David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
American farmers and growers of other agricultural products have had to endure a worldwide pandemic, an economic downturn, and extreme weather this past year. And now on top of all that, they face another growing crisis.
A surging tide of Asian imports is straining capacity at U.S. ports, especially on the West Coast. Import volumes are so high right now that ships remain at anchor in harbors for days waiting to dock and unload their goods. And sitting on those ships are ocean containers that are needed for exports. It’s a situation that has been exacerbated by a worldwide container shortfall. For products with limited shelf lives like agricultural goods, the current state is nothing short of a looming disaster.
Peter Friedmann is the executive director of the Agriculture Transportation Coalition (ATC). This group was formed 30 years ago with the goal of assuring that U.S. agriculture exports remain competitive with products from around the world. ATC members include producers of agriculture and forest products, such as cotton, poultry, beef, milk, dry dairy goods, berries, and lumber and paper products. Friedmann spoke recently to **{DC Velocity} Editorial Director David Maloney about the difficulties that many of these exporters now face.
Q: Can you tell us about the current shortage of containers for agriculture products and why that is a problem for your exporting members?
A: It is not an overstatement to say that the current situation is devastating to all U.S. agriculture exports. This includes products such as soybeans and hay, which are our largest volume exports off of our coast, as well as cotton and manufactured and processed foods, both refrigerated and dry.
The reason it is devastating is twofold. One is ocean carriers are looking at the revenue they can get on that inbound cargo coming from Asia, or what we call the eastbound. Those importers are paying $6,000, $8,000, $10,000, and in some cases up to $14,000 in freight rates for a container coming to the United States.
U.S. agriculture exporters have to compete with producers from all over the world. We cannot afford to pay those kinds of freight rates. The value of the cargo in those export containers is not that high. Therefore, the export revenue that the ocean carriers get for carrying the cargo westbound to Asia is more like $400, $800, or maybe $1,400 to $2,000 on the high end. So, ocean carriers are making an economic decision to forgo carrying cargo outbound across the Pacific and instead are sending the containers back empty.
Q: Why are the carriers returning the containers empty? They obviously won’t make money on containers with no cargo in them.
A: The reason they do this is to get them back to Asia as fast as they can so they can be filled with lucrative consumer goods and immediately sent back to the United States at those higher inbound rates. It has to do with processing time. They make money with containers on the water.
Our agriculture exports originate where crops and livestock are grown and processed. The stockyards are no longer in downtown Chicago. They are in places where there are fewer consumers and thus, fewer import distribution centers. So, for those containers to be loaded with our agriculture exports, they have to travel away from the gateway ports to inland areas. Some are just a couple hours inland, such as almonds from California’s Central Valley or the hay and dairy going out of Washington and Oregon. But many containers have to be hauled 1,500 miles to places like Kansas City, where our dry dairy goods come from; Arkansas, where pork comes from; and Minnesota, where soybeans are grown. So those export containers have to travel quite a distance and are not on the ship, where the revenue is made.
Q: So, that extra time required to send containers to the heartland to be filled with agriculture products and then back to the port is time that they’re not making money for the carriers. As a result, your members are not given an opportunity to fill any of those containers. Is that the basic problem we’re seeing?
A: That is correct. The other aspect is that ocean carriers are imposing penalties on failure of containers to arrive at the terminals in time or for arriving too early, the so-called demurrage and detention charges. The Federal Maritime Commission (FMC) has viewed those penalty fees as unreasonable and spent two years developing guidelines for the ocean carriers on what are reasonable practices. Most of the practices in use today don’t meet those guidelines, yet they continue, and the charges that the carriers are imposing are collectively in the hundreds of millions of dollars for our larger agriculture exporters. In fact, demurrage and detention charges are now more than the basic freight charges for carrying our exports. So, the freight budgets are more than double due to those penalty fees. Those are putting quite a few exporters—and I would also say importers—at financial risk.
Q: What are the long-term ramifications if the current situation does not improve?
A: When it comes to agriculture and forest products, there is nothing we produce in this country that cannot be sourced somewhere else in the world. If we can’t deliver it affordably and dependably to our overseas customers, they will find some other source in some other country, and we could lose that business and those customers forever.
Q: We know there is not a lot of available capacity right now in transportation networks. Even the trucking industry has limited capacity. It is very easy to rack up a lot of those penalty charges simply because there are inherent delays within our freight systems, including getting containers to and from the ports by truck and rail.
A: Yes, and there are delays and difficulties that the ocean carriers themselves face in maintaining their own vessel schedules. They keep changing. It is difficult for exporters to get the cargo to the terminal within a carrier’s time window when the carrier is changing that window constantly to meet sailing schedules that are themselves changing rapidly. That is why the FMC says those are unreasonable charges. Yet those charges continue to be imposed, and if exporters don’t pay them, the carrier won’t carry their cargo, even those export containers that are still being loaded.
Q: What products are the most affected by the lack of containers? Are they the ones that have a limited shelf life and could rot before they get to their destination if delayed too long?
A: We find that, frankly, all agriculture exports should be considered perishable. First of all, you have the obvious products. Those would be the chilled products where you have to monitor temperature. If there is a delay, they can be frozen. However, frozen products have a delivered value of probably 25% of what chilled temperature-controlled beef and pork would.
Then there are crops like soybeans and hay, which are largely exported as animal feed. Those animals can’t wait overseas. If the product doesn’t arrive on time, those animals are in real jeopardy. The last time we had a slowdown at the West Coast ports, the minister of agriculture in Japan wrote to the secretary of the U.S. Department of Agriculture, saying your ports are not working but our cows continue to eat.
So, if we can’t get our hay and soybeans and animal feed over to Asia in a timely way, the animal feed might still be good but those animals that depend on it may not survive. That is why some of those countries have invested considerable effort, time, and money into developing alternative sources for forage and soybeans. When we prove to be undependable, that is what we lose.
Q: So, there are a lot of ripple effects. I understand it is also worse than in the past because of the consolidation of ocean carriers in recent years. There are very few U.S.-owned carriers now. Can the federal government exert leverage over foreign carriers as it might with a U.S.-flagged carrier?
A: Foreign carriers should be subject to the same pressures and regulatory oversight by our Shipping Act as U.S. carriers. They are all subject to Federal Maritime Commission regulation, and they all would comply with regulations and the guidelines if the FMC were aggressive in the enforcement.
Q: But they are not complying right now, so what can be done to alleviate the problem?
A: First, folks are sending complaints to the Federal Maritime Commission in the hope and expectation that the FMC will self-initiate enforcement actions. At the same time, we are going to Capitol Hill. Many members of Congress have written letters to the FMC and to the Department of Agriculture seeking intervention. Over 70 of the largest agriculture trade associations in the U.S. have also written to President Biden and Department of Agriculture Secretary Tom Vilsack seeking intervention. And finally, we are developing legislative remedies, such as amendments to the Shipping Act, to mandate reasonable behavior by the ocean carriers.
Q: Is this a temporary problem or something that will be with us for some time to come?
A: World commerce is in turmoil right now due to the volume of imports coming into the United States and e-commerce globally. The ocean carriers and the ports cannot be blamed for that. That is a situation they are trying to adjust to. Neither the ocean carriers nor anybody else has enough capacity to handle this avalanche of imports into the United States.
What the agriculture exporters, together with all the big importers, retailers, and manufacturers, seek is fair treatment by the ocean carriers. When the ocean carriers change their sailing schedule and thus change the window for cargo to arrive at the terminal and for the ship to be loaded, the exporter should not be held responsible for failing to meet that window because the carrier has changed it at the last minute. The carrier should refrain from imposing these demurrage and detention charges, which depending on the cargo and the container, can run between $175 and $375 a day.
Q: That is quite a lot, and obviously, that drives up the cost of those exports. Are there any alternative markets for these products within North America that can be reached by truck, or is there just too much in the pipeline to be consumed domestically and in neighboring countries?
A: Everything that can be exported to Mexico and Canada goes by truck. In terms of domestic markets, yes, everyone is seeking to find domestic outlets. But there is only so much consumption that we have in this country of animal feed, soybeans, pork and beef, and so on. There is only so much we can eat. Those markets overseas are very valuable. The question is, can we find other markets overseas that are not subject to the trans-Pacific Ocean transportation turmoil? I would say that we are looking for every one of those and, frankly, the lack of capacity by the ocean carriers—not enough containers, not enough chassis, not enough ship space—is now a global challenge. The challenge exists across the Atlantic and across the Indian Ocean. The challenge is global.
Q: What do you foresee for the immediate future?
A: Well, first, this situation will be with us as long as the surge in imports continues—and I guess everyone who orders anything by e-commerce is part of the problem, including myself. We understand that this flood of imports is going to continue into the fall of this year and perhaps well into 2022. That flood will continue.
We do believe that ocean carriers are going to gain additional capacity. We do believe that there will be exports and imports that are going to shift from the most troubled and congested ports primarily on the U.S. West Coast to the Gulf ports, such as Houston, and to the Southeast ports, like Savannah, Charleston, and Norfolk. Those ports have larger terminals, and some of the port authorities themselves are operating more of the functions, rather than the private marine terminals at other ports. Operators at some of the East Coast ports have already endeavored to address some of the problems of demurrage and detention charges in a very constructive way. We will see if they will continue to do so and thus attract more cargo from the most congested West Coast ports.
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.
Supply chains are poised for accelerated adoption of mobile robots and drones as those technologies mature and companies focus on implementing artificial intelligence (AI) and automation across their logistics operations.
That’s according to data from Gartner’s Hype Cycle for Mobile Robots and Drones, released this week. The report shows that several mobile robotics technologies will mature over the next two to five years, and also identifies breakthrough and rising technologies set to have an impact further out.
Gartner’s Hype Cycle is a graphical depiction of a common pattern that arises with each new technology or innovation through five phases of maturity and adoption. Chief supply chain officers can use the research to find robotic solutions that meet their needs, according to Gartner.
Gartner, Inc.
The mobile robotic technologies set to mature over the next two to five years are: collaborative in-aisle picking robots, light-cargo delivery robots, autonomous mobile robots (AMRs) for transport, mobile robotic goods-to-person systems, and robotic cube storage systems.
“As organizations look to further improve logistic operations, support automation and augment humans in various jobs, supply chain leaders have turned to mobile robots to support their strategy,” Dwight Klappich, VP analyst and Gartner fellow with the Gartner Supply Chain practice, said in a statement announcing the findings. “Mobile robots are continuing to evolve, becoming more powerful and practical, thus paving the way for continued technology innovation.”
Technologies that are on the rise include autonomous data collection and inspection technologies, which are expected to deliver benefits over the next five to 10 years. These include solutions like indoor-flying drones, which utilize AI-enabled vision or RFID to help with time-consuming inventory management, inspection, and surveillance tasks. The technology can also alleviate safety concerns that arise in warehouses, such as workers counting inventory in hard-to-reach places.
“Automating labor-intensive tasks can provide notable benefits,” Klappich said. “With AI capabilities increasingly embedded in mobile robots and drones, the potential to function unaided and adapt to environments will make it possible to support a growing number of use cases.”
Humanoid robots—which resemble the human body in shape—are among the technologies in the breakthrough stage, meaning that they are expected to have a transformational effect on supply chains, but their mainstream adoption could take 10 years or more.
“For supply chains with high-volume and predictable processes, humanoid robots have the potential to enhance or supplement the supply chain workforce,” Klappich also said. “However, while the pace of innovation is encouraging, the industry is years away from general-purpose humanoid robots being used in more complex retail and industrial environments.”
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.”