You can source from around the world, but how do you know which is the best trading partner for you? Total landed cost tools have evolved in ways that may help.
Remember the glittering dot-com era? Well, perhaps those days are best forgotten. But recently an old buzzword from those heady times has surfaced again like an old lover—total landed cost engines.
The original idea was that, when you went to calculate transportation costs, it would be helpful to have online access to a database of all the various taxes, tariffs and duties associated with trade between one country and another. It would also be useful to be instantly notified if the trading party involved in the transaction was on any government "denied party" sanctions list for security or fraud reasons; and, even better, if the Web-based service would pop up with PDF files of forms you needed to fill out for this particular shipment, ready to be printed out and filled in.
Hop on the bus, Gus
And so, four years ago, the floodgates opened and vendors poured into the marketplace. There were the international trade logistics (ITL) companies that offered total landed cost capabilities as a stand-alone service among others related to cross-border trade—NextLinx, Vastera and Syntra. There were companies that mostly focused on landed cost calculation alone—Xporta, Open Harbor, Tarrific, Precision Software and World Tariff (an early leader in the field), to name but a few. Then Syntra changed its name to ClearCross and bought International Software Marketing, a specialist in global commerce management for the European Union; TradePoint Systems, a Customs services company, bought ClearCross; FedEx bought World Tariff and invested first in Vastera, then NextLinx, which meanwhile teamed up with BridgePoint, an online track-and-trace company.
All this turmoil wasn't just about the general public's losing confidence in the magic of the Internet. It turned out to be mighty expensive to gather all the constantly changing information about tariffs and trade barriers from every corner of the world. Automatically suggesting and offering paperwork was also a big headache. Plus there were just too many vendors for the uncertain market to sustain them as pure landed cost providers. The service typically became just one in a bundle of trade software offerings, as vendors widened their scope.
In the jumble of mergers, failures and revised business plans, a surprising number are still offering total landed cost calculation. But where total landed cost used to be a sub-section of transportation management, it has now emerged as a tool useful in supply chain and sourcing decisions.
That reflects a fundamental key change in the international trade melody. Buying and transporting goods from foreign countries brings into play an increasingly complex web of trade agreements, often between a single country pair. Importers looking for a deal are constantly being caught out by unexpected tariffs, taxes and duties. A manufacturer in Brazil may be offering you kitten heel pumps in this season's hottest colors with an unbeatable price, but when all's said and done, you might have been better off buying them locally.
Make a new plan, Stan
Another, newer, concern is the increasing reliance on China as a single source of imported goods, leading to vulnerability in the supply chain because of local disruptions— whether Avian flu, SARS or plain old political unrest. Other trade regions present similar risks, such as mad cow disease or terrorism scares.
"Companies that previously operated in a particular zone because of advantages in shipping costs and so on, now have to look at new regions because they can't use those countries or adjoining countries," says Ulrike Szalay, an international trade planning consultant affiliated with International Trade Services Corp., based in Washington, D.C. "Also, they have to think about contingency planning —where do they turn if something goes wrong?"
With total landed cost calculation, importers can be as quick on their feet as a boxer in the ring about assessing and choosing new trading partners.
So, it makes more sense than ever, but who's buying? Among the more enthusiastic users of total landed cost (TLC) services are the freight forwarders and third-party logistics providers who pass on the capability to their customers —often by incorporating the Web-based service into their own so that people don't even know they're using another company's software: what's known as "private label" usage. Early adopters include Exel, the UK-based logistics company. Others—including Danzas, Maersk Logistics, TNT, FedEx and UPS—have taken it up in response to the changing face of customer service.
No need to be coy, Roy
And logistics providers are, in turn, being prompted by increased interest from shippers. John Little, director of compliance at Houston-based Elite Group, a freight forwarder and Customs brokerage firm that started offering NextLinx's product on a private-label basis to its customers 18 months ago, says clients are increasingly asking for a little TLC.
Initially, Little was looking for a new denied-party screening mechanism, having become dissatisfied with his existing one. Along came NextLinx, based in Rockville, Md., which won Little over when it demonstrated its ability to screen for trading partners who are prohibited under U.S. laws for security or other reasons, as well as its "trade wizard," which takes the user step by step through all the processes needed to establish total landed cost. "We often had requests that I had a lot of trouble answering about duty rates for other countries, so that's when we decided to use that part of the product," says Little, who reports that he's delighted with the added capability.
"I think it's because people are realizing that it's a competitive advantage if you know what the duty rate is, going into the bidding process. If they know what that duty is going to be, they can lower their price to make up the difference," says Little.
Customers, he says, often just want a one-time quote on total cost implications associated with a tentative deal. Partly, the service appeals to logistics providers because smaller companies with lower rates of transactions can't afford to buy it.
Philadelphia-based logistics service provider BDP, for example, is eager to provide some landed cost capabilities to its customers, but it's working with G-Log—a relatively new entrant into the TLC market—to build its own, cheaper, services to check for regulatory compliance and tariffs and add those to G-Log's existing shipment execution, visibility and reporting services.
"You have to look at expense and value and how much the customer is prepared to pay," says Mark Stocksdale, director of software development at BDP. "The question is: How big is the demand? I think our clients would love to see it, but they're not really willing to pay for it. That's what we found out. It died out when they found out the cost."
Just trying to keep the customer satisfied
Robin Roberts, analyst with investment bank Stephens Inc. in Little Rock, Ark., says the TLC vendors aren't making much money out of this product yet. "The companies are having a hard time gaining traction, although in theory, demand should increase along with increased regulations. Although the total landed cost engine is a great tool, they have a hard time showing return on investment to customers," Roberts says.
The vendors' survival strategy has been to offer to be much more than an online database for customers. Vastera, for example, took over both the U.S. and the Mexican global trade operations divisions of Ford Motor Co. NextLinx still makes more money from software than from its trade data content. (The company says that this year will see that part of the business become profitable for the first time.) Xporta, like many others, has restricted the number of countries it covers to the top 40 importers, and many vendors have built their importer databases before turning to the much-trickier matter of export controls and tariffs.
Roberts says that, until the total landed cost calculator can be bundled with end-to-end solutions of data management, it's probably not going to gain as much market traction as everyone would have hoped. But vendors are making efforts to do just that.
Darren Maynard, chief operating officer at NextLinx, says the company is tailoring the service as it learns more about customers' needs. Maynard says, for example, that NextLinx staff discovered that their logistics company customers were using the trade wizard to manually populate spreadsheets with data, in order to compare multiple potential trade routes and partners. "We decided to give them a tool that did that—a trade planning tool, which can put in multiple sources to importing country or multiple exporting into one country—so you can work out the best place to sell from and the best place to buy from,"Maynard says.
"I think the science of landed cost analysis and determination is very important but only in the context of other applications," says Dave Horne, president and chief executive officer of Xporta in Santa Clara, Calif.
"What we find is that clients are looking for a complete solution to help them manage data throughout the global supply chain," says George Weise, vice president of global trade content at Vastera in Dulles,Va. "Landed cost calculation is a component of that. So we haven't focused on LCC but embedded it in our comprehensive whole."
"In my opinion, this is where the industry is going to go," says Little, describing the competitive advantage landed cost calculation adds to his logistics services. "In order to prosper, you're going to have to do things like this. It's certainly a far cry from what we were doing 20 or 30 years ago."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
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.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."