One of the ironies of modern supply chain management is that the rush to global sourcing boosts demand for energy even as world petroleum output may be peaking.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
In a provocative article in the premier issue of CSCMP'S Supply Chain Quarterly, supply chain veteran Chuck Taylor warns supply chain managers that the era of cheap oil has ended and will not return. It is not a new argument by any means, but Taylor draws on both expert opinion and statistical analysis to paint a persuasive and worrisome picture about what declining supply and rising costs will mean for world economies and for supply chains in particular.
High fuel costs, Taylor reminds us, have effects on supply chains well beyond the obvious issue of transportation prices. "Ask yourself what will be the impact on the supply chain when sales and pricing policies, service levels, order quantities, packaging, the number of stock-keeping units, and inventory strategies all have to change in a world without cheap oil," he writes. "What about networks, modal selection, plant and DC operations, sourcing strategies?"
One of the ironies of modern supply chain management, Taylor suggests, is that the rush to global sourcing, which is helping drive growth in places like China and India, boosts demand for energy even as world petroleum output may be peaking. That drives up energy costs, and the resulting high costs of transportation could force corporations to rethink global sourcing strategies.
Taylor argues that as transportation costs rise, supply chain managers need to look anew at the lean principles developed by Toyota in the years after World War II as a model for supply chains. He contends that global sourcing and lean do not mix. "It is beyond me how someone can claim that a 12,000-mile supply chain with a three-week lead time and inventory stretched halfway around the world is lean," he writes. "A true lean system operates as locally as possible."
He also laments the lack of a sound U.S. energy policy that acknowledges and addresses the need for reducing the nation's dependence on oil. "There appears to be no energy policy in the United States other than Cheap Oil," he observes. He believes active government engagement in energy and transportation regulation may be inevitable, and that supply chain professionals had better be alert to that and engaged in helping form rational law and regulation.
A crucial part of the energy debate, of course, is the environmental impact of burning fossil fuels. Oftentimes, fuel-conservation and environmental interests dovetail nicely, as I found when developing a story on heavy truck anti-idling rules for this issue of DC VELOCITY. The motor carrier and fleet executives I spoke with were anxious to comply with all of the various state and local anti-idling ordinances, not just because they were forced to do so, but also because it coincides with their business need to run trucks more efficiently and conserve increasingly expensive fuel.
Policy does not always work that way, however. In the United States, we have actually seen some degradation of fuel efficiency among truckers, in large part due to the federally mandated use of new, cleaner-burning diesel engines. Though the engines are greener than their predecessors, they also operate less efficiently. But the carrier executives I spoke with are committed to working with suppliers and customers to both reduce emissions and improve mileage. DC operations have an important role in achieving those goals through such efforts as improved scheduling or extended hours (the last of which, of course, has its own energy cost implications).
The efforts of motor carriers suggest that economic forces— such as rising fuel prices—will create market-driven conservation efforts. Higher transportation costs will force businesses to rethink their supply chain strategies. Regulations, fines, and fees on carrier operations are certain to stimulate further discussion about how to address real, energy-driven constraints.
The world is not running out of oil; Taylor does not argue that the sky is falling. But demand that will permanently outstrip supply means our love affair with cheap oil is over. And markets alone cannot resolve this issue. As Taylor writes, "Geology, not economics, will set the limits for this finite resource on our planet."
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”