Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
In 2011, the nation's business logistics system had one of those years that people won't feel the need to forget—but they won't feel the urge to remember either.
The 23rd annual "State of Logistics Report," which chronicled the nation's logistics output for the year, showed a modest change over 2010 totals. U.S. logistics costs reached $1.28 trillion, a 6.6-percent increase over 2010 levels and a 17 percent increase over the trough in 2009 as the U.S. grappled with the financial crisis and subsequent recession. (Total logistics costs are calculated by adding together business inventory costs, transportation costs, shipper-related costs, and logistics administration costs.)
Logistics costs as a percentage of nominal gross domestic product (GDP), a ratio often cited to measure the supply chain's efficiency in moving the nation's output, rose to 8.5 percent in 2011, up slightly from 8.3 percent in 2010. In 2009, the figure dropped to 7.8 percent.
In the 1990s, as the nation's supply chain was shaking off the yokes of rail and truck regulation and bringing free-market processes to bear on the marketplace, a ratio in the single digits was hailed as a breakthrough in logistics productivity.
Over the past three years, however, a low ratio has come to underscore a significant decline in shipping expenditures and transportation costs as shippers and carriers downshifted in response to a severe decline in economic activity from the levels of five or six years ago.
The findings of the 2011 report, which were released June 13 in Washington, D.C., paralleled what turned out to be a static year for the nation's economy. After a year of peaks and valleys, U.S. economic activity ended 2011 relatively flat over 2010 levels, with GDP growth rising by an anemic 1.7 percent.
Correspondingly, the freight transport industry started the year with strong gains in volumes and significantly higher freight payments through its first half, according to the report. However, the economy began to slow down in July, with the only sign of strength being an earlier-than-normal buildup of inventories ahead of the July 4 holiday, the report said.
Overall, Rosalyn Wilson, the report's author, called 2011 a "rather unremarkable year" for logistics statistics. Still, her 25-page analysis was sprinkled with more optimistic comments than were found in the last two distinctly downbeat reports.
"Things have not been especially robust in the first half of 2012," she wrote. "However, there are enough signs of improvement that [the] economy really does seem to be on the way up."
A GOOD YEAR FOR RAIL
For 2011, transportation "costs"—or revenues generated by freight carriers—rose 6.2 percent over 2010 levels. But that increase came from higher freight rates and not increased volumes, the report said. Rates increased broadly in 2011 and largely held their ground, allowing trucking companies in particular to recover some of their increased operating expenses, the report stated. However, higher labor, equipment, and insurance costs still ate up a good chunk of those gains, according to the report.
In the transportation industry, the big winners for the year appeared to be railroads and third-party logistics providers. Third-party logistics providers—which account for a large portion of the report's "freight forwarder" category—posted a 10.9 percent year-over-year revenue gain, substantially surpassing its pre-recession levels, the report said. Rail revenues, in aggregate, climbed 15.3 percent year-over-year largely on the back of increased demand for their intermodal offerings.
For years, large truckers have used rail intermodal to reduce their costs of managing an over-the-road fleet. For the first time ever, mid-sized truckers began doing the same in 2011, the report said.
Wilson said the railroads are well positioned to capitalize on the prospects for tightening truck capacity likely to continue through 2012 and in coming years. Wilson advised shippers and intermediaries to be prepared for fewer trucks, fewer drivers, and fewer trucking companies in the marketplace.
"I urge everyone to begin making contingency plans for the day you cannot get a truck," she wrote. "The railroads are standing by with a great offer and have the capacity to take up the slack."
Rick J. Jackson, executive vice president of Mast Logistics, a unit of Columbus, Ohio-based retailer Limited Brands, Inc., said the reliability of intermodal service has improved to the point that his company is comfortable moving expensive garments with the railroads.
"In past years, we may have been reluctant [to use intermodal], but now we've found that their services have become more reliable for time-sensitive goods," Jackson said in comments at the Washington event.
Not every segment of the transportation industry fared as well however. Ocean and airfreight carriers did relatively poorly in 2011, the report said. A decline in ocean fright demand—especially for what turned out to be a nonexistent peak pre-holiday shipping season—led to a relatively small gain in containerized volumes, the report said. Traffic rose by between 1 and 5 percent over 2010 levels, depending on the port surveyed, the report said.
Airfreight revenue fell 2 percent year-over-year due to weakness in domestic demand and a decline in overall international ton-mile traffic.
STABLE INVENTORY-TO-SALES RATIO
Overall inventory carrying costs (another key part of total logistics cost) rose 7.6 percent year-over-year, according the report. Inventory carrying costs are calculated as the investment in all business inventory plus interest; taxes, obsolence, depreciation, and insurance; and warehousing costs. The investment in all business inventories in 2011 rose to $2.1 trillion, an 8 percent increase over 2010, according to the report. The increase in inventory levels also resulted in an 8.2-percent jump in insurance, depreciation, taxes, and obsolescence. Warehousing costs rose by 7.6 percent, as greater demand for inventory capacity pushed rents up.
The higher costs and rising demand offset the benefits of declining interest rates for holding inventories, the report said. Interest costs in 2011 dropped 31.4 percent from already historically low levels. Indeed if last year's interest levels were replaced with those from 2005, logistics costs in 2011 would have increased by close to $70 billion, the report said.
The retail inventory-to-sales ratio (which measures the percentage of inventories a company currently has on hand to support its current level of sales) stood at 1.27 at the end of 2011. This is a marked reduction from the high levels in 2009 when the ratio spiked to 1.49 as final sales dropped dramatically during the recession.
The current ratio underscores retailers' success in keeping their inventories lean and requiring their suppliers only to deliver the product they need at that point in time, according to the report. Wilson said the ratio is likely to remain stable as retailers leverage better processes and increasingly sophisticated information technology to more accurately calibrate inventories with end consumer demand.
Additionally, U.S. exports rose 14.5 percent to $2.1 trillion, paced by record gains in exports of manufactured goods, the report said. Domestic industrial production of consumer goods rose 2.7 percent in 2011, compared to a 0.8 percent gain in 2010 over prior-year levels.
The "State of Logistics Report" is produced for the Council of Supply Chain Management Professionals (CSCMP) and sponsored by Penske Logistics.
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.”