John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
The heady growth reports out of China just keep coming. One week, it's the steel industry reporting that the sector is expanding even more rapidly than analysts had predicted just months earlier. The next week, analysts are hailing the emergence of a Chinese middle class a middle class of more than 250 million with both disposable income and an appetite for American-made products. And all the while, Chinese factories continue to pump out low-cost consumer goods: clothing, shoes, toys, consumer electronics and even cars for export. Although some economists predict that China will find itself dealing with deflation within the next six months, the economy is not expected to cool much from its current 9-percent growth rate.
With all those goods to be moved between the two nations, it should come as no surprise that air freight between the United States and China is burgeoning. In fact, air freight from China to the United States is expected to grow at an average of 9.6 percent a year over the next 20 years (while
traffic to Europe is predicted to grow almost as quickly at 9.3 percent over the same period). "The output from the two major airports [Shanghai and Beijing] into the United States and Europe is tremendous," says Charles Kaufman, vice president and head of air freight, Asia-Pacific, for DHL's Danzas Air & Ocean division. "Airlines are increasing their flights out of China rapidly."
Kaufman isn't alone in his assessment. "China is growing tremendously and I think many of the people that play in this market have seen similar phenomenal growth, especially out of Shanghai," says Rick Whitaker, vice president of international services at BAX Global, a freight forwarder with a significant presence in Asia. "The good news is that there [are] significant [numbers] of new carriers coming into the market."
That's due partly to the fact that the General Administration of Civil Aviation of China recently granted foreign carriers "freedom rights," which means they can pick up cargo on the Chinese mainland en route to other destinations. Previously, an aircraft picking up freight in Shanghai, for example, was required to fly directly to its end destination without making stops in between. Whitaker says the move is expected to further develop the aircargo market between China and the United States, which had been stifled by a shortage of flight rights.
The China syndrome
While the airfreight carriers jockey for a share of the growing U.S.-China trade, the air express carriers are embroiled in a battle of their own. UPS, FedEx Express, DHL Express and even the U.S. Postal Service are making big investments in hopes of capturing market share in the China region.
"We see nothing but growth coming from China and going into China, too," says John Wheeler, a representative of UPS International."The biggest issue right now is that there is a lack of capacity in and out of China and everybody is feeling the pinch."
To help ease the crunch, UPS announced in August that it will add eight new Boeing 747-400 freighters to its fleet, starting in June 2007. The aircraft will be delivered to UPS through 2008, helping UPS increase capacity on its most important international "trunk" routes connecting Asia, Europe and North America.
UPS also has placed an order for an A380 freighter that will be able to fly non-stop from China to the UPS Worldport air hub in Louisville, Ky. UPS expects to take delivery of the plane in 2009. Its primary benefit would be faster transit time from Asia to the U.S. East Coast, while allowing UPS to handle more cargo and larger individual items. Today, all shipments headed to the United States must stop in Anchorage first.
Earlier this year, UPS won permission from the U.S. Department of Transportation to expand air operations in China and was granted three more air routes in China. In the last year, the company has expanded to 18 weekly jet flights to and from China. And in a major public relations coup, UPS has also been chosen as the official Logistics and Express Delivery Sponsor of the Beijing 2008 Olympic Games.
But UPS isn't the only express carrier on the move. After an exhaustive series of feasibility studies that included projections for manufacturing and trading trends both within Asia and internationally for the next 30 years, FedEx announced this summer that it is building a new Asia Pacific hub at the Guangzhou Baiyun International Airport in Southern China. The facility, which represents a $150 million capital investment, will allow FedEx to double its capacity in China by sorting up to 24,000 packages per hour. It will employ 1,200 people when it opens in December 2008.
Although the new hub will undoubtedly rev up FedEx's operations, it's the Chinese economy that really stands to benefit. A joint study by China's Development Research Commission and the U.S.-based Campbell-Hill Aviation Group estimated the direct output impact of a FedEx hub on China's economy at $11 billion in 2010, increasing to $63 billion by 2020, with the majority of the gains resulting from industrial expansion.
Not to be outdone, DHL is investing $273 million in a five-year China expansion plan that calls for the company to develop and launch China Domestic, a door-to-door express delivery service in China; establish Express Logistics Centers (ELCs) in Shanghai, Guangzhou and Beijing; and establish 16 spare-parts centers across China. As part of its financial commitment, DHL will spend $12 million to double DHL Danzas Air & Ocean's presence from 20 cities to 37 by 2007, and will invest $3 million in two DHL Danzas Air & Ocean Logistics Centers in the Shanghai/Pudong region.
DHL cautions, however, that concentrating solely on China would be short-sighted. There are other "Asian tigers" out there with the potential to emerge as economic powerhouses. "We are investing a lot in China but we should not underestimate other countries," says DHL's Kaufman."The growth in China is still the strongest that we see, but there is still very excellent growth in Singapore, Japan and Malaysia, and what's coming up is India."
airfreight industry comes roaring back
Conventional wisdom holds that what goes up must come down. But in the topsy-turvy world of air freight, it seems the converse is true: what goes down must eventually come up. After slumping for several years, the U.S. international airfreight industry took off, posting a banner year in 2004. Air shipments measured by value to and from the United States showed double-digit gains over 2003 figures, according to The Colography Group Inc. The value of U.S. air export shipments rose 12.3 percent to $235.7 billion, while the value of U.S. air imports increased 12.7 percent to $346.5 billion. U.S. air export revenue surged 12.0 percent to $8.4 billion.
At the same time, air carriers managed to make some inroads into the international transport market in terms of tonnage. Measured as a percentage of total U.S. export tonnage, goods shipped by air rose 4.4 percent over 2003 figures last year. And although they lagged behind exports, air imports still showed strength: U.S. air import tonnage as a percentage of all-mode import tonnage rose 2.8 percent. Bidirectionally, the tonnage growth in air outpaced the tonnage growth for goods moving by ocean vessel.
"Our data confirm that 2004 was a stellar year for U.S. international air freight, certainly the best year since 2000," says Ted Scherck, president of the Colography Group. Scherck credits a number of external factors for the airfreight boom. "Air freight benefited from a robust replenishment of inventories due to improving demand and a shift in modal usage from vessel as shippers and consignees sought to avoid delays caused by ongoing congestion at U.S. West Coast ports," he says. "Air exports were further aided by the effect of the U.S. dollar's decline."
According to the Colography Group study, the Australia and Oceania regions were the fastest-growing markets for U.S. air exports, with a 34.1-percent gain in tonnage. However, Asia was the fastest-growing source of U.S. imports, with tonnage rising 16.5 percent. Those import gains were paced by China, whose U.S.-bound air imports (measured in tonnage) soared 31.1 percent.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.