January Sets the Stage for 2021: Supply Chain Disruptions Continue

 

January 2021 has started the year full of challenges. These challenges will likely create uncertainty that will shape the rest of the year. We probably won’t experience the staggering disruptions of 2020. Yet, we can expect 2020’s residual disruptions to affect all aspects of logistics.

We are already seeing rising costs of fuel and shipping. We’re also seeing a rise in delays of cargo worldwide coupled with a rise in refused bookings. As a result, we’re seeing a rise in innovation, optimization, and regulation.

Rising Costs. The beginning of the year has ushered in what appears to be a trend of rising costs. The cost of oil and shipping are increasing. We also see surcharges or space premium surcharges (SPCs) in trans-pacific shipping rates. JOC.com reports that Asian importers are paying up to 50% more than rates in the spot market. The cause for these sky-high costs is the high demand and short supply of vessels and equipment.

Rates in January for Asia-North America are approximately $4,000 per FEU to the West Coast. East Coast rates  are expectedly higher at $5,000 per FEU. When you apply SPCs for capacity and equipment, the cost rises to about $6,000. If that’s not astonishing on its own, consider this. SPCs that typically guarantee space (and equipment) now are not always honored. With space being scarce, a relief in costs before China’s Lunar New Year is unlikely.

Air cargo rates are also rising due to global demand and a shortage of capacity. Average rates for Shanghai-North America in early January were $8.34 per kg. The last time rates were that high was in May 2020, when Covid-19’s effects peaked. Putting that into perspective, compared to 2019, today’s rates are 157 percent higher. (Source: JOC.com)

Rise in Cargo Delays.  As shipping prices increase in Europe, EU shippers are delaying imports for Asia to sidestep these increases. Rates currently are $4,298 per TEU. Today the Shanghai Containerized Freight Index is three times higher than the rates in 2020 for the same period. And rates are four times higher than October 2020’s spot rate. (Source: JOC.com)

The effect of delaying shipments is a growing backup of containers at Chinese ports. This further exacerbates the already tight capacity shortage. As a result, competition for space among freight forwarders is heating up. For example, weekly rates per FEU are reaching incredible levels between $13,000 and $16,000.

Increasing rates will only intensify the rising trend of delayed cargo, creating more uncertainty.

Rise of Refused Bookings. As the effects of the pandemic subsided, we saw pent-up demand pop. Westbound trade is increasing, increasing demand for ships and containers. Also, carriers are compounding this problem by refusing bookings for eastbound trade.

Carriers have refused bookings, so they can ship empty containers to Asia. In many cases, carriers are doing this so they can stock containers with higher paid cargo. This has led the US Federal Maritime Commission to step in and warn carriers to stop this practice. It not only disadvantages U.S. exporters but also leads to greater trade imbalances.

Rise of Innovation and Optimization. Combatting the continued turmoil caused by post-Covid, appears to be an emerging trend. With so many unknowns a reversion to normal operations is unclear.

Thus, we’re beginning to see a rise in innovation and an emphasis on optimization. New conditions demand new solutions. Old ways of doing business won’t work in this increasingly competitive environment.

In particular, capacity shortages seem to be driving innovation and optimization now. Companies are looking for alternative ways to move freight and LCLs is one of them. LCL shipments offer flexibility as well as speed.

Greater use of LCLs can ease the pressure on limited capacity. Moving freight reflects one obvious use of LCLs.  Another is the movement of empty containers. Hence, LCLs represent a new strategic asset.

In addition, optimization is also emerging a trend. As competition heats up, businesses are looking for smarter ways to do business. Rising customer expectations and pressures to cut costs further spurs the drive for optimization.

Technology for technology’s sake is a thing of the past. Instead, technology development will likely focus on extracting greater efficiencies. Several areas offer potential savings in time and money.

First, we have more efficient routing. Next comes improved crew communications and training. Third, we have the development of solutions to deal with the effects of regulation. That includes development of biofuels and vessels that burn VLSFOs.

The Year of Resilience and Stabilization

Last year’s disruptions to supply chains was a year for the history books. Wracked by Covid-19, supply chain reacted, morphed, and adapted. And many transformed more quickly than expected. Surprisingly, many businesses recovered, making resilience more than a buzzword.

The new year, on  the other hand, will likely shape up to be a year of resilience and stabilization. The logistics industry’s stakeholders, like you, must continue to adapt to thrive. Refining business processes and developing new technologies will consume your time.

Shippers must operate more effectively and efficiently than ever before. Pressures to build agile and resilient supply chains will dominate 2021.

It’s how you will differentiate your business from your competitors. And that will require greater innovation and optimization.

At Terra Worldwide Logistics, we’ll work closely with you to help you achieve stability and growth.

Contact us to today to find out more about partnering with us.

 

What’s Stymieing Progress on IMO’s 2020 Zero-emission Shipping

 

Reduction of zero-carbon emissions made little progress since January 1, 2020. Progress in 2021 will likely also lag. That’s because many issues surrounding implementation remain unresolved.

The International Maritime Organization (IMO) mandated the reduction of emissions by 50% by 2050. The baseline for emissions reduction is emissions from 2008.

For the foreseeable future, implementation is a slow-go process. First, it’s an enormous undertaking – by any standards. The bar is set high and the scope is global. Second, achieving these mandated standards impacts the entire supply chain.

The IMO mandate impacts and is impacted by fuel prices, research and development. It also affects and is affected by technology investments and vessel procurement.

Let’s drill down into each of these to better understand why progress will continue to plod along.

Fuel Prices. Everyone expected bunker fuel prices to skyrocket after implementation. Moreover, predictions were that fuel costs would remain high. Regulators thought higher bunker fuel prices would speed the transition to cleaner fuels. But that didn’t happen.

Instead, prices declined due to reduced demand. That restrained the move to Very Low Sulphur Fuel Oil (VLSO).  Now, however, VLSFO has hit a 10-month high due to tight supplies.

Although demand for VLSFO isn’t high, neither are supplies. That’s now putting upward pressure on fuel prices. Erratic fuel prices has made it difficult to incentivize the transition to cleaner fuels. To incentivize movement to use of VLSFOs, prices must continue to rise.

Research and Development (R&D). R&D of zero-emissions is still in its infancy. This is a new and open field of study that lacks unified guidance. It also lacks a sense of urgency, at least compared to the R&D efforts for a Covid-19 vaccine.  On the plus side of the equation, shippers have agreed to a self-imposed carbon tax to fund a $5 billion R&D fund.

That’s a move in the right direction. Of course, this requires a new governance body to manage the fund. With bureaucracy moving at a lumbering pace, this body won’t be stood up until 2023. Meanwhile, some question the emphasis placed on R&D.

The Director of International Climate for the Environmental Defense Fund stated the industry should focus on carbon pricing tools rather than R&D. The director, Aoife O’Leary, thinks the R&D fund isn’t an effective transitional measure. Rather, he believes the industry needs a carbon pricing mechanism now.

To speed movement to IMO’s mandate, R&D needs an integrated approach and an energetic bureaucracy.

Technology Development. Technologies for achieving IMO’s strict standards, requires direction as well as funding. Technologies that stakeholders are pursuing include how to make existing vessels more fuel efficient. The use of scrubbers is a popular technology because it’s quick and easy to install. Yet the use of scrubbers is only a temporary solution.

Other technologies focus on development of new fuel-efficient engines. The same applies to developing alternative fuels that burn cleaner, such as biofuels. A leader in biofuels research and development is Maersk. Another leader is DHL, which intends to use biofuels on all less-than-container load (LCL) shipments in 2021.

Other independent initiatives including CMA CGM, BMW Group are also exploring fuel alternatives. While admirable, most business are pursuing these efforts independently.

They seem to be taking a fragmented approach in developing technologies. That is, the industry lacks a common, unifying goal for technology development. That could extend the time to achieve standardized technologies. 

Vessel Procurement. Like R&D, this also seems to be taking a scattered approach. Vessel procurement, too, lacks a common, strategic goal. Moreover, in 2020, we saw vessel procurement take a back seat to other measures. That wasn’t surprising, since vessel procurement requires a significant upfront investment. There’s also another factor hindering new procurement.

Without knowing what the preferred fuel of the future will be, it’s difficult to build ships. Thus, carriers have reduced their orders significantly. This uncertainty has acted as a huge brake on vessel procurement.

In 2007 global orders of newly-placed as a percentage of the existing fleet was 61%. That dropped to 16% between 2015 – 2019. Now, new ship orders have dropped like a rock, falling to 8%.

Also, you would think current capacity constraints would incentivize new ship buying. As the data show, however, global ship procurement has bottomed-out. So, new vessel procurement is not expediting the transition as planned. Rather, it’s having the opposite effect, further retarding progress.

Conclusion

Governments and industry agree sustainability is a major, long-term trend affecting the logistics industry. Today, a major long-term issue confronting the logistics industry is zero-carbon emissions. And it presents many challenges to smooth and timely implementation.

Implementing zero-carbon emissions has both near-term and long-term impacts. Impacts concern fuel prices, research and development, technology development, and vessel procurement. And that’s only a partial list.

With so many issues surrounding the IMO mandate, competing in the logistics industry may seem formidable. Add to that the uncertainty surrounding U.S. trade relations, and 2021 will challenge the best companies.

One way to combat these challenges is by seeking a long-term partnership with a solid 3PL.  At Terra Worldwide Logistics, we believe success in the future depends on long-term partnerships.

Building partnerships is also an evolving industry trend. And we’re intent on leading that trend for competitive advantage – yours and ours.

When you partner with Terra Worldwide Logistics,  we’ll tackle your challenges head-on. You’ll be hard-pressed to find another 3PL that tackles your challenges all-out with the same energy and passion.

Contact us today to learn how partnering with us will help you compete today and in the future.

 

The Unstoppable Rise of Shipping Prices in 2021

 

This year promises to segue from uncertain supply chain disruption into more predictable disruption. The unstoppable rise of shipping prices may cause that disruption. And it may dominate the news in 2021.

Last year Covid-19 dominated the disruption of supply chains– hands down.Although  a second strain has surfaced and threatens to disrupt supply chains, rising shipping prices may replace Covid-19 as a dominant disruptor.

The container capacity shortage, a front-burner issue now, promises to be dilemma for the  long-term. This post will look at how the industry got to this point. It will also examine what impacts you can expect, as this issue works its way to ultimate resolution. More important, it will explain what stakeholders are doing to mitigate the problem.

Global Shipping Rates Skyrocket Near Historic Highs

Container capacity shortage is a worldwide problem in the aftermath of Covid-19. Recall, Covid-19 resulted in massive declines in supply and demand, making forecasting all but impossible.

Blanket sailings reached record highs, cargo was rolled over, and shipping delays were the norm, not the exception.

As a result, today we have severe container shortages near record highs. And that negatively affects worldwide shipping rates. Since late 2020, rates have escalated almost fourfold from $1,400/TEU to over $4,000/TEU.

But that’s not the worst of it.

Carriers, primarily the big alliances have set these rates seemingly arbitrarily. They’ve broken existing contracts with much lower freight rates. And they’ve also added surcharges for various reasons, further causing shipping rates to spike.

It seems some of the Big Alliance, namely, 2M, THE Alliance, and The Ocean Alliance, are operating with a heavy hand. Shippers and forwarders are blaming them with taking advantage of the post-Covid environment.

Meanwhile, governments in the U.S., China, and Vietnam have stepped in to explore charges of anti-competitive behavior. At present, only the European Commission has refrained from entering the fray. But it appears the EC may soon join these other governments in digging into this mess.

In the U.S., shippers using the ports of New York, Los Angeles, and Long Beach are complaining about the severe lack of available container space. This issue is not restricted to the U.S – it’s a global problem.

Thailand, for example, is also suffering from the container capacity disconnect. According to The National Shipper’s Council in Thailand, compared to last year, Thailand has shortage of 1.5 million containers.

Thai authorities blame vessel delays, rollovers, and shipping cancellations. Moreover, Thai authorities estimate shipping will increase in 2021 by 3-5% after declining  about 7% in 2020. That will further exacerbate the capacity shortage.

That suggests shipping prices will get worse before they get better.

Fighting Rising Skyrocketing Prices with Partnerships and Regulation

Carriers have the upper hand at the moment and are forcing shippers and forwarders into the spot market. Of course, the spot market has much higher rates. Unless and until governments step in to regulate this huge disparity in supply and demand of containers, rates will continue to escalate.

This makes partnerships between shippers and 3PLs even more important. Fighting to resolve or avoid these adverse events demands a collective approach. Today’s situation gives truth to the adage: “There’s strength in numbers”.

The New Normal seems to be shaping up into a harsher, more competitive environment. More precisely, it’s showing signs of imbalance in the markets alone that may lead to greater government intervention.

As already mentioned, the U.S. is looking into claims by shippers and forwarders. On the table are not just formal inquiries, but also legal action, such as court injunctions against the shipping alliances. 

We’ve just entered the New Year, so we can’t draw any conclusions yet. That said, regulatory action may be in the offing, if the market can’t redress these apparent inequities soon enough. That means, liners, shippers, forwarders, etc., must address this issue collectively and share costs as well as benefits. A one-sided solution won’t prevail in the long-term.

Operating Nimbly in the New Normal

Supply chain disruption is nothing new. Yet many businesses won’t weather the storm when disruption hits. It doesn’t seem to matter whether disruptive events are predictable or not.

Whether shipping prices will be the great challenge they appear to be at the moment remains a question. What’s important is how you manage the disruption caused by escalating shipping prices.

So what’s your plan for managing and/or mitigating expected or unexpected disruptions in 2021?

One way to manage and/or mitigate supply chain disruptions is through contingency planning. But a plan is only as good as the use you make of it. To make a contingency plan work you need people – partners to be more exact.

That’s where Terra Worldwide Logistics comes into the picture. We’re a 3PL that knows a thing or two about managing everything from speed bumps to major crises.

When you partner with us, you can rest assured we’ll provide you with industry competitive rates. We have the personnel, processes, and technologies to help you prevent, avoid, or mitigate surprises.

Contact us today, if you’re looking for a stable partner to help you navigate the choppy waters 2021 promises to bring.

 

Rethink Work

 

The holidays are just around the corner. Everyone is winding down to enjoy family and friends. This is a good time to read and reflect.

Since Covid-19 dominated 2020, it makes sense to read about how its impacted the world of work.

With that in mind here’s a book worth your time.  It’s a quick read. Yet it’s full of valuable insights. It’s a recently published book and written by a young but prescient author. I say that because his advice, given in 2016, pre-dated Covid-19.

Without further ado here’s a brief summary of Rethink Work.

I hope you enjoy the book, should decide to read it.

Book Title:  Rethink Work: Finding and Keeping the Right Talent

Author: Eric Termuende

Publisher: Barlow Book Publishing, Inc., Toronto, ON, Canada

# Pages: 168 pages in the hardcover version; also available in Kindle

Summary: This book is apropos because it addresses some of the challenges businesses faced during Covid-19. As you know, many businesses transitioned to remote work to prevent total shut down.

And as many industry leaders stated, the New Normal implies employees at many businesses won’t return to work at the office. We will likely see a mix. Some employees will work in both the office and remotely. Others will work only at home. Finally, some will only work in the office.

The status quo has given way to a new way of work. How work gets done has changed forever. You and your business included. If you understand that, you’ll want to change your hiring and retention practices.

Addressing how employees do their work, argues Termuende, is a differentiator for companies. At the core of this precept is that all employees want more freedom over how they do their work. That translates into how they do their work… whom they do it with… and why.

In summarizing and reviewing this book, we’ll feature the main points the author makes in the book:

Financial incentive. How companies hire and train employees is important. It affects the bottom line costing companies as much as $15,000 for each employee earning $75,000. Again, that’s for one employee. As Termuende states, “That adds up”. Its crystal clear there’s a financial incentive to getting hiring and training right.

When employees are well-matched to their job and company, they perform better. They’re more motivated because they’re invested in the work they’re doing, who they do it with, and why they’re doing it.

When work is meaningful and purposeful at the individual and corporate levels, workers perform at higher levels. That positively affects the bottom line. It also makes for happy employees.

But to enjoy these financial benefits, businesses must attract and hire these highly motivated employees.

Attracting and hiring new employees.  The author makes the point that businesses must rethink their employee recruitment processes. Today hiring is a somewhat mechanical, bureaucratic process.

Today, most firms use job announcements to recruit. These job announcements identify mandatory knowledge, skills, and abilities (KSAs) and prescribe necessary experience. Finally, to address these criteria, applicants make generous use of keywords hoping to get an interview.

The problem with this mechanical approach is that it focuses on KSAs and not the individual. It doesn’t shed any light on what it’s like to work at the hiring company. So, getting the fit between prospective employee and company right is elusive.

To attract the right candidates, companies must explain what it’s like to work at their company. They must address what the environment is like. Long hours – are they a frequent thing (or not)? If so, it helps to explain why a company may need or rely on overtime.

Explaining “why”  a company requires excess hours may improve job candidates’ understanding. That will help weed out employees who may have not a passion for working late if doing so isn’t meaningful. And the opposite is true for passionately-minded prospects.

Besides hiring employees in new ways, companies must also update how and when work gets done. We learned some lessons from Covid-19 that reinforce this concept. Instead of the typical 9 -5 work hours, your business must make work fit your new employees’ lives.

During Covid-19, we saw this put into practice. For example, some businesses survived the onset of remote work. Some were better prepared for this, but many were not. Shift work became necessary and flexible hours became popular.

We live in more complex times that our parents. So, businesses must accommodate the complexities of our time. Thanks to technology, we can oblige that. In fact, solutions to alternative work options are available. Technologies like virtual private networks, Zoom, Slack, and email, etc., have enabled job flexibility.

Workers can chat online, hold meetings, and interact with one another on schedule. That promotes productivity giving employees quiet time to do their work uninterrupted. Flexibility facilitates working alone as well as in groups.

Anecdotally, some say remote work is more productive than working at the office. But that’s only part of the solution to retaining new employees.  To round out how we rethink work, we must turn to culture.

Workplace culture: Mission, Vision, People.  Termuende states that what pulls everything together is workplace culture. Workplace culture is extremely important today. New employees want to connect with one another. Yet, technology, which has tangible advantages, also has some disadvantages that impede connections.

Employees rely on email and texting to co-workers sitting in the same office. Communicating electronically gives personal interaction short shrift. This is a shortcoming all businesses must address. And culture can mitigate, if not cure, that flaw.

You must strive to achieve balance between the use of technology and human interaction. To achieve that balance, you must address mission, vision, and people or MVP. 

Today, new employees must understand their company’s mission. A clear mission statement goes a long way to attracting and keeping top employees. What’s different here is that you must write your mission statement in a way that relates to the individual.

  • Mission. A mission statement must convey in a human way how an individual can make a meaningful contribution. That helps in making a connection and in understanding the “why”. Then an individual can see how s/he can contribute to your mission.
  • Vision. Similar to mission,  your vision must be relatable. The days of vision expressed as an ambiguous concept is over. The vision must relate to people: it must bring vague concepts down to earth, so they’re palpable. Your vision should focus on people.
  • People. Here your company must humanize its hiring process. You can do this by providing information about a day in of a current employee in, say, accounting, shipping, or compliance. Providing useful information humanizes hiring. Learning how work gets done on a personal level will give candidates a better idea about their future job.

Another way is to have prospective employees spend a day or more on the job to assess the fit. This is a more expensive option, but it will give a candidate a real-world idea of what’s expected.

This approach to hiring allows a candidate to see how MVP works in practice.

At Terra Worldwide Logistics, we’re on the leading edge when it comes to working in the post-pandemic era. Our employees have been on the front lines. We understand the new world of work. We don’t have to rethink work. We practice the new ways of work every day.

That puts us a step ahead of most 3PLs. And more important, it allows us to help you manage your business through the challenges you face daily – whatever they are.

If you need help in preparing for 2021, don’t hesitate to contact us. We’re standing by and are ready to assist you as you rethink work and more.

 

The Logistics Industry in 2021: Using Strategy to Combat Uncertainty and Volatility

2021promises to be a year of strategic transformation for supply chains. It will mark the beginning of next generation supply chains.

Next generation supply chains will be ready for anything. They will be built to withstand uncertainty and volatility without blinking.

The new precepts of supply chain management will be adaptability, responsiveness, and resilience. To paraphrase innovation strategist Max McKeon, supply chains will go from adapting to coping… to adapting to winning.

Achieving adaptability, responsiveness, and resilience will demand a shift in thinking and planning. To deal with uncertainty and chaos, you must consider the big picture. You must take a strategic view yet be mindful of near-term risks.

Here are six ways in which a strategic focus will transform supply chains in 2021.

#1: The Value of Built-in Adaptability. Built-in adaptability  refers to performing an end-to-end analysis of your supply chain. Doing an end-to-end analysis will help identify opportunities to build-in adaptability and resilience.

Adaptability takes into account measures to “future-proof” your supply chain against major disruptions. Here are some of the means of building-in adaptability.

  • Accommodation of social distancing when necessary.
  • Ensuring a reliable supporting infrastructure. Examples includes back-up power sources and secure networks via cyber security.
  • Flexible fulfillment channels. This means prioritizing distribution of goods by criticality of need vs. cost. Delivering products directly to consumer instead of retail stores. Or it may entail shipping to retail stores for customer-pick-up.
  • Affordability of proposed solutions.  Any solution you devise must be cost-effective.
  • Supply Chain Partnerships. Ensure you have strong partnerships in place beyond your Tier-1 suppliers. Opening lines of communication to lower tier partners helps improve reliability of support. It can make the difference in getting support – when it’s needed.

The value of building-in adaptability lies in deliberate planning for uncertainty and volatility. Doing so will transform reactive supply chains to responsive supply chains. When that happens, they’ll outperform by providing seamless supply support.

Supply chains that can instantly respond to disruptions will gain competitive advantage.

#2: Value of Focus on Customer vs. Cost.  Pre-pandemic supply chain planning prioritized cost over the customer. That approach in supply chain thinking is flipping.

Recall, businesses first looked to logistics planning to reduce cost. Transportation costs, for example, make up about 50% of all logistics costs. Controlling these costs would go a long way towards cutting costs that go into creating goods and services.

But that began to shift during the pandemic. As supply chains struggled to meet the most basic needs, businesses began to put customers first. For many businesses, cost became a secondary concern.

You may know this shift was already underway before the pandemic. Now it’s accelerating as the massive disruptions forced businesses to focus on meeting customers’ demands.

Prioritizing customers will carry forward into the future, according to a report by McKinsey. In fact, McKinsey’s report states  prioritizing customers can “create long-term customer advantage”.

Foregoing short-term gains for long-term advantage represents a strategic approach to supply chain planning. Seeking long-term partnerships is another strategic approach you’ll see in 2021.

#3:  The Value of Strategic Partnerships.  Problem solving has been and will continue to be a staple of logistics. And solving problems on your own is inferior to solving them in groups or teams.

With the impetus of Covid-19, supply chain management will extend beyond corporate boundaries. Strategic partnerships between shippers and 3PLs, for example, will allow for better problem solving.

It begins with better problem identification. Working closely in partnership will generate deeper, more informed insights. That will lead to quicker, more innovative and customized solutions.

The best strategic partnerships will rest on mutual benefit. That entails equitable profit-sharing and balanced risk sharing. It requires working closely with one another. When you do that you will better understand each stakeholder’s needs and challenges.

Tomorrow’s operating environment requires agile thinking, quick decision making and fast-acting responses. This, too, like the other measures outlined above, is a strategic undertaking.

To understand a customer’s needs and challenges, successful partnerships will practice open communication.  On top of that, they will also practice close collaboration. That will set companies with successful partnerships apart from companies that go it alone.

#4: Value of supply chain diversification. Over the past twenty years, many manufacturers moved their operations overseas. China was the primary beneficiary due to China’s cheap labor costs. The folly of concentrating sourcing in China soon became evident.

As Covid-19 came on the scene in Wuhan, China, we watched a disaster in the making. It was a fluke that Wuhan was a major manufacturing center and logistics hub. That only magnified the disruption of global supply chains.

So, as Wuhan shut down to contain the corona virus, supply chains froze. The movement of supplies and products ground to a halt.

Almost overnight, businesses in the rest of the world lived on their inventories. And without a steady and reliable flow of goods, businesses couldn’t keep up with customer demand.

Thus, diversification, –  already underway due to the trade war with China – accelerated. That trend will continue in the U.S. with reshoring of manufacturing to the U.S.

Also, many businesses are near-shoring their operations. They’re moving their operations closer to the U.S. These moves will help lean out and diversify supply chains in the future.

Hindsight is instructive. It tells us diversification of sourcing  could have mitigated those disruptions.

Diversification also provides other benefits. For example, diversification can offer shorter lead times and reduced shipping costs. And as sourcing moves closer to consumers, may also simplify supply chain issue resolution. The value of supply chain diversification is clear.

Business that diversify their supply chains will gain competitive advantage. They’ll achieve that as they become more adaptive and more resilient.

In the future, adaptive and resilient supply chains must also be durable for the long-term. They must be sustainable.

#5:  The Value of Sustainable Supply Chains.  Sustainability was a growing interest among supply chain leaders and customers alike. Now it’s becoming a strategic asset that will translate into a competitive edge.

Let’s start with a definition : Sustainability is”… a widely accepted “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987)

This implies long-term thinking and planning about business processes and supply chain networks. Future supply chains that incorporate affordable sustainability are positioned dominate. That’s because they’ll be ready for the present as well as the long-term.

Sustainability ensures durability and flexibility. It entails prudent and realistic solutions that can withstand unexpected stresses. This helps reduce risks while providing reliable delivery of supplies and services. In short, you’ll get what you need… when you need it.

#6:  The Value of Continuity of Operations Plans (COOP).  Until now, businesses viewed COOP planning as “nice-to-have”.  Now, it’s a “must-have”. And as with the other measures described above, COOP is a strategic activity.

Before the pandemic, COOP existed in various forms of maturity by company. Some were effective, but most were not. Next generation supply chains will have viable COOP in place. These are strategic plans that modern-day businesses must have to remain competitive.

The pandemic gave “Murphy’s Law” (“…if anything can go wrong it will.”) deeper meaning. COOP plans codify all the above measures into a comprehensive and cohesive document. Successful companies won’t treat this as shelf ware. 

Instead, they will integrate COOP into their operations. They will do so by testing backup plans as a matter of course and make changes so all systems work as designed.

Uncertainty will not go away, and neither will volatility. Thus, your firm must have well-developed COOP plans to ensure seamless operations in good times and bad. That will separate your firm from the competition.

Strategically-minded supply chains will outperform those that ignore COOP.

What to Expect in 2021

The new year promises to be a better year than 2020. It’s unlikely disruptions in 2021 will exceed those experienced during the pandemic.

Nonetheless, the uncertainty and volatility that dominated 2020 calls for an antidote. That antidote comes in the form of strategic planning.

As a result, we should see less uncertainty and volatility. With strategically-designed supply chains, we should see disruptive effects smooth out. 

As supply chains become more adaptive and responsive during crises and more resilient post crises, uncertainty and volatility should subside.

Several things will distinguish successful supply chains from those that fall short. Those that leverage lessons learned from the pandemic will surpass their competition. In today’s competitive environment, choosing to stand still is the same as falling behind.

Next generation supply chains will emphasize strategic planning. They will forego dependence on short-term thinking for quick wins. Instead they will make customers the center of their strategic plans – not profitability. That structural change in planning that will win out in the long-term.

That means you should focus on your customers ahead of profits as you develop your supply chain. Well-thought out business processes and integrated technologies will reinforce formerly unprepared supply chains.

Expect to see strategically designed supply chains gain competitive advantage in 2021.

Terra Worldwide Logistics is uniquely prepared to help you adapt what 2021 throws at you. Customer service is our watchword. And as a customer-centric 3PL, we value close collaboration. Close collaboration helps us gain deeper, more informed insights.  

Contact us today if you’d like to partner with a 3PL that can help you “go from adapting to coping to adapting to winning in 2021”.

2020 in Review: 11 Game-changing Effects on Logistics

 

One word sums up 2020 for the logistics industry. PANDEMIC. Or, if you prefer, Covid-19.

The pandemic, a once-in-a-century event, shook the logistics industry to its foundations.

Covid-19 exposed weaknesses with reckless abandon. Neither governments, the logistics industry, nor individual businesses were ready for the unprecedented disruptions.

This once-in-a-century event caught the entire industry by surprise. To put the effects into perspective, we need only look at survey results from Adelante, Blue Jay Solutions and CSCMP (Jun 2020).

According to the survey, 75% of supply chain professionals plan to make changes to their supply chains based on lessons learned. That’s a startling statistic for an industry that routinely deals with change.

As we look back on what happened in 2020, we will see that many of the adverse effects were already evident. Others were lying buried beneath the surface.

In this post, we will review 11 ways the pandemic disrupted the supply chain industry. Understanding these events will help us grasp how they will shape logistics in 2021.

But that’s a topic of another blog post in which we’ll preview what to expect in 2021.

With that, let’s review how the pandemic upended the logistics industry.

Covid-19’s Negative Impacts

1)     Employee Health & Safety.  When Covid-19 reared its ugly head, one of the first things everyone grappled with was employee health and safety. The scale, scope, and severity of the pandemic made itself felt worldwide in short order.

Almost immediately, businesses began taking precautionary measures to keep their workforces healthy and safe. They implemented social distancing from office settings to the shop floor.

Workers needed time to adapt to what seemed unnatural and draconian measures. As time when on, employees on the frontlines, adapted and became a model of resilience.

Nonetheless, health and safety will remain a top priority for the foreseeable future.

2) Unemployment.  Almost overnight, starting with China, governments shutdown their societies. Business shut down, and trade came to a halt. That resulted in an immediate and dramatic rise in unemployment.

At its peak, unemployment in the United States reached 14.7% in April 2020. This exceeded the unemployment rate experienced during the Great Recession. Equally shocking was how fast unemployment rose.

Unemployment rose higher during the first three months of COVID-19 than it did in two years of the Great Recession. Unemployment dramatically increased by more than 14 million. It rose from 6.2 million in February to 20.5 million in May 2020 (Pew Research Center).

The sharp and massive rise in unemployment was unparalleled. It became clear unemployment further strained supply chains’ ability to cope with Covid-19.

3) Blank Sailings.  As economies shut down one after another, that led to a ripple effect of cancelled sailings. Cancellations came wave after wave by large and small container lines alike.

Container lines blanked sailings out of necessity to shore up rates. As container lines had to deal with excess capacity, blanketing sailings was the logical method. Again, these cancellations spread over time with worldwide effects.

Most troubling is that blank sailings will likely continue into 2021 and beyond. You can expect blank sailings to shape the New Normal.

Another byproduct of blanked sailings is increased demurrage and detention. That, too, was a prior existing issue. As shippers blanked sailings, empty containers remained at U.S. ports awaiting return to China. This led to excessive congestion.

We also saw delays in loaded containers. Contributing to this backlog was the reduction of work shifts at ports. Many ports introduced reduced shifts with little or no notice. This led to increased demurrage and detention charges.

It is clear wholesale blank sailings had an adverse effect on port operations. While the worst appears to be behind us, volatility remains, nonetheless. And that will provide an impetus for coming to grips with this knotty issue in 2021

4) Port Congestion.  Covid-19 also disrupted import and export. Port congestion proved to be a thorn in the side of every supply chain stakeholder. Like some of these other issues, port congestion was not new. As expected, the smooth flow of cargo through ports became problematic during Covid-19.

Ports had fewer workers to handle cargo, and many ports limited operations. Also, many retailers delayed picking up their cargo due to their own worker shortages. Many retailers also shut down their warehouses further adding to port congestion.

This issue became a prominent issue during Covid-19. That said, it won’t be easy to resolve and will likely dominate the foreseeable future.

5) Supply Chain Concentration.  As Covid-19 dragged on, its effects became more noticeable. A major weakness of global supply chains was the concentration of sourcing in China. This proved critical as China shut down its manufacturing facilities.

When manufacturing shut down in China it had a ripple effect. That led to unprecedented inventory shortages, sparing no industry sector. We saw shortages in autos, electronics, consumer goods, pharmaceuticals, and medical supplies, to name a few.

In hindsight, these dramatic effects were not inevitable.

Businesses could have avoided these negative effects. One way to do that was with diversification of sourcing. That is, diversifying sources among many countries would have alleviated the related shortages. In any case, for various reasons, business did just the opposite.

At the macro level, lack of diversification led to a supply-induced recession. At the micro level, it had a detrimental effect on company sales. Unsurprisingly, large firms sustained these supply shortages better than small- and mid-sized firms.

In fact, some small- and mid-size firms declared bankruptcy. And even some large companies weren’t spared. Here’s a partial list of companies that a declared bankruptcy during Covid-19: Pier1 Imports, Modell’s Sporting Goods, Nieman Marcus, J.C. Penny GNC Holdings, Lucky Brand, Brooks Brothers, J. Crew, and Steinmart.

These bankruptcies also hit consumers (at the end of the supply chain) hard.

6) Inventory Shortages.  One of the most obvious impacts of the pandemic was manifested by wholesale inventory shortages. We saw shortages of food items, cleaning supplies, and personal protective equipment.

Critical medical supplies were also in severe shortage. Supply and demand were grossly out of sync. The “whiplash” effect was in full display. Supply chains weren’t up to the task of matching supply and demand. Making matters worse, a hyperbolic press manufactured many of the issues.

As time went by, many businesses adapted to the New Normal. Driven by a sense of urgency, businesses applied lessons learned at a rapid pace. But making these adjustments were costly. Businesses re-sized inventories. Many streamlined business processes. And many workers worked overtime to meet unprecedented demand for critical items.

By taking expedient measures under duress, many supply chains began to rebound. But a return to business as usual was still out of reach.

7) Spot Rates.  Covid-19’s impacts affected different sectors of the economy in different ways. Spot rates experienced highs and lows that fluctuated according to demand.

For example, consumer goods enjoyed rising demand. So spot rates for transporting consumer goods were high. Pent-up demand continued to put pressure on keeping spot rates high. But freight rates for industrial and manufacturing tell a different story.

According to FTR Transportation Intelligence, freight rates for industrial production and durable goods dropped 8% and 6%, respectively. The data show the rebound in industrial goods lagged that of consumer goods.

Spot rates are higher now because capacity remains tight, as all the drivers have yet to go back to work. Also, Covid-19 restrictions in some states resulted in a 40% decline in the issue of driver’s licenses. Retirements also affected driver availability, which also affected spot rates.

Until the mass distribution of a vaccine in 2021 occurs, wild fluctuations of spot rates will continue. Rising demand will further exacerbate capacity constraints caused by rising demand. Hence, you can expect upward pressure on prices. 

8) eCommerce Overwhelm.  Although the pandemic had deleterious effects, eCommerce prospered and grew. We saw consumers move in droves to online shopping, as businesses closed their stores.

On the surface, we may see that as a good thing. Yet, the expansion of eCommerce came with growing pains. The rapid move to online shopping was so great it overwhelmed the eCommerce channel. Even Amazon, which pioneered two-day shipping and then one-day shipping, couldn’t keep up with the demand.

Other businesses, not as prepared as Amazon, found it even tougher to keep up with demand. On the whole, eCommerce grew dramatically but overwhelmed supply chains. That further strained supply chains’ ability to cope.

9) Long-term Forecasting.  When Covid-19 hit, consumers panicked. So, they made a run on what they deemed to be critical supplies. As a result, we saw empty store shelves. Shortages resulted in toilet paper, cleaning supplies, and face masks, to name a few. As demand skyrocketed, companies couldn’t keep supplies on the shelves.

Most of this was irrational. Thus, it was difficult if not impossible to forecast. Accustomed to steady-state operations, many supply chains couldn’t adapt to this volatility. Rather, companies built supply chains on long-term forecasts. Doing so tended to smooth out outlier events – until Covid-19 struck. Covid-19 broke the mold.

These forecasts were no match for the extreme disruption that resulted. Even companies with highly-regarded supply chains, like Amazon and Walmart, weren’t prepared. 

10)  Lack of Infrastructure Investment.  Another adverse effect of the pandemic was the inadequacy of infrastructure funding. As employment dropped and widespread disruption took hold, infrastructure investment took a bigger hit.

Covid-19 further affected revenue shortfalls by state and local governments. That in itself had a ripple effect. For one, employment suffered as federal, state, and local governments delayed infrastructure projects. And implementation of social distancing further slowed down funded projects.

Also, with the economy partially shutdown, governments collected fewer road and highway tolls. Reduced tax collection adversely affected current as well as future construction projects.

Fortunately, the government acted and provided some relief with the C.A.R.E.S Act. The passage of the C.A.R.E.S Act abated some of the effects, but only for the short run. As a result, infrastructure will loom large in 2021.

11) Continuity of Operations Planning (COOP) and Risk Management.  The lack of preparedness manifested itself in record disruptions, dislocations, and delays. That indicated businesses gave COOP planning short shrift.

It also highlighted the importance of supply chain risk management. In particular, it revealed the lack of integration with suppliers at lower level tiers. Tier-2 and Tier-3 and lower-level tiers did not have the necessary integration to withstand the pandemic’s effects. Coordination and collaboration below Tier-1 were severely lacking.

Covid-19 forced closer engagement with lower level suppliers. That had the unintended yet favorable effect of enabling supply chains to rebound. As a result, COOP planning and risk management are two areas that will shape the New Normal.

Conclusion        

The pandemic shone a spotlight on supply chains. Before the pandemic, supply chain management was unfamiliar to the general public.

Now, everyone knows what supply chain management is. More important, the public understands the importance of supply chain management.

That said, the pandemic resulted in widespread disruptions, dislocations, and delays. The effects were unprecedented in their scope, scale, and speed. They ushered in a new way of thinking about supply chains. That thinking has translated into what we now call the New Normal.

That in a nutshell sums up 2020.

The New Normal will shape next generation supply chains. Rigid rules and standards are out-of-date.Rigidity imposed by long planning cycles will give way to responsive supply chains.

Resilience will become a supply chain imperative. Agility and flexibility will underpin tomorrow’s supply chains.

As a 3PL provider, TerraWorldwide Logistics can help you meet the future’s challenges. We can help you transition and adapt to the New Normal without wrenching changes.

 If you’re resetting your supply chain to recover from weaknesses exposed by Covid-19, we can help you. Contact  TerraWorldwide Logistics now to start transforming your supply chain.

We can help you with current operations as well as with once-in-a-lifetime events.

 

Covid-19 Impacts to Infrastructure: What Needs To Be Done

 

Our roads, bridges, and ports are crumbling. And Covid-19 has accelerated our nation’s deteriorating infrastructure.

During the Great Depression, the U.S. government spent 4.2% of GDP on infrastructure. Today, the government only spends 2.5% of GDP on infrastructure. 

That’s a huge disparity.

As an industry insider, you know, infrastructure is indispensable to logistics. Infrastructure influences economic growth as well as job creation. More than that, infrastructure affects the competitiveness of our nation and your business.

In emerging countries, logistics costs up to 25 percent of a product. In first-world countries that figure is much less at 6 – 8 percent. Regardless, both represent a sizeable cost.

Deteriorating infrastructure only adds to those costs.

Compounding this issue is the severe underfunding of State Departments of Transportation (DOTs). They are in dire need of federal aid. Thus, Congress must address the nation’s aging infrastructure now. Doing nothing is not an option.

This post addresses Covid-19’s impact to roads, bridges, seaports, and airports. It also suggests recommendations to fix this threat to the economy and your business.

Fixing the Nation’s Deteriorating Roads

The nation’s roads are bad and getting worse. Many of them are dangerous, if not unusable. Some roads require scheduled maintenance but aren’t getting it. And new road construction is at a virtual standstill.

To fix these issues, states look to the Highway Trust Fund for aid. With that in mind, as of May 2020, revenues from the Highway Trust Fund have declined 49% from May 2019. You can attribute much of that decline to less traffic on the highways due to Covid-19.

At the same time, many state DOTs expect an average decrease in their revenues of 30% for the next 18-months. That only compounds the problem.

How bad is the problem?

According to the American Society of Civil Engineers (ASCE), 20% of highway roads are in poor condition. And without dedicated funding that percentage shows no signs of decreasing.

ASCE recommends a $50 billion investment in the next Covid-19 relief package. Also, ASCE recommends that Congress tackle this issue from a long-term perspective. That means providing a multi-year funding plan for the Highway Trust Fund.

The outlook isn’t promising. So, piecemeal investments are no better than band-aids.

As it happens, some of the same issues plague the nations bridges.

Fixing the Nation’s Deteriorating Bridges

This funding situation for bridges mirrors the funding issues for roads. For example, state DOTs expect a 30% decline in their revenues on top of reduced aid from the Highway Trust Fund.

For example, ASCE has identified 46,100 bridges in need of structural repair. This is quite a backlog, and it continues to grow. But the gas tax that funds bridge repair and maintenance has stood still.

That is, the federal gas tax remains stuck at 1993 levels. Moreover, due to reduced traffic and road usage, purchasing power has also declined. That makes for a risky and hazardous situation.

This is a long-term problem that needs immediate action. Without immediate attention, ASCE projects fixing these unsound bridges would take 50 years. That means we would not see completion until 2071 – and that’s if repairs started straightaway in 2021.

ASCE makes the same recommendation for repairing bridges as it does for roads. That is, Congress should provide $50 billion in the next Covid-19 package. But that’s only a short-term solution.

Instead, Congress should combat this dilemma by addressing the issue from a strategic perspective. Thus, Congress should provide a long-term solution for funding the Highway Trust Fund. As you might expect, the situation for improving the nation’s ports isn’t much better.

Fixing the Nation’s Deteriorating Seaports

Seaports, like the U.S. roads and bridges, need an infusion of capital to continue operating. Since Covid-19 though, shipping volume has fallen sharply due to record breaking blank sailings.

That has hurt revenue collection, which funds port maintenance and improvement. Revenues have declined between 20 and 30%. Further aggravating this is the collapse of the tourism industry.

To appreciate the degree and severity of the problem, we need to understand the impact to the economy.

ASCE estimates that seaports contribute $4.6 trillion to the economy. That comes to about 26%  of GDP. Shipping at seaports provides about 23.1 million jobs. And it provides $321 billion in taxes to cities, states, and the federal government.

There’s no question the nation’s seaports have an outsize impact on the economy. Yet, investment for seaports is much lower than for repairing roads and bridges.

ASCE recommends Congress appropriate $1.5 billion for operations, maintenance, and new development. That’s for the near-term. For the long-term, ASCE recommends investing $4.5 billion to upgrade coastal navigation.

Finally, ASCE recommends investing $1.0 billion for the Port and Intermodal Improvement Program. That comes to total an investment of $7.0 billion or $43 billion less than for roads or bridges.

Next, let’s look at the conditions of the nation’s airports and what’s needed to upgrade them.

Fixing the Nation’s Deteriorating Airports

It’s no exaggeration to say that Covid-19 hammered airports. Both passenger and air cargo traffic declined significantly. Commercial travel dropped a stunning 95%. Air cargo did not drop as much. It fell 15%, which, when added to the commercial decline, proved devastating.

Those impacts adversely affected airport revenues resulting in a $23.3 billion loss. It’s no wonder then that revenue loss negatively affects modernization of terminals and technology. Thus, keeping pace with future demands is at risk.

ASCE recommends a $10 billion investment to modernize airports. ASCE also recommends Congress remove the cap on Passenger Facility Charges (PFCs). Airports rely on PFCs to upgrade their airports. Removing the cap will ease some of the pressure on funding.

Bear in mind these issues existed before Covid-19 struck. But, no doubt, Covid-19 accelerated and intensified these issues. As a result, they demand attention now, not later. And attention should focus on the long-term as well as the short-term.

Next-Generation Supply Chains Require Next-Generation Infrastructure

The nation’s infrastructure requiresa remedy to keep the U.S. and its businesses competitive – nationally and internationally. That requires legislation that proposes both short- and long-term solutions.

Funding is a top priority. Yet, even more important is to approach funding from a comprehensive standpoint. The nation’s infrastructure problem calls for proactive risk management.

It’s safe to say, Covid-19 caught the government and most businesses by surprise. So any plan must address both immediate and future issues. That takes us to how next-generation supply chains will meet customer requirements.

The experience of 2020 tells us, Next-generation supply chains must be resilient and agile. They must be adept at managing or mitigating risk. A dilapidated infrastructure sabotages progress on those fronts. Thus, attacking infrastructure’s issues requires a strategic mindset.

Likewise, at TerraWorldWide Logistics, we take strategic mindset when tackling our customers’ issues. Our approach is tailor-made for the challenges you face in the New Normal.

We believe in long-term partnerships because the issues facing our industry in a post-Covid-19 world demand a long-term view. We believe that reduces the uncertainty, volatility and complexity of the New Normal. 

As 2021 approaches you have a choice to make. You can continue to prepare for the New Normal based on your existing plans.  

Or you can contact us to discuss how you can prepare for tomorrow’s needs and challenges today.

 

Covid-19 Impacts to Infrastructure: What Needs To Be Done

Our roads, bridges, and ports are crumbling. And Covid-19 has accelerated our nation’s deteriorating infrastructure.

During the Great Depression, the U.S. government spent 4.2% of GDP on infrastructure. Today, the government only spends 2.5% of GDP on infrastructure.

That’s a huge disparity.

As an industry insider, you know, infrastructure is indispensable to logistics. Infrastructure influences economic growth as well as job creation. More than that, infrastructure affects the competitiveness of our nation and your business.

In emerging countries, logistics costs up to 25 percent of a product. In first-world countries that figure is much less at 6 – 8 percent. Regardless, both represent a sizeable cost.

Deteriorating infrastructure only adds to those costs.

Compounding this issue is the severe underfunding of State Departments of Transportation

(DOTs). They are in dire need of federal aid. Thus, Congress must address the nation’s aging infrastructure now. Doing nothing is not an option.

This post addresses Covid-19’s impact to roads, bridges, seaports, and airports. It also suggests recommendations to fix this threat to the economy and your business.

 

Fixing the Nation’s Deteriorating Roads

The nation’s roads are bad and getting worse. Many of them are dangerous, if not unusable. Some roads require scheduled maintenance but aren’t getting it. And new road construction is at a virtual standstill.

To fix these issues, states look to the Highway Trust Fund for aid. With that in mind, as of May 2020, revenues from the Highway Trust Fund have declined 49% from May 2019. You can attribute much of that decline to less traffic on the highways due to Covid-19.

At the same time, many state DOTs expect an average decrease in their revenues of 30% for the next 18-months. That only compounds the problem.

How bad is the problem?

According to the American Society of Civil Engineers (ASCE), 20% of highway roads are in poor condition. And without dedicated funding that percentage shows no signs of decreasing.

ASCE recommends a $50 billion investment in the next Covid-19 relief package. Also, ASCE recommends that Congress tackle this issue from a long-term perspective. That means providing a multi-year funding plan for the Highway Trust Fund.

The outlook isn’t promising. So, piecemeal investments are no better than band-aids.

As it happens, some of the same issues plague the nations bridges.

 

Fixing the Nation’s Deteriorating Bridges

This funding situation for bridges mirrors the funding issues for roads. For example, state DOTs expect a 30% decline in their revenues on top of reduced aid from the Highway Trust Fund.

For example, ASCE has identified 46,100 bridges in need of structural repair. This is quite a backlog, and it continues to grow. But the gas tax that funds bridge repair and maintenance has stood still.

That is, the federal gas tax remains stuck at 1993 levels. Moreover, due to reduced traffic and road usage, purchasing power has also declined. That makes for a risky and hazardous situation.

This is a long-term problem that needs immediate action. Without immediate attention, ASCE projects fixing these unsound bridges would take 50 years. That means we would not see completion until 2071 – and that’s if repairs started straightaway in 2021.

ASCE makes the same recommendation for repairing bridges as it does for roads. That is, Congress should provide $50 billion in the next Covid-19 package. But that’s only a short-term solution.

Instead, Congress should combat this dilemma by addressing the issue from a strategic perspective. Thus, Congress should provide a long-term solution for funding the Highway Trust Fund.

As you might expect, the situation for improving the nation’s ports isn’t much better.

 

Fixing the Nation’s Deteriorating Seaports

Seaports, like the U.S. roads and bridges, need an infusion of capital to continue operating. Since Covid-19 though, shipping volume has fallen sharply due to record breaking blank sailings.

That has hurt revenue collection, which funds port maintenance and improvement. Revenues have declined between 20 and 30%. Further aggravating this is the collapse of the tourism industry.

To appreciate the degree and severity of the problem, we need to understand the impact to the economy.

ASCE estimates that seaports contribute $4.6 trillion to the economy. That comes to about 26%  of GDP. Shipping at seaports provides about 23.1 million jobs. And it provides $321 billion in taxes to cities, states, and the federal government.

There’s no question the nation’s seaports have an outsize impact on the economy. Yet, investment for seaports is much lower than for repairing roads and bridges.

ASCE recommends Congress appropriate $1.5 billion for operations, maintenance, and new development. That’s for the near-term. For the long-term, ASCE recommends investing $4.5 billion to upgrade coastal navigation.

Finally, ASCE recommends investing $1.0 billion for the Port and Intermodal Improvement Program. That comes to total an investment of $7.0 billion or $43 billion less than for roads or bridges.

Next, let’s look at the conditions of the nation’s airports and what’s needed to upgrade them.

 

Fixing the Nation’s Deteriorating Airports

It’s no exaggeration to say that Covid-19 hammered airports. Both passenger and air cargo traffic declined significantly. Commercial travel dropped a stunning 95%. Air cargo did not drop as much. It fell 15%, which, when added to the commercial decline, proved devastating.

Those impacts adversely affected airport revenues resulting in a $23.3 billion loss. It’s no wonder then that revenue loss negatively affects modernization of terminals and technology. Thus, keeping pace with future demands is at risk.

ASCE recommends a $10 billion investment to modernize airports. ASCE also recommends Congress remove the cap on Passenger Facility Charges (PFCs). Airports rely on PFCs to upgrade their airports. Removing the cap will ease some of the pressure on funding.

Bear in mind these issues existed before Covid-19 struck. But, no doubt, Covid-19 accelerated and intensified these issues. As a result, they demand attention now, not later. And attention should focus on the long-term as well as the short-term.

 

Next-Generation Supply Chains Require Next-Generation Infrastructure

The nation’s infrastructure requires a remedy to keep the U.S. and its businesses competitive – nationally and internationally. That requires legislation that proposes both short- and long-term solutions.

Funding is a top priority. Yet, even more important is to approach funding from a comprehensive standpoint. The nation’s infrastructure problem calls for proactive risk management.

It’s safe to say, Covid-19 caught the government and most businesses by surprise. So any plan must address both immediate and future issues. That takes us to how next-generation supply chains will meet customer requirements.

The experience of 2020 tells us, Next-generation supply chains must be resilient and agile. They must be adept at managing or mitigating risk. A dilapidated infrastructure sabotages progress on those fronts. Thus, attacking infrastructure’s issues requires a strategic mindset.

Likewise, at Terra Worldwide Logistics, we take strategic mindset when tackling our customers’ issues. Our approach is tailor-made for the challenges you face in the New Normal.

We believe in long-term partnerships because the issues facing our industry in a post-Covid-19 world demand a long-term view. We believe that reduces the uncertainty, volatility and complexity of the New Normal.

As 2021 approaches you have a choice to make. You can continue to prepare for the New Normal based on your existing plans.

Or you can contact us to discuss how you can prepare for tomorrow’s needs and challenges today.

 

Trucking Industry Insights: Roadblocks and Opportunities (Part 2)

 

A previous blog post (Nov. 11, 2020), featured roadblocks facing the trucking industry. Today’s blog post focuses on key opportunities.

In particular, this post delves into the following areas of opportunity:

  • Improving customer service
  • Creating shareholder value
  • Creating new services 
  • Improving cost containment
  • Leveraging emergent technologies

Challenged by Covid-19, the trucking industry has not stood still. It has and is changing… for the better. That’s because the status quo is no longer acceptable. To paraphrase a well-known quote, “we must be ready to change… or risk being left behind”.

With that let’s review five keys areas of opportunity for the trucking industry.

Opportunities Facing the Trucking Industry

The road ahead is not hassle-free, but it also offers benefits. Trucking companies taking a proactive approach to the New Normal can thrive by exploiting the obstacles.

Here are five ways trucking companies can convert obstacles into competitive advantage.

Improving customer service.  Improving customer service was always a hallmark of trucking. But now, customer service is a market differentiator. Trucking companies that provide customer-centric services will thrive. Those that don’t may not survive.

As mentioned above, closer communications with the customer strengthens relationships that increase trust. And that feeds the ability to develop customized and innovative solutions. Improved customer service results from closer, more frequent communications.

Creating shareholder value.  To stay competitive truckers will have to add value to their basic services. That will prevent the commoditization of their service offerings. Taking a lesson learned from the pandemic suggests businesses require never-failing service.

Trucking companies that can deliver during times of upheaval will stand out. So, truckers that increase resilience and reliability while keeping costs down will create value. Thus, executing effective CONOPS will help contribute to the customer’s bottom line.

Creating New Services.  Also, successful trucking companies will constantly strive to introduce new services. For example, offering backhaul operations as a prime service provides an opportunity for growth. It can also open up a new revenue stream.

Further driving the growth of reverse logistics is ecommerce. For trucking companies, it provides a way to maximize capacity. Returning goods also helps reduce expenses for tucking companies and their clients. Reverse logistics as a service will likely grow and has the potential for increasing value and profitability.

Improving cost containment.  The Coronacrisis has taught us the necessity of agility. Lack of agility led to increased costs or loss of market share. Thus, trucking companies that embrace agility have a chance to become leaner yet stronger. Becoming flexible ensures improved service through greater efficiency and effectiveness.

Reverse logistics helps maximize capacity along with integrated networks and streamlined distribution operations. Those efficiencies will help trucking companies keep costs low.

In one case, Penske logistics backhauls scrap from Ford for recycling by its aluminum manufacturer, Novelis. The amount of scrap backhauled supports the manufacture of 34,000 F-150s per month. (inbound Logistics, Sep 2020). That increases competitive advantage and could be a potential game changer.

Leveraging emergent technologies. As mentioned in the blog post on obstacles facing the trucking industry, autonomous vehicles won’t be ready for decades. But, over time, artificial intelligence (AI) will mature making it useful to scale. So, too, will the Internet of Things or IoT.

So the future of trucking will experience an evolution – not a revolution – of  technologies.

As AI matures, it will help relieve the perennial driver shortage. IoT, meanwhile, will lead to efficiencies in preventive maintenance. As these emerging technologies evolve over time, they will improve operations and help cut or contain costs.

The Future of Trucking and Next Steps

As you can see the future holds promise for the trucking industry. The promising future stems from becoming more customer-centric. In focusing on customers, benefits will accrue to customers and trucking companies alike.

Shareholder value will also improve as trucking companies strive to provide continuous service. Plus, the creation of new services will mutually benefit customers and trucking companies.

Furthermore, cost will likely be more important, although it won’t only be about the bottom line. Remember, customer service is the dominant concern. Finally, trucking companies will seek new technologies to deliver cost-effective/efficient solutions.

This means, we can expect to see more agile, responsive, and customer-centered trucking companies. Flexible and resilient firms will separate themselves from those that fail to adapt.

As a 3PL whose cornerstone is customer service, TerraWorldwide Logistics is well-positioned to help you navigate the future of the industry.

We pride ourselves on providing customer service that’s second to none. In providing matchless service, we get to know our customers intimately.

That allows us to learn about your needs and challenges in depth. That’s why we can offer you tailored and innovative solutions. Our customer-centered approach is our competitive advantage.

The next steps depend on you. You can continue to operate as you do now. Or you can adapt by working with a customer-oriented 3PL.

The decision is yours. It depends on whether you’re prepared to compete in the New Normal.

 

Trucking Industry Insights: Roadblocks and Opportunities (Part 1)

 

As the trucking industry emerges from Covid-19, the future reveals roadblocks and opportunities.

Disruptions from Covid-19 have changed the way the industry operates. And a reversion to pre-pandemic operations is unlikely.

Priorities have changed. Operations have changed. And a new business model is emerging.

The trucking industry has always faced many challenges. However, post-Covid-19 the industry faces some new obstacles as well as some old ones.

Without further ado, let’s see what roadblocks hinder the trucking industry.

Roadblocks Facing the Trucking Industry

The uncompromising need for (available) trained and healthy drivers. Before the pandemic, the driver shortage affected the trucking industry. In the post-pandemic world, the driver shortage will continue to hamper the industry.

That only adds to the new concern of driver health and safety.

For the moment, the health and safety of drivers take top priority. So, trucking companies must pay special attention their employees. The challenges are to maximize employment of a scarce workforce and to keep them working.

What about autonomous vehicles (AVs)? Some tout AVs as a panacea. According to some reports, they won’t be ready for decades. AI research is still in the early stages before deployment of AVs can make a material difference.

These concerns will likely continue at least until we have vaccine. Several cures appear to be on the horizon. According to a report in the NY Times, Pfizer and BIONTECH have one now that’s 90% effective. But having the necessary quantities available is the next concern.

For the short-term, expect to see health and safety of drivers remain a top concern. Without a healthy workforce, the trucking industry can’t meet customer demands. And customer demands are increasing, not decreasing.

The continuous need for speed. As stated above, customer demands are increasing. One of them is the need for instant gratification. We need only look to e-commerce as an illustrative example.

Amazon worked to meet this demand. First, it achieved that with two-day shipping. Then it further fueled customers’ expectations with one-day delivery. Other retailers have jumped into the fray, scurrying to meet this new standard.

Walmart, Best Buy, and Kroger’s have also risen to the challenge, not willing to cede any market share to Amazon.

As a result, the need for speed is here to stay. But there’s a twist to this.

The persistent need for agility.  Besides expediting delivery, companies found new ways to deliver products to customers. In many cases, businesses treated retail stores as distribution centers. Businesses bypassed their retail stores and shipped directly to customers.

That helped move products to customers more effectively and efficiently. And they accomplished this under challenging conditions imposed by the pandemic.

Responsiveness to customer needs was important before the pandemic. As we emerge from the pandemic, it’s even more important. That makes agility even more important. That’s true as customers expect businesses to continue providing services during disruptions. 

As a result reliability has become essential.

The constant need for reliability.  Disruption, dislocation, and delaycharacterized global supply chains. Covid-19 exposed supply chain weaknesses worldwide. Recall critical shortages in basic supplies: toilet paper, hand sanitizer, and protective masks.

Predictability gave way to unpredictability and instability. For example, the pandemic skewed demand cycles, rendering planning ineffective. Even retailers like Walmart and Amazon were unable to meet customers’ basic demands. Reliability suffered across the board.

As a critical link in supply chains, trucking companies strive daily to ensure safe, on-time deliveries. To assure that, information flow has become a critical enabler in attaining reliability.

That entails better internal communication as well as closer communication with customers. Keeping customers informed helps set expectations. Closer communication also helps to identify and resolve issues before they become problems.

Constant communications enable truckers to operate with greater precision and intensity. That will help to boost reliability. While important before Covid-19, reliability’s prominence has risen to a new level. To stay competitive, reliability must continuously improve.

The growing need for sustainability.  With the onset of Covid-19, we saw a reduction in CO2 emissions as trade came to a virtual halt. Yet the acute need to maintain profitability sparked a renewed interest in sustainability. For example, balancing truckload capacity and driver availability arose out of austerity.

That included smarter use of trucks and more efficient network and route planning. That influenced better fuel management and an increase in back hauling. The benefits of improved trucking operations enhanced sustainability.

Covid-19 showed that sustainability goes beyond regulatory compliance. To stay competitive, trends indicate tucking companies will likely make sustainability a strategic goal (ATRI).

Expect this to strain resources in the short-term. Meanwhile, benefits may not materialize until the long-term. Failure to adapt to this new operational environment may disadvantage truckers.

The unending need for containing costs.  There’s no disagreement that maintaining cost control during the pandemic was crucial. Maintaining ongoing operations under extreme conditions challenged the best trucking companies. Lacking stability and predictability, truckers had to find new ways to contain costs.

New costs came in the form of prepping trucks and work sites for daily use. It also included containing costs associated with hiring, training, and retaining truck drivers. That placed a premium on virtual operations. That, in turn, dictated investments in relevant technologies.

Once the CDC approves a vaccine (Pfizer and BIONTECH are close now), some of these costs will diminish. Until then, investment in workarounds will continue. As businesses return to pre-Coronacrisis conditions, companies must manage new costs with care.

Despite the challenges facing the trucking industry, opportunities also present themselves.

Navigating the Road Ahead with Confidence

The trucking industry’s roadblocks have been outlined above. Some things have changed, and others remain the same. Regardless, challenges persist as truckers navigate uncertainty and volatility.

A few things are clear. We’ve seen noticeable change in priorities. Health and safety of drivers is a top priority now. It’s always been important, but now, due to health concerns, it’s critical.

Also, the former business model is no longer competitive. Instead, adding value through delivery of relevant services is the new mandate.

You may be struggling with how to tackle uncertainty and volatility head-on, even as you’re reading this post now.

If so, contact Terra WorldWide Logistics to help you get ready for the next generation of trucking.

We’ll help you navigate the roadblocks with peace of mind in good times and bad. More important, we’ll help you convert those roadblocks into opportunities. (See Part 2 of this blog post that focuses on opportunities facing the trucking).

If you’re looking for a partner that can deliver resilient, reliable, and innovative services check out TerraWorldWide Logistics.

Simply fill out the form here to start the conversation.