Over the long haul, exports will be the engine that drives the U.S. economy. But without the equipment properly positioned to get the goods from origin to port, the nation's exporters may lose out.
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.
It's the dream of every U.S. politician and globally minded businessman: trillions of dollars of exports pouring into U.S. ports for lading onto ships bound for eager foreign hands.
The dream may be closer to reality than some think. Between 2009 and 2011, the total value of U.S. exports rose at an annualized rate of 15.6 percent, ahead of the 14.9-percent annual growth needed to meet President's Obama's goal (as stated in his 2010 State of the Union address) of doubling export values to about $3.15 trillion by the end of 2014, according to the Commerce Department's International Trade Administration (ITA).
In 2011, U.S. export value hit a record $2.1 trillion and is expected to exceed $2 trillion again in 2012, according to agency data. Export value in March totaled $186.8 billion, a 2.9-percent increase over February totals and an all-time record for any month since numbers have been tracked. Through the first quarter, export value totaled $549.2 billion, an 8.2-percent rise from year-earlier levels.
The beat has continued into 2012, albeit with some recent weakness as the crisis in Europe and slowing of China's growth have cooled U.S. export demand. Growth in export values fell 0.8 percent in April to $182.9 billion, after rising in March to $186.8 billion, which was an all-time record for any month since numbers were kept.
Since 2009, exports have supported the creation of 1.2 million American jobs, the ITA said. The administration's objective is for exports to support 2 million jobs by the end of 2014.
For President Obama, whose stewardship of the economy will likely be the central theme of the upcoming election campaign, the numbers are welcome news, particularly so since his January 2010 clarion call was initially met with skepticism. For example, a survey taken later that year of U.S. high-tech executives found that most believed the goal to be unachievable because it was too costly for companies to manufacture in the United States.
A jaundiced observer might note that the government's data excludes tonnage and shipments, and is skewed toward a metric—values—that is easily influenced by currency fluctuations. A weaker dollar makes U.S. exports less expensive and more competitive in international markets.
In addition, one of the most valuable U.S. exports last year was energy, as much a reflection of rising world oil prices as of the nation's competitiveness.
Still, even when volume figures are put into the data hopper, the outlook for U.S. exports appears bright. William L. Ralph, maritime economist at R.K. Johns & Associates, a New York-based maritime consultancy, said at a conference in Norfolk, Va., in April that he expects containerized U.S. exports to grow 8 to 9 percent this year as strength in Latin American markets—particularly Brazil and Chile—as well as in China offsets weakness in Europe, the destination for 20 percent of containerized goods moving off the East Coast.
Business executives say they are experiencing solid demand from traditional markets outside of Europe. There are also stories about emerging demand for unconventional items from places such as Saudi Arabia, which is importing tens of thousands of containers of water, and Iran, where food producers have a strong need for finished feedstock.
John Fornazor, president of Fornazor International, a New Jersey-based producer and exporter of feeds and grains, said at the Norfolk conference that he sees strong potential in Africa, where arid climates make it difficult for countries to grow their own foodstuffs. "We are very, very high on that part of the world," he said.
John R. Wainwright, head of international trade compliance for Leggett & Platt, a Carthage, Mo.-based manufacturer of residential, commercial, and industrial components, said international consumers' expanding wealth and consumption habits would be a major boon to U.S. exporters. "I am very encouraged about the growing middle class overseas," he told the conference.
WHERE THE BOXES ARE
However, much like the golfer who reaches the green of a par-4 hole in two strokes only to be sabotaged by his putter, all of this enormous export potential could mean nothing without the supply of properly positioned containers to haul the stuff.
Since the early 1990s, the quantities of container equipment—and where they flowed through U.S. commerce—have been pegged to the rapid growth of imports from Asia to the United States. However, the direction of loaded twenty-foot equivalent unit (TEU) container movements across the Pacific is as evenly balanced today as it has been for two decades, according to Walter Kemmsies, New York-based chief economist at Moffatt & Nichol, a global infrastructure adviser.
Each March for the past four years, the United States has come close to net exporting more loaded TEUs than it imported, according to Kemmsies. If the trend persists as Kemmsies expects it will, the United States will become a net exporter of loaded containers during a year's first quarter, while remaining a net importer during the traditional build-up leading into peak season.
But even during the traditionally strong seasonal cycle for imports, the directional imbalances will narrow as fast-growing Asian economies stoke year-round demand for U.S. capital equipment and foodstuffs, among other commodities, Kemmsies said.
Another factor likely to curtail Asian import activity is the growing practice of "near-shoring" production in Mexico and Central America. Near-shoring, designed to bring manufacturing closer to end markets in the United States, reduces demand for Asian-made goods because products can get to their destination in a few days instead of spending weeks on the water.
The trend toward "near-shoring to Mexico is more visible than we know," Kemmsies said.
OFF BALANCE?
The shift in demand patterns threatens to catch the U.S. export infrastructure flat-footed. A supply chain built around containerized imports of retail merchandise unloaded in densely populated commerce centers is often not geographically positioned to transload capital equipment, lumber, and agricultural products that may originate in more remote regions.
In addition, many ship lines calling on West Coast ports are focused on port-to-port business and don't have large-scale commitments with railroads to offer intermodal service to interior U.S. points at competitive rates. Thus, the boxes remain at or near the coast and beyond the reach of exporters.
Ted Prince, who runs a Richmond, Va.-based supply chain consultancy bearing his name, argued the problem isn't the quantity of equipment moving around the country, but the cost of getting boxes to the proper export locations. "There are 'empties' in Dallas and Memphis, but not in Chicago," Prince said. "There's plenty of equipment, but nobody wants to pay to get it in the right place."
Most U.S. exports do not consist of high-value goods because of the relatively high cost of domestic labor that goes into the production; this might explain why IT executives in the November 2010 survey were skeptical about the United States' doubling the value of its exports by the end of 2014. Instead, the nation's exports are predominantly what Prince classifies as "traded commodities," meaning they are of relatively low value and can't command the high per-unit selling prices of high-tech or electronic equipment.
For ocean carriers, it is often too costly to ship empty boxes from the original U.S. import destination to a subsequent export origin just to haul inexpensive commodities to a port. Unless inland shipping costs decline or westbound trans-Pacific rates increase—neither of which is likely for the foreseeable future—"it's just cheaper for the liners to move empty boxes back to the West Coast from their import origin points," Prince said.
"The surplus [of equipment] is in the cities, and the demand is in the hinterlands," said Phillip M. Behanna, senior vice president of International Asset Systems, an Oakland, Calif.-based firm that helps customers reposition containerized equipment.
Henry L. (Rick) Wen Jr., vice president, business development/public affairs for the U.S. arm of liner company Orient Overseas Container Line Inc., echoes that view. "Imports drive the locations where equipment is abundant, and large population centers like Los Angeles and New York-New Jersey have surplus equipment," Wen said in an e-mail. By contrast, exports from the Pacific Northwest and certain Midwest markets currently face equipment deficits, he said.
Since so much export traffic originates from remote locations, Wen said, "cost becomes a factor if carriers are expected to position empty equipment into demand areas for lower-valued cargo." Much of the time, he said, the expense isn't worth the effort.
Behanna of International Asset Systems takes a more optimistic view. He said that, for the first time in years, exporters and ocean carriers are concluding that ridiculously low westbound shipping rates are helping no one. Higher rates will encourage carriers to provide the equipment needed to get exports to the docks, and exporters will be more comfortable knowing that the boxes will be there when they need them, he said.
Behanna said that talk of a container shortage doesn't square with reality, adding that firmer shipping rates for carriers are the tonic needed to correct the imbalance. "If rates go up, the 'shortage' goes away," he said.
To be sure, it is premature to say that export containers are in chronic short supply. Fornazor, head of Fornazor International, said his company has no problem securing containers for its export traffic. Douglas W. Gray, general manager, international transportation operations for Caterpillar Logistics, the logistics arm of titan Caterpillar Inc., said Cat Logistics has contractual agreements that guarantee a specific level of container availability, and that the company's sizable import activity provides a cushion to protect against equipment imbalances.
"We are not generally struggling with getting containers today," Gray said in an e-mail.
Kemmsies, however, believes the future may tell a different tale. Under a scenario where export and import flows are evenly matched, global container positioning will be turned on its head. For years, fully loaded equipment from Asia entered U.S. commerce and would return empty for re-stuffing. In the future, it would not be surprising to see empty containers actually entering the United States from Asia to be filled with exports for the returning westbound move, Kemmsies said.
The worldwide supply chain has not modeled for such a profound change in equipment balance, Kemmsies said. "This then becomes a global logistics problem," he said.
Adding to the positioning issue is the potential of a general shortage of containers to move U.S. exports to their ports-of-departure. Although he doesn't have data to quantify it, Kemmsies said he suspects there will soon be shortages of refrigerated containers as well as twenty-foot containers. In addition, the ratio of container equipment in stock versus equipment in use is today about 2 to 1, down from the traditional 3 to 1 ratio, meaning there are fewer surplus boxes available if they're needed, according to Kemmsies.
"I would rather be a container manufacturer than anyone else right about now," he said. "We are going to need a lot more boxes, or someone is going to have to be real good at equipment positioning."
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.