Supply Chain & Logistics


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Introduction

Around 90% of world trade is carried by the international shipping industry.  Without shipping the import and export of goods on the scale necessary for the modern world would not be possible. Seaborne trade continues to expand, bringing benefits for consumers across the world through competitive freight costs. Thanks to the growing efficiency of shipping as a mode of transport and increased economic liberalization, the prospects for the industry’s further growth continue to be strong.

There are over 50,000 merchant ships trading internationally, transporting every kind of cargo. The world fleet is registered in over 150 nations, and manned by over a million seafarers of virtually every nationality.

Shipping is a growth industry

Shipping plays a vital role in world trade and is the backbone of the world economy. Without ships and the transportation services these ships provide, the world would not be as prosperous as it is today and many countries would not be able to participate in world trade.

In recent years, shipping has proven to be a growth industry witnessing the increase in gross tonnage of the world fleet by millions of tonnage every year. Since the worldwide economic downturn set in late 2008, the interdependence of global economies has become even more evident. International trade – by any mode of transport – has been affected immediately and dramatically.

Shipping Development over Last 5,000 years

The history of trade can be divided into three phases. The first started in the Mediterranean, spreading west through Greece, Rome and Venice, to Antwerp, Amsterdam and London. During this phase a global trading network gradually developed between the three great population centres in China, India and Europe. At first this trade was by land and was slow and expensive, but when the voyages of discovery opened up global sea routes in the late fifteenth century, transport costs fell dramatically and trade volumes escalated.

The second phase was triggered by the industrial revolution in the late eighteenth century. Innovations in ship design, shipbuilding and global communications made it possible for shipping to be conducted as a global industry, initially through the Baltic Exchange, whilst reliable steamships and technical innovations such as the Suez Canal made it possible for liner companies to operate regular services. For the next century trade grew rapidly, focused around the colonial empires of the European states and the framework of sea trade was radically changed.

Finally in the second half of the twentieth century another wave of economic and technical change was triggered by the dismantling of the colonial empires which were replaced by the free trade economy initiated at Bretton Woods. Manufacturers set out to track down better sources of raw materials and invested heavily in integrated transport systems which would reduce the cost of transporting these goods. During this period we saw the growth of the bulk carrier markets, the containerization of general cargo and specialist shipping operations transporting chemicals, forest products, motor vehicles, gas, etc. An important part of this revolution was the move of shipping away from the nation states which had dominated previous centuries towards flags of convenience. This brought greater economies and changed the financial framework of the industry, but it also raised regulatory problems.

Shipping’s ‘industrial revolution’

Trade expansion on this scale would not have been possible without a major reform of the transport system. During the next 35 years many new ship types were developed, including bulk carriers, supertankers, liquefied gas tankers, chemical tankers, vehicle carriers, lumber carriers and, of course, container-ships.

Congestion and the Economy

Many industries have adopted transportation-dependent strategies designed to reduce non-transportation costs, or improve customer service. These include siting facilities in areas where large numbers of potential employees live within commuting distance, implementing “just-in-time” manufacturing and delivery concepts, and siting facilities where package express air services can pick up a parcel in the evening and still deliver it the next day.

Transportation supports regional economies in three distinct ways. One is providing some form of access to/from other economies. Another is through the provision of services and infrastructure that have the ability to reduce transportation costs. Finally, transportation supports economies by ensuring the services and infrastructure provided are managed and operated in a manner that allows industries to minimize production costs as well as transportation costs. In particular, this means it is very important to find ways to reduce congestion or at least keep it from getting worse.

The Global Economic Role of Maritime Shipping

Marine transportation is an integral, if sometimes less publicly visible, part of the global economy. The marine transportation system is a network of specialized vessels, the ports they visit, and transportation infrastructure from factories to terminals to distribution centers to markets. Maritime transportation is a necessary complement to and occasional substitute for other modes of freight transportation. For many commodities and trade routes, there is no direct substitute for waterborne commerce. (Air transportation has replaced most ocean liner passenger transportation and transports significant cargo value, but carries only a small volume fraction of the highest value and lightest cargoes; while a significant mode in trade value, aircraft moves much less global freight by volume, and at significant energy per unit shipped.) On other routes, such as some coastwise or shortsea shipping or within inland river systems, marine transportation may provide a substitute for roads and rail, depending upon cost, time, and infrastructure constraints. Other important marine transportation activities include passenger transportation (ferries and cruise ships), national defense (Naval vessels), fishing and resource extraction, and navigational service (vessel-assist tugs, harbor maintenance vessels, etc.).

Globalization is motivated by the recognition that resources and goods are not always collocated with the populations that desire them, and so global transportation services are needed (and economically justified if consumer demand is great enough). For example, until the 1950s, most crude oil was refined at the source and transported to markets in a number of small tankers [sized between 12,000 and 30,000 deadweight tonnage (dwt)]. However, economies of scale soon dictated that oil companies would be better off if they shipped larger amounts of crude from distant locations to refineries located closer to product markets. Product could then be more efficiently distributed to points of consumption using a host of transportation modes. This realization ultimately led to the emergence of large tanker vessels (e.g., greater than 200,000 deadweight tons) and drove down the per-unit cost of intercontinental energy transportation.

Similarly, rather than palletize grains, minerals, and other commodities, dry bulk cargo ships were designed to deliver cargoes in raw or semi-raw condition from where they were found or grown to processing facilities (e.g., mills and bakeries) closer to final market. Along with containerization and advances in cargo handling and shipboard technology, these measures reduced crew sizes and long-shore labor requirements which also reduced the per-unit cost of ocean cargo transport.

Lastly, globalization identified labor markets overseas that encouraged transport of semi-raw materials and intermediate products where manufacturing costs were lower. With low-cost petroleum energy for vessel propulsion, facilitated by vessel economies of scale, the per-unit costs of semi-finished and retail products were minimized by multi-continent supply chains. Today it is common for agri-products to be harvested on one continent, shipped to another for intermediate processing, transported to a third continent for final assembly, and then delivered to market. For example, cotton grown in North America may be sent to African fabric mills, and then to Asian apparel factories before being returned to North America for sale in retail stores. Orange juice, wine, and other products have also found markets on continents where seasonal or climatic limitations require an offshore source.

Another trend associated with globalization is the pace at which trade occurs. Globalization has encouraged transactions of goods and services in smaller packets delivered “just-in-time”. This has increased the “velocity of freight” which justified in the 1970s faster, small containerized vessels, and over the last two decades justified faster, large containerized vessels. In a globalized economy, containerization offers the advantage of integrated freight transportation across all modes.

Global Transport Industry

Today it has become a tightly knit global business community, built on communications and free trade. Perhaps that will change. The relationship between transportation and a region’s economy depends upon its industry mix, the location of industry growth, and the location of population growth. Between 1990 and 2010, significant changes took place in the makeup of Oregon’s base industries, but very little change occurred in the relative size of industries supporting household activities. For example, employment in the forestry, lumber and paper industries declined while employment in the instruments and electronic equipment industries increased. At the same time, the proportion of the workforce employed in retail trade and in the finance, insurance, and real estate industries remained about the same.

The modern international transport system consists of roads, railways, inland waterways, shipping lines and air freight services, each using different vehicles. In practice the system falls into three zones: inter-regional transport, which covers deep-sea shipping and air freight; short-sea shipping, which transports cargoes short distances and often distributes cargoes brought in by deep-sea services; and inland transport, which includes road, rail, river and canal transport.

Shipping, Transportation and Economic Development

There is universal agreement among interest groups that transportation facilities and services are necessary to enable economic development to occur. However, there is little agreement among interest groups on a specific definition of “economic development.”

Economists define economic development as activities that result in increased average per capita incomes. However, most common viewpoints of economic development can be generalized as follows:

1-      Capital investment in high wage industries resulting from investment (e.g., transportation improvements) that improves the competitiveness of a region;

2-      Development of new territory that is separate from similar, existing developed areas;

3-      Development/investment in specific built-up areas (e.g., central business districts, along light rail corridors); or Specific developments (e.g., a new paper mill, a new microchip plant) at specific sites.

Factors limiting private-sector capital investment in a region can often be identified. These factors may be a limited water supply, an inadequate land supply, limited sewerage and wastewater treatment capacity, an insufficiently skilled workforce, congested highway segments, or difficult and time consuming access to distant markets. When these factors are constraining and the limits are removed, private-sector investment will create jobs. For instance, the recently improved aviation connection between Portland and Frankfurt, Germany is expected to generate significantly increased trade and tourism between these parts of the world. Highway improvements in the right places will have the same effect. The key element is identification of those factors that constrain private-sector capital investment.

Some areas are characterized by large amounts of vacant land, constrained access to that land, and local citizens’ desire to see it developed. Development of such land may be “economic development” if it attracts new high wage industries along with supporting commercial and housing development that would not otherwise locate in the region, or if it provides housing for population growth that cannot be accommodated in more developed areas of the region. However, land development that merely diverts capital investment or housing from other nearby areas provides little, if any, actual economic development to a region. In any case, areas having roads designed for low-volumes and low-speeds will require new high-speed, high-volume roads to accommodate large-scale urban or suburban development.

The implication of all of this is that transportation access and funds used to encourage or subsidize retail development for the purposes of economic development usually will not be effective for the economy as a whole. The use of transportation funds to subsidize retail development may be an effective way to address other issues.

Finally, there is one universally agreed upon principle concerning transportation and economic development. Modern transportation facilities are necessary, but not sufficient, to ensuring an area’s development. Other necessary factors include available andcompetitively priced land, labor, capital, and natural resources, as well as reasonable tax rates, an acceptable quality of life, and the presence of other types of infrastructure.

The Global Economic Role of Maritime Shipping

Marine transportation is an integral, if sometimes less publicly visible, part of the global economy. The marine transportation system is a network of specialized vessels, the ports they visit, and transportation infrastructure from factories to terminals to distribution centers to markets. Maritime transportation is a necessary complement to and occasional substitute for other modes of freight transportation. For many commodities and trade routes, there is no direct substitute for waterborne commerce. (Air transportation has replaced most ocean liner passenger transportation and transports significant cargo value, but carries only a small volume fraction of the highest value and lightest cargoes; while a significant mode in trade value, aircraft moves much less global freight by volume, and at significant energy per unit shipped.) On other routes, such as some coastwise or shortsea shipping or within inland river systems, marine transportation may provide a substitute for roads and rail, depending upon cost, time, and infrastructure constraints. Other important marine transportation activities include passenger transportation (ferries and cruise ships), national defense (Naval vessels), fishing and resource extraction, and navigational service (vessel-assist tugs, harbor maintenance vessels, etc.).

Globalization is motivated by the recognition that resources and goods are not always collocated with the populations that desire them, and so global transportation services are needed (and economically justified if consumer demand is great enough). For example, until the 1950s, most crude oil was refined at the source and transported to markets in a number of small tankers [sized between 12,000 and 30,000 deadweight tonnage (dwt)]. However, economies of scale soon dictated that oil companies would be better off if they shipped larger amounts of crude from distant locations to refineries located closer to product markets. Product could then be more efficiently distributed to points of consumption using a host of transportation modes. This realization ultimately led to the emergence of large tanker vessels (e.g., greater than 200,000 deadweight tons) and drove down the per-unit cost of intercontinental energy transportation.

Similarly, rather than palletize grains, minerals, and other commodities, dry bulk cargo ships were designed to deliver cargoes in raw or semi-raw condition from where they were found or grown to processing facilities (e.g., mills and bakeries) closer to final market. Along with containerization and advances in cargo handling and shipboard technology, these measures reduced crew sizes and long-shore labor requirements which also reduced the per-unit cost of ocean cargo transport.

Lastly, globalization identified labor markets overseas that encouraged transport of semi-raw materials and intermediate products where manufacturing costs were lower. With low-cost petroleum energy for vessel propulsion, facilitated by vessel economies of scale, the per-unit costs of semi-finished and retail products were minimized by multi-continent supply chains. Today it is common for agri-products to be harvested on one continent, shipped to another for intermediate processing, transported to a third continent for final assembly, and then delivered to market. For example, cotton grown in North America may be sent to African fabric mills, and then to Asian apparel factories before being returned to North America for sale in retail stores. Orange juice, wine, and other products have also found markets on continents where seasonal or climatic limitations require an offshore source, or entered into competition with domestic production at higher labour costs.

Another trend associated with globalization is the pace at which trade occurs. Globalization has encouraged transactions of goods and services in smaller packets delivered “just-in-time”. This has increased the “velocity of freight” which justified in the 1970s faster, small containerized vessels, and over the last two decades justified faster, large containerized vessels. In a globalized economy, containerization offers the advantage of integrated freight transportation across all modes. Analogous to the more uniform transport of liquid crude oil or unprocessed grains, containerization standardized the shipping package, reducing the per-unit cost of transporting most finished goods.

The Role of Ports

The facilities provided in a port depend on the type and volume of cargo which is in transit. As trade changes, so do the ports. There is no such thing as a typical port. Each has a mix of facilities designed to meet the trade of the region it serves.

Ports and terminals earn income by charging ships for the use of their facilities. Leaving aside competitive factors, port charges must cover unit costs, and these have a fixed and variable element. The shipowner may be charged in two ways, an ‘all-in’ rate where, apart from some minor ancillary services, everything is included; or an ‘add-on’ rate where the shipowner pays a basic charge to which extras are added for the various services used by the ship during its visit to the port. The method of charging will depend upon the type of cargo operation, but both will vary according to volume, with trigger points activating tariff changes.

The Shipping Companies

A striking feature of the shipping business to outsiders is the different character of the companies in different parts of the industry. For example, liner companies and bulk shipping companies belong to the same industry, but they seem to have little else in common. In fact there are several different groups of companies involved in the transport chain, some directly and others indirectly. The direct players are the cargo owners, often the primary producers such as oil companies or iron ore mines and the shipowners (shipping companies). However, in the last 20 years they have been joined by two other increasingly important groups: the traders who buy and sell physical commodities such as oil, for which they need transport, making them major charterers; and the ‘operators’ who charter ships against cargo contracts for an arbitrage. Ship managers and brokers are also involved in the day-to-day commercial operation of the business. Each has a slightly different perspective on the business.

Each of The suppliers, including managers, ship repairers, shipbuilders, equipment manufacturers and shipbreakers are a distinctive business with its own special culture and objectives. Ship finance forms another category, again with distinctive subdivisions, as do lawyers and other associated services such as ship surveying, insurance and information providers.

The Role of Finance in Shipping and Ports

The growth prospects and capital requirement to finance projects, namely shipbuilding, ports development, mergers and acquisitions, have attracted the attention of large financial firms and changed the relationships finance was traditionally having with the industry. Financialization, as a proxy for the growing influence of capital markets, their intermediaries, and processes in contemporary economic and political life—has attracted growing academic, political, and popular attention (Pike and Polllard, 2010). Supported by financial institutions, maritime shipping companies and global terminal operators have built an impressive portfolio of assets. Finance has made a complex industry even more complex with an array of new players such as sovereign funds and various stakes.

While financialization shifted the relations between the port industry and the trade patterns it is servicing, this relation is likely to shift again towards a new paradigm better placed to assess risk. before the economic crisis ports and terminals had experienced the arrival and normalization of what Froud and Williams (2007) termed as a ‘culture of value extraction’: financial principles interpreted port businesses as abstracted bundles of financial assets and liabilities to be traded for higher economic returns than the existing configurations are able to deliver. In the aftermath of the economic crisis, the broken link between, (a) financial institutions whose decisions have assumed a central role in port development and directed towards particular corporate strategies, and, (b) the territorial and relational specialties of economic environments and markets within which ports and terminals develop, might be reestablished in a way that previously ignored concerns, like the organization of production factors, trade developments, regulatory regimes, localized corporate and social cultures, will once more condition decisions to invest. Given this reconnection, uneven geographies of future financialization processes, in terms of assets investments, profitability opportunities, and exclusion potentials, that is observed in other sectors might also apply in the port sector, reversing the observed in the pre-crisis period ‘globalised’ reckless nature of in financial actors involvement.

 Conclusion

Because shipping is a service business, ship demand depends on several factors, including price, speed, reliability and security. It starts from the volume of trade, how the commodity trades can be analysed by dividing them into groups which share economic characteristics, such as energy, agricultural trades, metal industry trades, forest products trades and other industrial manufactures. The shape of the PSD function varies from one commodity to another. The key distinction is between ‘bulk cargo’, which enters the market in ship-size consignments, and ‘general cargo’, which consists of many small quantities of cargo grouped for shipment.

Bulk cargo is transported on a ‘one ship, one cargo’ basis, generally using bulk vessels. Some shipping companies also run bulk shipping services geared to the transport of special cargoes such as forest products and cars. To meet marginal fluctuations in demand or for trades such as grain where the quantities and routes over which cargo will be transported are unpredictable, tonnage is drawn from the charter market.

General cargo, either loose or unitized, is transported by liner services which offer regular transport, accepting any cargo at a fixed tariff. Containerization transformed loose general cargo into a homogeneous commodity which could be handled in bulk.

This changed the ships used in the liner trades, with cellular container-ships replacing the diverse fleet of cargo liners. However, the complexity of handling many small consignments remained and the liner business is still distinct from the bulk shipping business. They do, however, go to the charter market to obtain ships to meet marginal trading requirements.

Specialized shipping falls midway between general cargo and bulk, focusing on high-volume but difficult cargoes such as motor vehicles, forest products, chemicals and gas. Their business strategy is generally to use their specialist investment and expertise to give the company a competitive advantage in these trades. However, few specialist markets are totally segregated and competition from conventional operators is often severe.

Sea transport is carried out by a fleet of 74,000 ships. Since technology is constantly changing and ships gradually wear out, the fleet is never optimum. It is a resource which the shipping market uses in the most profitable way it can. Once they are built, ships ‘trickle down’ the economic ladder until no ship-owner is prepared to buy them for trading, when they are scrapped.

By: Irami



Global Ports Forum presents - Executive Workshop on Multi-Purpose Terminal Business & 
Operations, 11-12 Aug 2016, Singapore

Zarak International Logistics

SIGN UP TODAY!

Global Ports Forum presents - Executive Workshop on Multi-Purpose Terminal Business &
Operations, 11-12 Aug 2016, Singapore

Key Learning Outcomes

1) Understand the multi-purpose port business
2) Understand the port marine services, port facilities usage and its charges.
3) Understand how the port activities are organised to interface with one another
4) Understand the ship side operations
5) Be aware of the importance of ports being managed as commercial enterprises irrespective of their ownership.
6) Understand the port tariff, order to cash process and the port billing.
7) Business Process outsourcing and choosing a contractor
8) Guidelines for Abandoned cargo

About the Course

This 2-day course is aimed to provide a deep understanding of the subject matter.
The course is based on a real Multi-Purpose Terminal project; the details have been altered for commercial secrecy. Video clips, slides and demonstration will be presented during the course.

Course Outline
Start a multi-purpose terminal - greenfield
Terminal User and value added services
Equipment used in Multi-purpose terminal
Types of Marine services
Terminal facilities usages
Ship side operation, gate in/out
Port Tariff
Order to Cash process and the terminal billing
Demo: Port billing system
Terminal operating system(TOS)
Outsourcing - stevedoring services
Abandoned cargo
Dangerous Cargo
Security and Safety
Who should attend

Both Finance and operation managers above of:
Port Authorities;
Port Operator;
Shipping Companies;
Shipping Agencies;
Logistics Companies;
Freight Forwarder;
Port equipment’s suppliers;
Importer/exporter
Stevedoring services provider.

About the Course Director

Mr Ng Koon Seng (FCA Singapore, FCCA UK, FCPA Australia) has over 30 years of experience in a global logistics, ocean freight operations and container transportation conglomerate. He has a wealth of international experience from his career in shipping, global container equipment operation; process Optimization, end to end finance system setup for the shipping business start-up operation, transformation, change management, merger & acquisitions and divestures. He was engaged by Jurong Port Pte Ltd in year 2014 as a Finance system lead and business process consultant for a Joint Venture start up Port/Terminal project, providing finance IT project management and translate user requirements into solution concept, prepare training manuals specific to each finance processes and setting up the finance organization, Multi-Purpose Port/Terminal billing system and implementation of the real time integrated Enterprise financial full system from scratch through end to end finance process innovation and design, develop innovation and out-of-box solutions, lean and digitize, user & finance-friendly administration, workflow integrated for Marunda Center Terminal - PT. Pelabuhan Tegar Indonesia, the 1st private international & domestic multi-purpose seaport which focusing in General Cargo & Bulk Cargo (dry & liquid) in greater Jakarta area. The port is a joint venture between Marunda Center Industrial Estate (www. marundacenter.com) Indonesia and Jurong Port Pte Ltd (www.jp.com.sg) a leading international multi-purpose port operator in Singapore. The integrated port billing and finance system is up and live in Marundra Center Terminal.
He was also tasked to do research on the Ports in Thailand, training, financial modelling with Activity-based costing Analysis for the Aggregates and sand Terminal project.
Mr Ng spent 25 years of his career with NOL/APL, a world leader in shipping and logistics services with annual turnover of US$8b., holding various senior management positions from liners services, special cargoes, freight forwarding, shipping agencies, manage PSA’s appropriated Berth scheme for shipping consortia to global equipment operation including M&A of APL, lead Post Merger integration and transformation of the NOL/APL global equipment operation, depots, trucking, rail, land and intermodal operation which involved more than US$1.5 Billion worth of operational cost globally. Head of the NOL global equipment management and achieved significant hard core saving per company's testimonial thru dynamics operational modelling. He was also appointed as deputy general manager of its container/reefer/tank depots, fully automated warehouse (ASRS) & 3rd party cold chain Integrated FMCG Logistics, warehouses and distribution services based in Singapore. He was sent to china as deputy general manager partnering with the local management team for the setting up of the Joint Venture Shipping Services, business and operation control. He was the chief accounting officer of NOL group corporate Accounting and head of group consolidation of more than 200 of NOL's shipping/vessel/port related subsidiaries, associated and Joint venture companies globally. Lead and manage M&A project for the acquisition of a major shipping logistics corporation in China.
Mr Ng is a Fellow Chartered Accountant from Institute of Singapore Chartered Accountants, Fellow of Associate chartered Certified Accountant of UK and Fellow Certified Public Accountant of Australia. Beside undertake project work in shipping and finance, research and coaching, Mr Ng currently doing research in the area of dynamics modelling on port operation, global container transportation and empty repositioning, business process optimization, dynamics company cash flow planning and forecasting.

Costs:


On or Before 11 July 2016: The ‘Early Bird’ Rate is S$2895 – Save S$400!
Special Offer! – 3 Delegates For The Price of 2 in This Category! Save S$2895!
• From 12 July 2016: The Regular Rate is S$3295
Special Offer! – 3 Delegates For The Price of 2 in This Category! Save S$3295!
Note: All fees stated include luncheons, refreshments and complete set of documentation. It does not include the cost of accommodation and travel.

REGISTER NOW!

To register, please submit the following details to thomasng@globalportsforum.com:
Name:
Position:
Organisation:
Address:
Tel:
Fax:
Email:
What Best Describes Your Industry Sector?:

Billing information will be sent once we received your registration details.

Look forward to welcoming you at the workshop in Singapore!

Kind regards


Thomas Ng 
Chairman
The Global Ports Forum

THE GLOBAL PORTS FORUM

Website: http://www.globalportsforum.com/
Email: thomasng@globalportsforum.com






November 25, 2015

October truck tonnage levels remained in similar territory compared to previous months, according to data issued by the American Trucking Associations(ATA).

Seasonally-adjusted (SA) for-hire truck tonnage in October at 135.7 (2000=100) was up 1.9 percent compared to September’s 133.1, which was down 0.7 percent from August.

The current SA level is just below January’s all-time high of 135.8.

And on an annual basis, the SA is up 2 percent compared to October 2014, topping September’s 1.6 percent annual gain.

Year-to-date through October, SA tonnage is up 3 percent compared to the same period in 2014.

The ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment was 139.8 in October, which was 0.9 percent ahead of September.

The October SA was 0.4 percent below the 140.4 recorded in October 2014.

ATA Truck Tonnage Index Jumped 1.9% in October

As defined by the ATA, the not seasonally-adjusted index is assembled by adding up all the monthly tonnage data reported by the survey respondents (ATA member carriers) for the latest two months.

Then a monthly percent change is calculated and then applied to the index number for the first month.

“It was good to see tonnage increase nicely in October after contracting a total of 1.6 percent in August and September” said ATA Chief Economist Bob Costello in a statement.

“However, tonnage has been overall pretty flat this year, as October’s reading is just shy of January’s level. Like I’ve said over the last couple of months, I remain concerned about the high level of inventories throughout the supply chain. We recently learned that inventories throughout the supply chain and relative to sales rose in September, which is not a good sign. This will have a negative impact on truck freight volumes over the next few months”

The inventory overhang continues to hinder freight transportation volumes and particularly impacts trucking as it moves roughly 70 percent of all U.S. freight.

When inventory levels running too high as they currently are now, it typically results in transportation volumes seeing declines, which is where things currently stand as with holiday shopping season set to begin in earnest.

That is good timing on two fronts: one being that it will result in increased consumer spending levels, which has been largely flattish as consumers have opted to pay down debt rather than shop more even though low gas prices were viewed not all that long ago as something that would spur increased spending, and another thing being a way to empty shelves and warehouses of the excess inventory, which is clearly needed.

Deutsche Bank analyst Rob Salmon said in a research note that his firm is cautious about the near-term outlook for freight demand given elevated inventories, and soft manufacturing demand.

Related: How Market Conditions Affect Carrier Decisions



Will the next 15 years be a logistics golden age?


Thursday July 21, 2016

By: Jonathan Thatcher

Director Reserach

Logistics professionals help keep the world running in ordered motion. Their vision and imagination continually solve daunting challenges of time and space, yet forecast trends for the years 2016–2030 reveal a wave of change, which will test those talents. The phrase “like never before” could become ever more commonplace.

Here are five examples:

  1. A growing global middle class will create a demand for logistics activities like never before. The Organization for Economic Cooperation and Development (OECD), predicts the global middle class will grow to 3.2 billion people by 2020 and further increase to around 4.9 billion by 2030. China and India will be the home to many of these new middle-class citizens. Of course, jobs typically held by middle-class workers need a home base—an office or production facility—which requires apartment buildings, stores, and the related infrastructure necessary to support every middle-class consumer. This will revolutionize the scale of investment in logistics.
  2. Free-trade accords will boost the flow of global trade like never before. Trade deals now allow for most trade to occur without high tariffs; and, as these costs fall, the scope, complexity, and volume of profitable global trade will grow. This will drive logistics competition and complexity in global trade to an unprecedented level.
  3. The new norm of e-commerce business models means logistics will be practiced in ways like never before. This is a world where warehouses become mobile and the customer remains fixed. Skip-the-store customers, who routinely expect two-hour-or-less delivery times are becoming ever more common. Logistics practices are pushing the envelope in the last mile or last kilometer just-in-time delivery. For example, predictive analytics systems load up delivery trucks with the items most likely to be ordered that morning in a section of a town or city.  
  4. Advances in technology will enable automated logistics like never before. Developments such as automated trucks, drones, and machine learning algorithms address complexity, cost, and uncertainty. Device democracy technology—which promises devices that create, move, and deliver products and services in speeds and volumes no human can keep up with—will be the norm. Trustless public ledger technologies, originally pioneered by bitcoin, allow automated economies and product tracking where devices create supply for other devices. Digital agent-based supply, demand, information, and finance flows will no longer bound by location or delays caused by waiting for a human to make a decision. Digital economies with their own self-governing logistic systems will expand human-based economies and flows of products and services like we have not seen before.
  5. Product-life-cycle value chains will operate like never before. Reverse logistics, remanufacturing, 360-degree supply chains, other advanced recycling practices (such as the certified destruction of information systems or engineering bacteria to convert waste to useful materials) will expand. The overall result will be that deliveries are never truly finished—one delivery simply means scheduling another pickup and delivery somewhere else. Ownership will change to custody, as the customer also becomes the supplier. This will create product-life-cycle value chains engineered to operate on massive scales we have not seen before.

No doubt the detailed coordination of the movement of goods and services, information, and finance will transform logistics over the next 15 years. Change may come imperceptibly, day by day; or suddenly, such as with the launch of a disruptive technology.  Perhaps, at that future time, one of our colleagues will look back on our activities in 2016 and ask, “How could they not know how primitive they were back then?” To that, our answer might be, “We did the best with what we had, and—more importantly—we laid the groundwork for that exciting 15-year logistics industry transition.”