continuity plans must extend beyond the company itself, Taylor notes. The survey, he says, reveals that 40% of companies do not require overseas suppliers to have a bus-continuity plan. Tayor says if an overseas supplier does not have a plan to recover, and if that supplier provides a critical component to a business, then that business’ continuity plan “isn’t really effective.”

MEGA SHIPS AND SUPPLY CHAINS

What can shippers do about the negative effect of mega ships, and in the effect on ports, on supply chains?

SUPPLY CHAIN & OMNICHANNEL

Continuing supply chain erosion caused by container line practices negatively impact omnichannel programs.