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.
Much has been made about the waning influence of organized labor in the United States. But try telling that to the thousands of businesses whose supply chains were at the mercy of the two waterfront unions that flexed their muscles in 2012 like they haven't in years.
Those who rely on the International Longshoremen's Association (ILA) to move their goods in and out of 14 East and Gulf Coast ports breathed a sigh of relief Feb. 1 when it was announced the ILA and the U.S. Maritime Alliance, representing ship management at the ports, had reached a tentative six-year contract agreement. The pact, which at press time still was subject to ratification on both sides and to the negotiation of local agreements impacting each port, averted a Feb. 7 work stoppage and keeps the ports open for business.
The master agreement, if it holds, would end a standoff that began late last summer and that twice pushed the ports to the brink of being shut down. The agreement came just five days before the third extension in five months was to expire.
Though cargo had moved unimpeded during the dispute, businesses that rely on dockworkers to handle their freight spent a skittish six months reviewing their contingency playbooks, putting them away when it looked like the logjam would break, only to take them out again when all seemed lost.
Businesses shipping in and out of the nation's largest port complex, the Ports of Los Angeles and Long Beach, weren't as fortunate. In late November, an 800-member clerical workers unit of the International Longshore and Warehouse Union (ILWU) struck the port complex. The ILWU dockworkers honored the strikers, this time shutting down Los Angeles and significantly curtailing operations at Long Beach. Before the walkout ended eight days later, about 40 percent of the nation's import tonnage had been affected, at a cost of roughly $8 billion.
A week earlier, 220 members of the Service Employees International Union (SEIU) walked off their jobs at the Port of Oakland (Calif.). As they would do in the Los Angeles basin, ILWU workers honored the SEIU picket lines, shutting the port's operations for a day.
The battles aren't over. In the Pacific Northwest, ILWU members at six grain-handling terminals at the Port of Portland and the Washington state ports of Puget Sound and Vancouver have been working without a contract since their one-year compact expired Sept. 30. Despite alternating threats of a union strike and a lockout by grain elevator owners, labor remains on the job while management seems bent on imposing a contract with terms the ILWU opposes. Hanging in the balance is the one-fourth of the nation's grain exports that flow through the terminals.
LIMITED OPTIONS FOR RELIEF
If the ILA had struck, companies shipping to and from the ports where the 14,500-member ILA mans the docks would have had little choice but to endure the work stoppage for the duration. According to a report issued Jan. 31—one day before the contract announcement—by London-based consultancy Drewry Supply Chain Advisors, ocean carriers do not view ports on Mexico's East Coast as a viable alternative for large amounts of cargo. Similarly, the ports on Canada's East Coast have their limitations. Few services call at the Port of Halifax, and big containerships cannot sail up the St. Lawrence River to reach the Port of Montreal, Drewry said.
At best, the Canadian and Mexican ports would serve as backups for limited traffic flows, according to the firm.
Trans-Pacific shippers who normally use the Panama Canal to send shipments to the East and Gulf Coasts could reroute their freight over West Coast ports and then move the goods inland by rail or truck. But that is a more costly option and is subject to capacity limitations and dock congestion, especially if the ILWU acts in sympathy with its brethren in the East.
One advantage for West Coast shippers and importers is the close proximity of the Mexican ports of Lazaro Cardenas and Manzanillo. The ports are linked to the U.S. mainland by cross-border rail connections and are considered less geographically remote than their counterparts in the eastern part of the country. "Their capacity may be limited but they could act as a useful safety valve" should U.S. ports get congested, Drewry wrote in its Jan. 31 report.
Since an ILA strike became a possibility, trans-Atlantic shippers began diverting some of their traffic to the West Coast. But such a remedy might have been difficult to implement at this late date, and it would have come at a cost to liner carriers for redirecting their ships, an expense passed on to the cargo owner.
In its report, Drewry said carriers would levy a congestion surcharge of about $1,000 per 40-foot equivalent unit container, or FEU. They may also charge demurrage fees on containers stuck in port beyond a contractually agreed-upon "free" time period, according to the firm. Based on the average weekly throughput of 300,000 20-foot equivalent unit containers, or TEUs, at East and Gulf Coast ports, the surcharges alone would cost cargo owners about $150 million for each week of a strike, Drewry forecast.
Ann Bruno, vice president of global trade for New Freedom, Pa.-based consultancy TBB Supply Chain Guardian, whose firm has worked closely with carriers to develop strike-related contingency plans, said a few days prior to the Feb. 1 announcement that the surcharges could go as high as $2,000 per FEU, in some cases.
Then there are other costs that would be hard to quantify, but which could inflict more substantial and durable pain. For U.S. exporters, they include delayed deliveries, canceled orders, financial penalties, and expiring letters of credit. For importers, it could mean lost production and sales. Both may incur additional expense to pay for expedited shipping via air freight.
It is believed that a strike lasting two weeks would take the supply chain about six weeks to get back to normal.
A YEAR OF LIVING DANGEROUSLY
Even as the ILA and management settle their scores, the uncertainty sown by the 2012-13 labor wars will not be lost on those in the trenches. The question for stakeholders, many of whom stand to be around for the next contract cycles later this decade, is what can be proactively done to minimize future damage, especially after memories of 2012 have faded.
Bruno said companies should take stock of their third-party relationships. "Did they take steps to mitigate your risk?" she said. "Did they make an effort to schedule calls at non-ILA ports? Did they do a good job of negotiating 'bullet mini-landbridge' rates?" (a reference to arrangements with ship lines allowing companies that normally use the Panama Canal to shift their containers to intermodal service at West Coast ports).
Another approach would be for companies to conduct an extensive modeling exercise covering their global supply chains and to view a port as just another node in the network, similar to, say, a distribution center. Jeffrey J. Karrenbauer, president of Insight Inc., a Manassas, Va.-based firm that performs these types of simulations, said companies could simulate a preferred port's being knocked out of commission, and then use the model to gauge if they are overcommitted to any one port, and to estimate the full range of costs incurred to shift to other ports.
A fringe benefit of the exercise, Karrenbauer added, is that "you'll probably discover things about your operations you didn't know before."
The problem, he said, is that while the transportation folks live and breathe the day-to-day action, the upper echelon decision-makers are more focused on broader issues, notably their company's stock price if it is publicly traded. As many at the C-level view it, investing millions of dollars to reconfigure a supply chain as protection against an event that may not happen is less desirable than sweating out a work stoppage and then resuming normal operations, according to Karrenbauer.
"Wall Street doesn't reward risk mitigation," he said.
There may be logic behind the passive attitude, however. Because containerization remains a cost-effective means of transporting goods internationally, many executives in and out of supply chain management don't want to rock the proverbial boat. As they see it, the periodic turmoil is a small price to pay for the benefits of the service, as long as the work stoppage doesn't occur at or around peak season.
Another factor that may favor inaction is the power of the bicoastal labor axis. A steamship line, cargo owner, or intermediary with significant tonnage could seek out a port with nonunion labor but may not find one with the size or resources to meet their needs. In addition, maritime labor may decide to punish a steamship line for seeking a nonunion port by "working to the rule," an action that has the effect of dramatically slowing the cargo loading and unloading process.
"The message that goes out is 'If you call a non-union port, just try to get your freight moved the same way again,'" said a high-level industry executive who asked not to be named.
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.
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."
Specifically, the move allows Hong Kong-based GSBN to test its eBOL tokenization use case with Ant Digital Technologies, and to conduct interbank atomic settlement of tokenized deposits between the Hongkong Shanghai Banking Corporation (HSBC) and Hang Seng Bank (Hang Seng).
Project Ensemble is a new wholesale Central Bank Digital Currency (wCBDC) initiative established by the HKMA to encourage use cases from all sectors to build innovative financial market infrastructure (FMI) that enables the settlement of tokenised money and real-world assets (RWA) via a wCBDC.
Under Project Ensemble, eBLs are issued over GSBN’s blockchain infrastructure which also facilitates trade finance activities between corporates and financial institutions. These eBLs are tokenised by Ant Digital Technologies and wrapped on their own blockchain to enable trade finance payments to flow through via tokenised deposit and wCBDC.
The move comes as GSBN continues to forge an ecosystem of partners with global shipping lines, including COSCO Shipping Lines, OOCL, Hapag-Lloyd, and banks to issue eBLs over GSBN’s platform to offer greater efficiency, visibility, and potential financing opportunities to the customer. To date, over 14,000 customers have been onboarded globally and more than 300,000 eBLs have been issued and transferred on GSBN.